On October 30th, major memory manufacturer Western Digital unveiled its financial results for the first quarter of 2024. During this quarter, the company achieved revenue of $2.75 billion, marking a 3% increase compared to the previous quarter but a 26% decrease compared to the same period last year.

The Potential for Sustained Growth in the Cloud Market

Taking a closer look at end-market dynamics in this quarter, flash memory prices continued to decline, but a surge in product shipments drove quarterly growth in specific business segments.

Western Digital’s cloud business revenue was $872 million, accounting for 32% of total revenue, with a 12% quarterly decrease and a significant 52% annual drop. On client revenue, revenue reached $1.147 billion, comprising 42% of total revenue, showing an 11% quarterly growth but a 7% annual decrease. Consumer revenue stood at $731 million, constituting 26% of total revenue, with a 14% quarterly increase and an 8% annual increase.

Looking forward, Western Digital expects its Q2F24 to range from $2.85 billion to $3.05 billion.

Western Digital’s CEO, David Goeckeler, credited the Q1F24 to the team’s dedication. He said, “Our ability to develop differentiated and innovative products across a broad range of end markets has resulted in sequential margin improvement across both flash and HDD businesses.”

Goeckeler also noted that consumer and client markets continue to perform well, and the cloud market is expected to sustain growth. As market conditions improve, Western Digital’s refined cost structure empowers the company to leverage enhanced profitability.

Data from TrendForce, as of September 12th, places Western Digital fourth in the global NAND Flash market for Q2 2023, with a market share of 14.7%. This positions the company closely behind industry giants like Samsung Electronics, Kioxia, and SK Group.

Regarding the merger with Kioxia, media reports suggest that Western Digital, following stalled negotiations, plans to divest its flash memory business, accompanied by a new round of financing to address part of its debt. This strategic separation allows the company to maintain its traditional hard drive business and create two distinct publicly traded entities.

Goeckeler also explained, “However, given current constraints, it has become clearer to the board in recent weeks that delivering a stand-alone separation is the right next step in the evolution of Western Digital.”

Is the Storage Industry Poised for a Revival?

The storage industry has been facing a period of stagnation due to economic challenges and sluggish demand in the consumer electronics sector. Major players in the storage market, including Western Digital, Micron, Samsung, and Kioxia, have been compelled to reduce production and investments to address the issue of oversupply.

However, recent reports indicate that memory chip prices are set to experience a significant upturn in the fourth quarter of the challenging year 2023. Experts suggest that the industry is gradually moving towards a phase of growth.

In terms of pricing, TrendForce forecasts a general price increase in both DRAM and NAND Flash products, starting in the Q4. For DRAM, a seasonal price increase of approximately 3-8% is expected. The sustainability of this upward trend will depend on suppliers’ commitment to production reduction strategies and the extent of demand recovery, particularly in the general server domain.

As for NAND Flash, TrendForce anticipates a comprehensive price increase of around 8-13% in the fourth quarter. Looking forward to 2024, the continuation of this upward trend for NAND Flash may face challenges unless original manufacturers maintain production reduction strategies and demand for Enterprise SSDs in the server domain experiences a revival.
(Image: Western Digital)

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