Manufacturers of solid-state memory, which in part is Western Digital, tend to be pessimistic in the face of declining prices for products of this type, but the chief executive of the company Steve Milligan (Steve Milligan) at a reporting event said that the market behaved in accordance with expectations, and some harbingers growth even allows WDC to associate cautious optimism with the second half of the year. In the direction of hard drives, they are preparing to release models with a volume of 16-18 TB, which will be cheaper to manufacture than competitors. In aggregate, the gross capacity of drives shipped in the corporate segment by the end of the year may grow by 30%, and not by 20%, as previously expected.
In the WDC calendar, the third quarter of fiscal year 2019 ended just a month ago, so the annotations in the tables should not mislead you. Revenue for the period amounted to $3,7 billion, which is 13% less than the result of the previous quarter, and 27% less than the revenue of the same period last year. Hardest hit by the decline in solid-state memory prices was profit margins, falling from 43,4% a year earlier to 25,3%. As the representatives of the company explain, they had to take into account the reduction in the cost of unsold stocks. The latter increased from 79 to 101 days, while the turnover of capital slowed down by 73%.
Compared to the previous quarter, the average selling price of a nominal unit of solid-state memory capacity decreased by 23%. Under these conditions, it was not possible to avoid operating losses in the amount of $394 million, and net losses reached $581 million. WDC intends to fight losses by reducing memory production volumes and reducing costs.
Hard drives performed better than expected
Classic hard drives sold better than WDC executives expected last quarter. Naturally, demand grew mainly in the corporate sector, where high-volume magnetic platter drives were in demand. Although the number of hard drives sold in the server segment decreased from 7,6 million to 5,6 million units in a year, the gross capacity of hard drives increased by 13% compared to the previous quarter. What's more, hard drive revenue remained at the same level as the previous quarter. Hard disk profit margins remain at 29% versus 33% a year earlier.
In total, 27,8 million hard drives were sold during the quarter, the minimum for the last five quarters. But the average selling price at the same time increased from $72 to $73. Demand for PCs declined more slowly than expected, but the brand's SSDs performed well in the customer segment, including products based on BiCS4 type memory. The popularity of WDC external SSDs continues to grow. The average specific capacity of the brand's solid-state product increased by 44% over the year, and this is mainly due to price dynamics.
Representatives of the WDC drew attention to the use of telescopes that helped build the image of the so-called "black hole", hard drives of this brand with helium filling. They have proven themselves well in conditions of high altitudes and temperature extremes.
In the current quarter, WDC will significantly increase the production of 14 TB hard drives. By the end of the year, 16 TB and 18 TB hard drives will be released, which will use the traditional magnetic platter structure and “tiled”, respectively. In both cases, the data will be recorded under exposure to microwaves (MAMR). Toshiba is ready WDC is in the commercial implementation of this recording technology, but the latter promises to outperform the competitor in the cost of products, since they will use fewer magnetic plates and heads. Considering that Toshiba plans to place nine magnetic platters in a standard case, WDC should have no more than eight of them.
Memory prices undermined financial performance
While still a major manufacturer of solid-state memory, WDC is suffering from declining prices for this type of product. In the past quarter, revenue from the sale of solid-state memory did not exceed $1,6 billion. The profit margin for this type of product decreased over the year from 55% to 21%. Until the end of the calendar year 2019, WDC plans to reduce memory output by 10-15 percent. In the current quarter, the share of BiCS4 memory in the supply structure will reach 25%, although the supply of corresponding drives in the customer segment has just begun. Corporate customers will be offered drives with support for the NVMe protocol, built on controllers of their own design.
The memory of the BiCS4 family has a three-dimensional layout and a 96-layer structure. According to the manufacturer, it offers the lowest manufacturing cost in the industry, and therefore, in the second half of the year, WDC will transfer a significant part of its production capacity to its production. Production is curtailed at the enterprise in Kuala Lumpur, production is transferred from Thailand to the Philippines. These transformations are necessary to reduce costs. And yet, by the end of the year, WDC expects cumulative solid-state memory production across the industry to grow by more than 30%. This is less than previously expected.
Source: 3dnews.ru