News

posted on 21 April 2008 11:29

Hitachi GST, Hitachi's perennially loss-making hard disk drive unit, has decided to compete head on with Seagate in the server hard drive market.

Buoyed by its first profitable quarter in a long time (Q4 in fy 07) due to a strong market and lower production costs, parent Hitachi called off talks with private equity company Silver Lake, and gave its GST subsidiary its head.

Hitachi GST chairman and CEO Hiroaki Nakanishi, believes that more production cost can be wrung out of its operation. Multiple production bases for drive heads, head gimbal assemblies, and drive media have aleady been consolidated and more such production consolidation efforts will complete this year and next.

The company has increased its yield of TMR heads by double digit percentages from 2006 through 2007 by improving production processes. It has also lowered its procurement costs and developed lower cost product designs.

Nakanishi said that Hitachi, which has just announced its first 1TB enterprise hard drive, will focus on server 2.5-inch and 3.5-inch drives. It has previously ended production of 1-inch and 1.8-inch drives, a market under assault from flash memory. Nakansishi says that server hard drives are moving to the 2.5-inch form factor because of the popularity of blade servers and their lower power needs.

He did not announce an attempt to gain areal density leadership by binging forward higher density discrete track media or bit-patterned media into production. Yes, Hitachi GST's R&D is working on this technology but it requires additional production processes compared to existing processes, and the huge capital investment required cannot be justified, yet.

He is impressed that Toshiba has said it will put such technologies into production in 2009 but did not say he'd follow suit.

Seagate has 60 percent of the server hard drive market. Without areal density leadership it is hard to see how the Hitachi GST HDD oil tanker can catch up with the Seagate one. It surely cannot cut its production costs to be significantly lower than Seagate's.

The crucial decisions are likely to be when it moves to third generation perpendicular recording techology and then, when it moves to the next techology generation. Only many tens of millions of 2.5-inch drive sales are likely to bring in the revenue needed to pay for the introduction of such technology.

Prepare to watch the oil tankers race.

^{[Paul Roberts, news editor.]}