December 16, 2009

Activity in the 2.5" SATA market is for HDD service support

Converge Storage Update.

3.5" Drives:
Widespread shortages in the 3.5" storage market continue. This is especially true in the 500GB through 1.5TB SATA capacities, and specifically in the 1TB drives, across all manufacturers. The aforementioned drives are being allocated through distribution. Currently, when available in the open market, 500GB is selling at $55 to $60, 1TB at $89 to $92, and 1.5TB at $117 to $122 into the manufacturing space. These prices are reflective of non-enterprise-level HDDs. We expect this shortage to continue at least until the midway point of Q1 CY2010, with shortages in the 500GB and 1.5TB increasing to the levels that we are currently seeing with the 1TB capacity. Meanwhile, the lower-capacity SATA HDDs have not reached the shortage levels of the higher-capacity drives. As a result, pricing is relatively unchanged month over month. However, we are seeing volume demand on a price point variance (PPV) basis. The IDE capacities have been relatively unaffected by the SATA shortage. Demand remains steady for the 80GB through 400GB range, with pricing stable.

2.5" Drives:
Most of the activity in the 2.5" SATA market is in support of end-of-life HDDs needed for service. We are not seeing shortages near the level of the 3.5" market, thus most production inquiries are for PPV savings. Demand remains strong, with routine volume purchase inquiries for the 160GB through 500GB SATA capacities. Meanwhile, demand is increasing for the 2.5" IDE interface. This is evident in the 80GB through 250GB HDDs. We believe that the shift of mainstream production to the SATA interface coupled with an overall slowdown in production during late 2008 and early 2009 are primarily responsible for this. Looking forward, we expect this trend to continue, with increasing demand and shrinking supply for this interface in the capacities previously noted.

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