14
Western Digital set to acquire Hitachi GST… but what does this mean for the industry?
The acquisition of Hitachi GST by Western Digital could be seen in two ways; as a positive move that will create new investment and opportunity; or as a further consolidation of the disk storage vendor community that will play into the hands of the biggest players. The disk storage market is an extremely competitive, global, volume business. According to market research firm iSuppli, WD has about 31% of the market, closely followed by Seagate with 29%, while Hitachi has around 18%. So, post acquisition, the WD-Hitachi alliance will have almost half of the market.
Assuming the purchase is allowed to go ahead – it is subject to regulatory approval of course – WD and Hitachi will presumably bring their product lines together and drive economies of scale. This won’t necessarily reduce choice, but it will reduce overall costs. The merged WD/Hitachi will be a more stable and more competitive business.
It will also mean that WD/ Hitachi will become the dominant player. If it looks like being approved, Seagate may try to make a further acquisition itself. The problem here is that there is not much left to buy; other disk drive makers, such as Samsung and Fujitsu, are significant businesses in their own right but may not be for sale and more to the point, have relatively small shares. The big three – as they are today – dominate with 80 percent of the market.
But there is another very important aspect to this whole story – the rise of the tablet PC, cloud computing and solid state technology. These trends are changing the dynamics of the whole industry. Improvements in flash memory are going to reduce demand for smaller hard disks in mobile devices, while increasing use of the cloud is going to fuel the need for much larger more resilient storage arrays. Somewhere in between solid state drives are going to take over as the core technology for local PC and server storage.
None of that is going to happen overnight of course. It is going to take years so we are not about to see sales of disk drives fall off a cliff. But the market is going to change. High volume production will shift from small disk drives to Flash and other memory technologies, and to a lesser degree SSDs; and there will be more focus on massive disk arrays that can provide dynamic storage for the data centre. As a merged entity, WD and Hitachi will be in a stronger position to prosper as we move towards this new era in storage.
What do you think – let us know below.
Not sure it means more stability and competition in drive supply. One of the biggest issues for Seagate in particular has been the inability to forecast the ups and downs. Having fewer suppliers makes the ups and downs worse and more likely. It will mean a boost for the brokers and third party cross-border grey market suppliers unfortunately. Will TD be holding more stock from the combined company?
A couple of good points raised…. One of the reasons for WD acquisition of Hitachi, was a easy route to break into the Enterprise/SAS Market, as you may be aware there is no current offering from WD on SAS. WD have also gained a route into the High-end Mac arena, with Hitachi’s recent acquisition of GTECH. Hitachi having factories & R&D already set up for HDD production is a far less costly exercise for WD than to start from the gound up. The “grey market” I see actuallly shinking, as WD in past experience are very good at policing the Channel. Stock Holding at TD will combine rather that canibalise the stock holding when they fully merge in late in Q3.