seagate thursday announced plans to cut hard drive production and cut 3,000 jobs due to the significant drop in demand for HDDs it faced in the first quarter of fiscal 2023. The company’s first quarter of his 2023 fiscal year was the company’s worst earnings quarter in 15 years. Barely above $2 billion, the company’s net income fell 18-fold year-over-year. Seagate is also facing charges for shipping hard drives to Huawei.
Exabyte shipments drop for first time
Seagate doesn’t disclose how many hard drives it ships each quarter, but HDD sales have been steadily declining over the years, while exabyte shipments are increasing. That all changed in the first quarter of fiscal year 2023, as Seagate’s HDD capacity fell from 154.6EB in the previous quarter to 118.2EB from 159.1EB in the same period last year.
There are a number of reasons why Seagate’s shipments fell and the company’s financial situation changed dramatically in the first quarter of fiscal year 2023. First, his COVID-induced lockdown in China slowed the economy, reducing demand for Seagate products. Second, slowing economic growth caused Seagate customers to start destocking, which further reduced the company’s sales. Third, due to the economic slowdown and rising logistics costs, CSPs began shipping hard drives and the like by ship (rather than by air), slowing procurement cycles. Finally, consumers cut spending amid inflation and geopolitical uncertainty.
Seagate tends to produce hard drive platters, heads, and other HDD components in-house and assemble drives in its own product line, resulting in fewer drives and lower demand for its products. We need to adjust production capacity and personnel. As a result, we had to implement a restructuring plan to reduce costs. This includes laying off his 8% of employees, or about 3,000 employees. The plan will be completed by the end of the second quarter of 2023, cost him $60 million to $70 million, and save Seagate about $110 million annually from his third quarter of 2023. increase.
Seagate revenue reached $2,035 million in the first quarter of fiscal 2023, down 35% year-over-year and down 23% quarter-on-quarter. Hard disk drive sales were down 38% year-over-year and accounted for 87% of the company’s sales, while solid-state drive and system sales were up 5% year-over-year and accounted for 13% of the company’s revenue. accounted for Seagate’s net income fell $29 million from $529 million in the first quarter of 2023, fueled by unprecedented demand for hard drives from cloud service providers (CSPs) and Chia miners.
Worse for Seagate, given weaker demand from server makers and cloud service providers, Seagate expects Q2 2023 to drop further to $1.85 billion ±150 million. is doing 2005, Report bloomberg.
Claims from SEC
In addition to declining hard drive sales, Seagate has also been sued by the US Department of Commerce’s Bureau of Industry and Security (BIS).seagate Said This week, in late August, we received a Proposed Complaint Letter (PCL) from the US DoC BIS alleging violations of US export controls by shipping hard drives off the Entity List in 2020-2021. That company is believed to be Huawei.
Pursuant to regulations imposed by the U.S. DoC in August 2020, do not sell products subject to U.S. export controls developed or manufactured using U.S. IP, software, technology, or equipment to Huawei or its affiliates. Companies that ship must obtain an export license from the U.S. Export Administration. Screw. Seagate believes its products have not been subject to the US Export Administration Regulations (EAR) and have not violated any regulations.
Technically, the restrictions on Huawei are primarily semiconductor-related, but Seagate’s hard drives were designed using electronic design automation tools developed by US companies and manufactured using US-made equipment. Because it uses a controller and memory, it is classified as an export-controlled item.
If Seagate and DoC are unable to resolve the issue, the HDD manufacturer will have to pay a fee for violating export regulations.
The bright spot: 30 TB HDD on track for 2023
Seagate is certainly going through tough times, but there is a light at the end of the company’s tunnel as it says it plans to ship its first 30TB hard drive with heat-assisted magnetic recording technology in 2023. And it seems.
Seagate Chief Executive Officer Dave Mosley said: “Our team is on track with our innovation roadmap and we are seeing strong engagement from our cloud customers.”
