After a highly unusual Q2 2011, during which sales were given an unexpected boost by the Tohoku Earthquake, things returned to normal in Q3 2011.  During Q2 2011, sales of all optical drives (DVD ROM, DVD RW, Blu-Ray ROM, and Blu-Ray RW) had been 8% higher than in Q2 2010.  In Q3 2011, the market resumed its long-term decline.  Shipments were 31% lower than a year earlier in Q3 2010.

Exhibit 1: Quarterly Optical Drive Shipments: Q1 10 – Q4 11

*Q4 2011 Forecasted

The results were in fact better than PRC had expected.  In the Q2 2011 edition of this segment update, PRC forecasted shipments of 106,000 for Q3 2011.  Actual shipments were 115,000.  The vendors began Q3 2011 with excessive inventory.  The surplus, however, was eliminated fairly quickly so that the distributors, OEMs and Mass Merchants returned to normal purchase volumes earlier than we had expected.

Because the buying spurt was due to a natural disaster, rather than a change in the market, the optical drive distributors and computer manufacturers, who now hold very large inventories of drives, will need to cut back dramatically on their purchases in the next two quarters so as to bring their stocks into line with market demand.

 With two exceptions, unit sales in Q3 2011 were lower in all categories than a year earlier in Q3 2010.  Firstly, shipments of internal Blu-Ray writers were 82% higher.  Secondly, shipments of external Blu-Ray writers also increased on a year-over-year basis. However, since no shipments of external Blu-Ray writers were recorded in Q3 2010, it is not possible to calculate the percentage increase.

Exhibit 2: Quarterly Optical Drive Shipments: Q3 10 – Q3 11

Thousands	Q3-10	Q4-10	Q1-11	Q2-11	Q3-11
DVD-ROM	2.8	2.7	2.8	3.1	2.7
DVD-RW Internal	125.3	121.2	120.0	134.0	85.4
DVD-RW External	31.3	29.5	14.8	14.0	16.0
Blu-Ray Readers (Internal and External)	4.0	2.3	4.0	3.6	2.9
Blu-Ray External Writers	-	-	0.8	0.6	0.8
Blu-Ray Internal Writers	4.0	8.1	8.8	6.4	7.2
Total	167.4	163.8	151.2	161.7	115.0
YoY Growth	-24%	-29%	-39%	8%	-31%

Shipments of both internal and external DVD-RW Drives (or DVD writers) were down significantly.  Strangely enough, unit sales of DVD-ROM were roughly at the same level as a year ago.

Exhibit 3: Optical Drive Market Leaders: Q2 2010

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LG had a very strong Q3 2011 capturing 71% market share.  Its principal competitor was Samsung.   These two vendors have dominated the Canadian optical drive disk for the last four years.  During this period, their shares have fluctuated but have always remained close to their current levels.