Making them TOO well?
I'd venture to guess that the reason for the decline in hard drive sales is NOT that they're less popular, but that they're being made TOO well.
That, and the reduction in sales of new PC computers, particularly those with spinny drives. [my usual comments as to why are currently being withheld, but people generally fix and upgrade the old boxen, until there is no longer a need to do so]
The price of hard drives right now is REALLY good. You can get a 2TB spinny drive for under $100, and a good quality one at that. And seriously, even if you work at it, filling up a 2TB drive takes a while. Most people (who don't have source repositories on them or a zillion torrent'd videos) might actually never fill it before it develops bad sectors and needs replacing.
But one other thing worthy of mention: Milpitas and San Jose are right next to one another on the map. Silly Valley and Orange County are both VERY expensive to live in. And of course, wages will be highest there (within the USA), with maybe 2 or 3 other places being worse, like San Francisco and New York City. So they might actually be MINIMIZING the number of people they let go by focusing on those locations...