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Western Digital (WDC) and Seagate Technology (STX) are under heavy pressure today following an announcement from Toshiba, a major HDD manufacturer, that it has begun manufacturing nearline HDDs at its Laguna Technopark facility in the Philippines, expanding production beyond its Carmelray facility, and has made its first shipment from the newly expanded production line. Toshiba plans to continue investing in the Philippine operation, with TIP aiming to nearly double its annual production capacity by FY27 compared with FY25 on a storage-capacity basis. Separately, Nikkei reports that Toshiba plans to invest roughly ¥60 bln, or $380 mln, and is targeting 30% HDD market share by storage capacity over the medium term.

• Demand for high-capacity nearline HDDs has surged alongside AI and cloud infrastructure investment as growing training, inference and agentic AI workloads create and retain increasingly large amounts of data. In their Q4 (Jun) reports in late July, WDC said cloud represented 89% of revenue, while STX said data centers accounted for roughly 90% of exabyte shipments.
• The strong demand environment, combined with disciplined industry supply, has created significant pricing power. WDC's average price per terabyte increased by high-teens yr/yr in Q4, helping gross margin expand to 54.4%, while STX said the gap between supply and demand had widened and was allowing it to capture additional pricing on incremental output.
• The concern is not that HDD demand is weakening; Toshiba itself is expanding because AI and cloud storage demand remains strong. Rather, materially more nearline capacity could begin to loosen the favorable supply-demand balance that has supported pricing and margin expansion for WDC and STX. Both companies have emphasized disciplined supply as an important part of their earnings improvement.

Briefing.com Analyst Insight

Overall, Toshiba's expansion is notable because it adds a supply-side risk to what has been a highly favorable setup for WDC and STX. Today's announcement does not undermine the strong AI and cloud-driven demand for HDDs; Toshiba is expanding capacity specifically in response to growing data center storage demand. The concern is whether added industry supply eventually loosens the tight supply-demand balance that has supported strong pricing and margin expansion. The near-term impact may be limited by existing customer commitments, with STX's nearline exabytes largely allocated into CY28 and WDC discussing LTAs extending into 2029-31. Still, if capacity begins growing faster than demand, the pricing environment that has been a major driver of recent profitability could become more difficult to sustain.