Key insights
- Seagate's stock fell after the CEO announced no plans for factory expansion due to long lead times. The company will focus on technology transitions to increase capacity within existing facilities. This decision reflects a cautious approach to meeting soaring demand for memory chips and a focus on long-term growth through technology rather than pure capacity additions. The market reaction suggests concern about Seagate's ability to capitalize on current demand.
Investing.com -- Seagate Technology Holdings (NASDAQ: STX) shares fell 7.5% Monday after Chief Executive Officer Dave Mosley said building new factories would "take too long" during a presentation at the JPMorgan Global Technology, Media and Communications Conference.
When asked whether Seagate plans to expand manufacturing capacity to meet soaring demand for memory chips, Mosley said new factories would "take too long" and potentially set up the company with more capacity than it needs. The CEO emphasized that the company is focused on driving exabyte growth through technology transitions rather than adding new manufacturing facilities.
Mosley explained that Seagate’s critical components, particularly recording head wafers, have lead times exceeding nine months, with drives taking an additional quarter to produce. The company has moved to a build-to-order approach, providing visibility four to five quarters out.
"If we took the teams off and started building new factories or bringing up new machines that would just take too long, you end-up more capacity, if you will, but then you’d slow the rate of growth on that technology," Mosley said during the conference.
The CEO said Seagate is targeting mid-20s percent CAGR growth by advancing through technology transitions, moving from 3 terabyte per platter products to 4 and 5 terabytes per platter. The company is adding tools to strengthen capacity within existing manufacturing facilities rather than pursuing pure capacity additions.
Mosley noted that demand significantly exceeds the company’s current supply, with customers seeking more exabytes. However, he indicated that unit capacity expansion would only make sense if applications like Edge AI take hold, which would require diversifying beyond current data center uses.
The company has qualified its Mozaic 3 HAMR technology at all planned cloud service providers and expects to reach 50% exabyte crossover to HAMR in the second half of calendar 2026.