The strong rebound in HDD demand in CQ3 was great relief for the HDD industry. It has been seven long years, since the HDD industry had a Q-Q growth of this magnitude. More importantly, the strength of the nearline market is what resulted in improved gross margins and profits, but also one of the reasons behind the current tightening of HDD and HDD component supply. These massive capacity HDDs not only utilize higher-performance grades of disks and heads than standard mobile/desktop HDDs, but also employ other components that are more tightly specified. This fact plus the stringent testing parameters lengthens the overall product lead time. As such, HDD and component companies have to reallocate resources to support demand, but in some instances, that re-prioritization shortchanges other demand.
Given the eroding long-term HDD TAM, it is not likely that the current base of suppliers will invest heavily to meet these occasional periods of demand spurts, but instead will shuffle resources even if means user serving some opportunities. This may result in more tight supply situations like this in the future, but ultimately, it is far better off to deal with tight supply conditions than to deal with over-supply and idle capacity issues