The surge in demand from the artificial intelligence (AI) market has sparked a substantial need for data storage. Coupled with HDD manufacturers reducing supply due to market conditions last year, the shortage of high-capacity HDDs since the second half of last year has led to overall HDD price spikes. Industry sources cited by TechNews have pointed out that from the third quarter of last year to the first quarter of this year, HDD prices have risen by a cumulative 10%-20%.

According to a previous report from Nikkei News, despite HDD’s competitive advantage in lower cost per storage unit, SSD has been gradually replacing HDD in the mainstream consumer PC market for storage devices below 2TB. This shift is driven by SSDs’ access speeds that surpass HDDs by nearly 10 times, coupled with the recent decline in NAND Flash memory prices, which has narrowed the cost gap between the two technologies.

Previously, TrendForce projected a strong 13–18% increase in Q2 NAND Flash contract prices, with enterprise SSDs expected to rise highest. Despite Kioxia and WDC boosting their production capacity utilization rates from Q1 this year, other suppliers have kept their production strategies conservative. The slight dip in Q2 NAND Flash purchasing—compared to Q1—does not detract from the overall market’s momentum, which continues to be influenced by decreasing supplier inventories and the impact of production cuts.

However, according to industry sources cited by the same report, the global economic downturn in 2023 and the resulting decline in server demand have led to losses even for suppliers of smaller-volume HDDs. Consequently, manufacturers implemented production reduction strategies, reducing capacity by 20% in hopes of stabilizing HDD prices.

Despite this, the burgeoning demand in the AI market since early 2023 has sparked a surge in demand for high-capacity HDD products. As suppliers have not announced plans to increase production capacity, industry sources cited by the report predict that the supply shortage for large-capacity HDD products will persist throughout this quarter and possibly extend for an entire year.

The report further cited sources indicating that HDD prices are expected to continue rising in the second quarter of 2024, with a potential increase of 5% to 10%. Sources also indicate that HDD prices have remained stagnant amid SSD competition. Reportedly, suppliers are unlikely to expand production immediately to sustain the upward price trend of HDDs. Therefore, the timing of HDD price stabilization hinges on developments in the artificial intelligence and high-performance computing markets.

(Photo credit: WDC)

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• [News] Western Digital Customer Letter Confirms HDD Supply Shortage! NAND Flash and Hard Drive Prices Continue to Rise
• [News] SSD Prices Keep Rising

Memory prices continue to rise, with the world’s top five memory chip manufacturers, including Western Digital (WDC), notifying their distributors and consumer customers on December 5th that they will shorten the quoting period for their two major products – HDD and NAND Flash memory. Instead, they will adopt a pricing strategy of periodic adjustments to cope with the rapidly changing storage market.

Despite the traditional peak season of the tech industry nearing its end, memory industry insiders indicate that the off-season is not slack. WDC predicts a lively scenario of “weekly increases” in quotations, potentially prompting OEM customers to place orders earlier.

This trend is advantageous for raising both spot prices and contract prices for memory in the first quarter of the coming year.

The content of the letter sent by WDC to its channel customers is as follows:

“HDD – We will continue to review pricing on a weekly basis, with increases expected through the first half of next year.

Flash – We anticipate periodic price increases over the next few quarters, with the cumulative increase likely surpassing 55% of current levels.”

We have aligned our production capacity to the current demand environment, so our ability to respond to unplanned demand and orders is limited. Please ensure any changes to your orders are communicated as early as possible. Anticipate extended lead times for any unplanned demand.

According to industry sources in the memory sector, the letter from WDC primarily serves as a notice to OEM customers related to its two major product lines, HDD and NAND Flash. Due to major international memory manufacturers actively reducing production and controlling capacity to maintain prices, this has led to a significant rebound in NAND prices.

In recent times, both spot and contract prices have shown an upward trend, and HDD prices have been on the rise since the second half of this year.

Based on TrendForce’s data, WDC has benefited from the recovery in demand in the consumer electronics sector. The increase in NAND bit shipments in the third quarter has driven revenue upward, reaching USD 1.556 billion in the third quarter, showing a 13% quarterly increase.

The original plan for WDC was to merge with Japanese counterpart Kioxia, but after negotiations fell through in October, it was announced that WDC would be split into two publicly listed companies.

According to foreign reports, WDC has previously issued a statement announcing the spin-off of its flash memory business. Reportedly, the separated business will focus on memory for computers, devices, and portable hard drives, while the HDD business will concentrate on selling large-capacity memory to cloud data centers.

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• NAND Flash Industry Revenue Grows 2.9% in 3Q23, Expected to Surge Over 20% in Q4, Says TrendForce

(Photo credit: WDC)