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Wednesday, March 9, 2011

Western Digital to Buy Hitachi's Hard Drive Sector

No pun intended on the title (hard drive, bad sectors--bad joke? I know).

Yesterday, Western Digital announced that it would be purchasing Hitachi's hard disk drive (HDD) business for approximately $4.3 billion (in a mixed purchase of both cash and stock). Hitachi would own around 10% of Western Digital's stock after the transaction. This would make Western Digital, already the biggest manufacturer of hard drives in the world--an even bigger hard drive manufacturing giant.

A hard disk drive read/write head and platter.
Source: academic.ru

Currently, Western Digital has a market share of around 31.0%, right above Seagate's market share of 29.7%. After the purchase, Western Digital's market share of the hard drive market will shoot up to a staggering 50% or higher, according to forecasts. However, this brings in the question of whether or not Western Digital will be potentially monopolizing the hard drive industry. Antitrust issues may prevail unless the deal is approved by authorities and not found to damage competition in the market.

However, both Western Digital and Hitachi have stated that they expected the deal to go smoothly and to finish by the third quarter this year. Upon breaking of the news, Western Digital's stock rose by a sharp 16% to $34.68. For a stock that has been down more than 11% for the past year, such a rise is more than welcome by stockholders.

The top 5 main hard disk drive manufacturers, which will be reduced to 4 after the transaction between Western Digital and Hitachi.
Source: IHS iSuppli and The Wall Street Journal


Now that the 5 main competitors (Western Digital, Seagate, Hitachi, Toshiba-Fujitsu, and Samsung) have been reduced to 4, what does this mean for the market as a whole? For one, the competition is probably going to heat up rather than getting reduced. With hard drive prices tumbling over the past decade and the advent of portable tablet computers which rely on static memory (see my SSD drive post), R&D may be the only way to lead a market already saturated with products offering nearly the same performance across the board.

It is clear that with this purchase, the future of hard disk drive costs, performance, and value will be altered significantly. Additionally, with a worldwide cap of neodymium by China (which controls harbors roughly 90% of the world's neodymium--a rare earth magnetic metal which is used in everything from hybrid vehicles to hard drives), new technology will almost become necessary in order to keep prices at bay.

Let's just hope that quality control remains the same across the board with all hard disk manufacturers as demand increases with more tablets, PCs, and laptops being manufactured and shipped around the world.

38 comments:

  1. No monopolization in this market when you consider that in 5 years time the hard drive will be outdated. With the process for making solid state drives becomes cheaper it will religate mechanical drives obsolete. This is a method for Western Digital to grow its bussiness as organic market growth in this industry is nonexistant.

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  2. Also Solid State drives over offer about 200 times more IOPS over a traditional hard drive.

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  3. Though its sad to see Hitachi go, it seems like business to me. They will have to fight harder against the remaining competition in the face of dropping costs in SSDs. In a decade, they'll move on to other formats anyways.

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  4. I didn't know even Hitachi made hard drives.

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  5. Personally, I'm thinking that Samsung is going to grow in the next few years. They announced recently that they are able to make a 4 TB HDD for desktops and 1TB for common notebooks.

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  6. Interesting stuff! Will definately be keeping up with this one.

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  7. Probably worth following, I've been in the market for another hard drive. All the tech stores have been failing me.

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  8. That is impressive, I have to say that Seagate are very aggressive in their marketing department, they are always sending us presents to make us buy their products, the rest of their competitors don't really care.

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  9. Interesting development, i predict a consultation of the harddrive market to max 2-3 companies in the next 5 years.

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  10. That would be a big deal. Hitachi also produces diggers, don't they?
    Baxxmans

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  11. I've always been a western digital buyer! I think there hard drives are great!

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  12. my actually HDD is a WD.
    But thx for your informative post

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  13. I just got a 1tb WD that I am very pleased with. This was a really informative post!

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  14. Haha, ever since I first built a computer, I only trusted WD / Seagate. At first, it was just Seagate but now WD as well. Other brands didn't quite make the list for me.

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  15. I wonder what will come from this, this specific industry will make a monopolization interesting

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  16. got every single hdd from WD. always worked fine so GJ

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  17. i always buy wd if hdd needed

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  18. it's kind of ridiculous to think that companies just sell off entire sections of their company for profit haha.

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  19. Reminds me that I need to get another hard drive. I didn't realize that this was going on in the market though. Interesting read.

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  20. I wonder if there will be anti-trust issues.

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  21. The life of HDDs is very short...

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  22. This is pretty big news, Western Digital is really getting huge.
    Nice article, I'll be following.

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  23. interesting stuff thanks for posting.

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  24. Western Digital is the best manufacturer!

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  25. I hope that after this WD continues to make good products.

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  26. I....didn't understand your bad joke at all.

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  27. I feel weird... I didn't get that joke either e__e

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  28. That's interesting news; unfortunately, I don't know enough about hard drive manufacture to conjecture on the ramifications of this purchase. Thanks for the post!

    (and I got the joke)

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  29. I didn't know china had all that metal

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