Storage - Hard Drive Market Fourth Quarter 2006

The Canadian Hard Drive market finished the year in stunning fashion. During Q4-06, a record total of 677,400 units were shipped.

For the whole year shipments were 22% higher than in 2005.  The remarkable strength of the Canadian hard drive market can be attributed to two factors.  First, Canadian computer manufacturers are holding their own against the international players even though the Canadian dollar has become very expensive.  Second, consumers have eagerly adopted external hard drives as a way to add capacity without having to go the trouble or expense of opening their microcomputer enclosures.  These two trends should ensure a very healthy Canadian hard drive market in the years ahead.

Exhibit 1: Hard Drive Shipments by Quarter Q1-05 – Q4-06

A side effect of the success of the external drive market is that the proportion of the market accounted for by Serial ATA (or SATA) bus drives stopped growing in Q4-06.  SATA drives constitute an evolutionary step from Parallel ATA (PATA) drives.  Canadian manufacturers have been steadily increasing the proportion of microcomputers built with SATA drives since they first became available in the Canadian market in 2003. By the end of Q3-06, SATA drives accounted for 47% of all units shipped.  In Q4-06, this proportion remained at 47% despite increased use of SATA by the manufacturers.   The reason was that PATA drives captured the lion’s share sales in the external drive segment for the simple reason that external drives are sold primarily to add capacity to older microcomputers having internal PATA drives.  Hence for reasons of compatibility, the external drives connected to these microcomputers must also have a PATA bus. It now seems very likely that PATA technology will be a major factor in the Canadian market for several more years.

To date, Seagate’s acquisition of Maxtor on May 19, 2007 has had very little impact in Canada. Seagate’s market share in the two quarters following the acquisition has stayed virtually at the same level as the combined total of the two companies during the two quarters prior to the acquisition. An even greater disappointment is that Seagate’s acquisition of Maxtor has also failed to prevent the industry AUP from falling as often happens when two major players in an industry merge into a single entity.

Exhibit 2: Hard Drive Market Leaders: Q4 2006