Analysis of Reportable Segments
Western Digital Corp. operates in 2 segments: Flash-based products (Flash) and Hard disk drives (HDD).
Segment Profit Margin
Western Digital Corp., profit margin by reportable segment
| Jun 30, 2023 | Jul 1, 2022 | Jul 2, 2021 | Jul 3, 2020 | Jun 28, 2019 | Jun 29, 2018 | |
|---|---|---|---|---|---|---|
| Flash-based products (Flash) | 7.14% | 36.16% | 29.99% | 24.49% | — | — |
| Hard disk drives (HDD) | 24.06% | 29.44% | 27.03% | 29.02% | — | — |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-07-01), 10-K (reporting date: 2021-07-02), 10-K (reporting date: 2020-07-03), 10-K (reporting date: 2019-06-28), 10-K (reporting date: 2018-06-29).
The segment profit margins for Flash-based products and Hard disk drives exhibit divergent performance patterns between 2020 and 2023, characterized by high volatility in the Flash segment and relative stability in the HDD segment.
- Flash-based Products (Flash)
- A period of sustained margin expansion occurred between 2020 and 2022, with profitability rising from 24.49% to a peak of 36.16%. This upward trajectory reversed sharply in the fiscal year ending June 30, 2023, when margins contracted significantly to 7.14%, representing the lowest profitability level recorded across the analyzed period.
- Hard Disk Drives (HDD)
- Profit margins for the HDD segment demonstrated a more consistent profile, fluctuating within a narrower range. Margins began at 29.02% in 2020, experienced a minor decrease to 27.03% in 2021, recovered to 29.44% in 2022, and subsequently declined to 24.06% in 2023.
- Comparative Segment Performance
- While Flash-based products achieved higher peak profitability than the HDD segment by 2022, the HDD segment exhibited significantly lower volatility. By June 30, 2023, a reversal in relative performance is observed, as the HDD segment's margin of 24.06% substantially exceeded the Flash segment's 7.14%, indicating a shift in the stability of profit contributions between the two segments.
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Segment Profit Margin: Flash-based products (Flash)
Western Digital Corp.; Flash-based products (Flash); segment profit margin calculation
| Jun 30, 2023 | Jul 1, 2022 | Jul 2, 2021 | Jul 3, 2020 | Jun 28, 2019 | Jun 29, 2018 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross profit | 433) | 3,527) | 2,611) | 1,903) | —) | —) |
| Net revenue | 6,063) | 9,753) | 8,706) | 7,769) | —) | —) |
| Segment Profitability Ratio | ||||||
| Segment profit margin1 | 7.14% | 36.16% | 29.99% | 24.49% | — | — |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-07-01), 10-K (reporting date: 2021-07-02), 10-K (reporting date: 2020-07-03), 10-K (reporting date: 2019-06-28), 10-K (reporting date: 2018-06-29).
1 2023 Calculation
Segment profit margin = 100 × Gross profit ÷ Net revenue
= 100 × 433 ÷ 6,063 = 7.14%
The financial performance of the Flash-based products segment is characterized by a period of consistent expansion from 2020 through 2022, followed by a significant contraction in 2023. The segment experienced simultaneous growth in both scale and efficiency during the first three years of the observed period, before facing a sharp decline in all key metrics.
- Revenue Trajectory
- Net revenue demonstrated a steady upward trend from 2020 to 2022, increasing from 7,769 million US dollars to a peak of 9,753 million US dollars. This growth phase was followed by a substantial decrease in 2023, with revenue falling to 6,063 million US dollars, representing a significant reduction in market demand or pricing.
- Gross Profitability
- Gross profit grew aggressively between 2020 and 2022, rising from 1,903 million US dollars to 3,527 million US dollars. However, this gain was largely erased in 2023, as gross profit plummeted to 433 million US dollars. The magnitude of the profit decline far exceeded the proportional drop in net revenue, suggesting a severe compression of margins.
- Segment Profit Margin Analysis
- The segment profit margin showed a strong positive correlation with revenue growth from 2020 to 2022, climbing from 24.49% to 36.16%. This indicates improved operational leverage or pricing power during that period. In 2023, the margin experienced a sharp correction, falling to 7.14%, the lowest level in the analyzed period.
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Segment Profit Margin: Hard disk drives (HDD)
Western Digital Corp.; Hard disk drives (HDD); segment profit margin calculation
| Jun 30, 2023 | Jul 1, 2022 | Jul 2, 2021 | Jul 3, 2020 | Jun 28, 2019 | Jun 29, 2018 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross profit | 1,505) | 2,661) | 2,221) | 2,602) | —) | —) |
| Net revenue | 6,255) | 9,040) | 8,216) | 8,967) | —) | —) |
| Segment Profitability Ratio | ||||||
| Segment profit margin1 | 24.06% | 29.44% | 27.03% | 29.02% | — | — |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-07-01), 10-K (reporting date: 2021-07-02), 10-K (reporting date: 2020-07-03), 10-K (reporting date: 2019-06-28), 10-K (reporting date: 2018-06-29).
1 2023 Calculation
Segment profit margin = 100 × Gross profit ÷ Net revenue
= 100 × 1,505 ÷ 6,255 = 24.06%
The financial performance of the Hard Disk Drives (HDD) segment between 2020 and 2023 is characterized by relative stability through 2022, followed by a sharp contraction in both top-line revenue and profitability in 2023.
- Net Revenue Trends
- Net revenue experienced moderate volatility from 2020 to 2022, peaking at 9,040 million US dollars in 2022. This was followed by a significant downturn in 2023, where revenue fell to 6,255 million US dollars, indicating a substantial reduction in segment scale.
- Gross Profit Trajectory
- Gross profit mirrored the revenue trend, reaching a high of 2,661 million US dollars in 2022. A precipitous decline occurred in 2023, with gross profit dropping to 1,505 million US dollars, reflecting the combined impact of lower sales volume and potential pricing pressures.
- Segment Profit Margin Analysis
- The segment profit margin remained resilient between 2020 and 2022, fluctuating within a narrow band between 27.03% and 29.44%. However, a marked compression is observed in 2023, as the margin fell to 24.06%. This downward shift suggests a deterioration in operational efficiency and a decreased ability to absorb costs relative to revenue during the 2023 fiscal period.
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Net revenue
Western Digital Corp., net revenue by reportable segment
US$ in millions
| Jun 30, 2023 | Jul 1, 2022 | Jul 2, 2021 | Jul 3, 2020 | Jun 28, 2019 | Jun 29, 2018 | |
|---|---|---|---|---|---|---|
| Flash-based products (Flash) | 6,063) | 9,753) | 8,706) | 7,769) | —) | —) |
| Hard disk drives (HDD) | 6,255) | 9,040) | 8,216) | 8,967) | —) | —) |
| Total | 12,318) | 18,793) | 16,922) | 16,736) | —) | —) |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-07-01), 10-K (reporting date: 2021-07-02), 10-K (reporting date: 2020-07-03), 10-K (reporting date: 2019-06-28), 10-K (reporting date: 2018-06-29).
Total net revenue exhibited a trajectory of moderate growth between 2020 and 2022, followed by a significant contraction in 2023. Aggregate revenue increased from US$ 16,736 million in 2020 to a peak of US$ 18,793 million in 2022, before declining sharply to US$ 12,318 million in 2023, representing a year-over-year decrease of approximately 34.4%.
- Flash-based Products (Flash)
- This segment experienced a steady upward trend for three consecutive years, rising from US$ 7,769 million in 2020 to US$ 9,753 million in 2022. This growth phase was abruptly reversed in 2023, with revenue falling to US$ 6,063 million, marking a substantial reduction from its peak performance.
- Hard Disk Drives (HDD)
- The HDD segment demonstrated greater volatility compared to Flash. After an initial decline from US$ 8,967 million in 2020 to US$ 8,216 million in 2021, revenue recovered to US$ 9,040 million in 2022. However, the segment suffered a steep decline in 2023, falling to US$ 6,255 million.
- Segmental Revenue Distribution
- A shift in revenue leadership occurred over the observed period. In 2020, the HDD segment was the primary revenue driver. By 2022, the Flash segment had surpassed HDD to become the largest contributor to total net revenue. By 2023, both segments converged at a significantly lower revenue level, with HDD marginally exceeding Flash in terms of total contribution.
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Gross profit
Western Digital Corp., gross profit by reportable segment
US$ in millions
| Jun 30, 2023 | Jul 1, 2022 | Jul 2, 2021 | Jul 3, 2020 | Jun 28, 2019 | Jun 29, 2018 | |
|---|---|---|---|---|---|---|
| Flash-based products (Flash) | 433) | 3,527) | 2,611) | 1,903) | —) | —) |
| Hard disk drives (HDD) | 1,505) | 2,661) | 2,221) | 2,602) | —) | —) |
| Total | 1,938) | 6,188) | 4,832) | 4,505) | —) | —) |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-07-01), 10-K (reporting date: 2021-07-02), 10-K (reporting date: 2020-07-03), 10-K (reporting date: 2019-06-28), 10-K (reporting date: 2018-06-29).
Total gross profit exhibited a growth trajectory between 2020 and 2022, increasing from US$ 4,505 million to a peak of US$ 6,188 million, before experiencing a severe contraction to US$ 1,938 million in 2023. This overall volatility is primarily driven by the performance of the Flash-based products segment.
- Flash-based products (Flash)
- This segment showed strong growth from 2020 to 2022, with gross profit rising from US$ 1,903 million to US$ 3,527 million. However, a precipitous decline occurred in 2023, where gross profit fell to US$ 433 million, representing a significant reduction in profitability for this business line.
- Hard disk drives (HDD)
- The HDD segment demonstrated more stability relative to the Flash segment between 2020 and 2022, with values fluctuating between US$ 2,221 million and US$ 2,661 million. In 2023, this segment also experienced a downturn, with gross profit decreasing to US$ 1,505 million.
- Segment Contribution Shift
- A notable shift in the profit mix is observed. In 2022, Flash-based products were the primary driver of profitability, contributing approximately 57% of the total gross profit. By 2023, the HDD segment became the dominant contributor, accounting for approximately 77.6% of the total gross profit due to the disproportionate collapse in the Flash segment.
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