Speculation about the fate of hard disk drives in the wake of late-2011 floods in Thailand and recent data from major set-top box vendors are resulting in new predictions about digital video recorder demand in 2012. Last Friday, Technicolor, one of the world’s largest STB manufacturers, indicated in its financial reporting that reduced DVR shipments cut deeply into the company’s 2011 revenues. Pace PLC, the world’s largest set-top box manufacturer, has reshuffled top management and issued profit warnings in response to HDD supply contractions. Recent forecasts from IMS Research’s
Online Set-top Box Database anticipate a 2012 DVR volume drop of more than 20 percent as operators rely on existing inventories and delay new DVR orders.
Initial estimates of the 2011 Thai floods’ impact on 2012 DVR shipments were understandably alarmist, with suggestions HDD shipments would not resume pre-flood volumes until at least 2013. Nearly five months after the Thai floods began, there has been speculation that 2012 shipments of HDDs, and DVRs by extension, will drop between 30 and 40 percent below 2011’s already reduced volume.
“Current DVR predictions rest heavily on Western Digital’s rebound,” notes Anna Maxbauer, Senior Analyst at IMS Research and manager of the Online Set-top box Database. “Flooding of major HDD production facilities has cut output 30%, but the company is determined to restore pre-flood HDD production levels by Q4 2012.” Rival manufacturer Seagate emerged from the Thai floods virtually unscathed, but is still hampered by interruptions to the local electrical motor, suspension assembly, wiring, and heat sink supply chain. Resulting price hikes have STB manufacturers and pay-TV operators nervous about 2012.
What does the HDD crunch mean for DVR consumers? “Pay-TV consumers will not feel the price hike to the extent that operators and STB manufacturers will,” adds Maxbauer. “Operators understand that consumers’ willingness to absorb shocks in the equipment ecosystem is very limited.” HDD manufacturers are offering discounts to STB makers in exchange for multi-year contracts, leaving final margin fights to STB makers and operators. Hard disk price hikes of twenty percent are unlikely to linger through 2012; IMS Research currently predicts an ASP bump in 2012 but expects DVR prices will drop quickly in 2013.