Evercore says vertical integration favors Seagate and WDC

Investing.com -- Evercore analysts said the hard disk drive industry can meet growing exabyte demand while maintaining discipline on finished-drive units through higher areal density, which produces more terabytes per drive.

The firm said this approach shifts the production bottleneck upstream from final assembly into head wafers, HAMR photonics, magnetic media, glass substrates, deposition and testing. This dynamic favors Seagate (NASDAQ: STX) and Western Digital (NASDAQ: WDC), according to Evercore.

The analysts noted that both companies manufacture substantially all of their heads and media, allowing them to co-optimize the recording system, accelerate yield learning and retain the resulting cost per terabyte benefit.

HAMR technology adds a laser, waveguide and near-field transducer to turn the writer into a magnetic-photonic device. Specialized tools, difficult optical and thermal yields, and six-to-nine-month head-wafer cycles make qualified head capacity far less elastic than drive assembly, the firm said.

HAMR requires FePt recording layers, tighter thermal stacks and greater defect control. Merchant supply is concentrated in HOYA for glass substrates and Resonac for finished media, with much of the capacity addition arriving in 2028-29.

Between 2025 and 2030, IDC expects capacity-optimized HDD units to grow approximately 11% annually versus approximately 13% for media, substrates, HGAs and suspensions. Evercore views this as a component-content and process-conversion cycle, with the largest gap in 2027-28.

The firm estimates a 32TB, 10-disk HAMR drive carries approximately $190-195 of bill of materials. The larger benefit emerges near 40TB, where flat unit cost could reduce cost per terabyte by approximately 20%.

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