Analysis Intevac has said there is strong interest in its HAMR disk drive platter and head production machinery from a second customer, which could indicate that Western Digital is now involved in HAMR disk developments following Seagate’s move into volume production.
Intevac supplies its 200 Lean thin-film processing machines to hard disk drive media manufacturers, such as Seagate, Showa Denko and Western Digital. It claims more than 65 percent of the world’s HDD production relies on its machinery. The Lean 200 is used to manufacture recording media, disk drive platters, for current perpendicular magnetic recording (PMR) disks.
Intevac’s main customer for HAMR-capable 200 Lean machines is Seagate, which first embarked on its HAMR development in the early 2000s. It is only this year that a prominent cloud service provider has certified Seagate’s Mozaic 3 HAMR drives for general use, more than 20 years after development first started. The lengthy development period has been ascribed to solving difficulties in producing drives with high reliability from high yield manufacturing processes, and Intevac will have been closely involved in ensuring that its 200 Lean machines played their part in this.
There are basically only three disk drive manufacturers: vertically integrated Seagate and Western Digital, which between the two of them dominate the market, and smaller player Toshiba, which uses suppliers such as Showa Denko. Collectively they have around 140 x 200 Lean Machines installed and Intevac has a lumpy sales cycle as the machines are expensive, sold to a single digit number of customers, and their purchase rate tends to follow the disk drive market’s cycles. As HAMR drive acceptance has been so lengthy, and the disk drive market has only emerged from a down cycle in recent quarters, Intevac 200 Lean system sales have been constrained, with one early 2024 order cancelled.
We have asked both Toshiba and Western Digital for comment on the identity of the second HAMR customer mentioned by Intevac. B&F believes this is likely WD because of its budget and market as well as the fact that it lines up with a timeline it gave previously for volume shipping of the technology.
A thin-film, from a few nanometers to a few micrometers in thickness, is deposited on the surface of disk drive platters and read/write heads using sputter deposition technology. This is based on magnetron sputtering in which high-energy argon gas ions are directed at a target material, such as a cobalt alloy, inside a vacuum chamber. This forces some of the target’s atoms to be ejected and they are deposited on the receiving substrate, forming a thin film.
There are multiple film layers on a disk platter. One is a magnetizable cobalt alloy and is used for data recording with positive or negative bit areas. There is also an insulating layer to prevent a read/write head causing damage, corrosion or wear to the recording film layer, plus a top-layer protective film.
Read/write heads have films supporting magneto-resistive and tunneling magneto-resistive sensors necessary for their read and write functionality.
Such thin-films have to be applied to the underlying substrate with high precision and uniformity to function properly. The 200 Lean machines can be upgraded to increase throughput, reduce the disk defect rate, increase the vacuum, and produce HAMR (Heat-Assisted Magnetic Recording) media. For example, Intevac’s Radio Frequency Source “is most suitable for deposition of non-metallic (insulating) or high resistivity metal targets that may be used in advanced HAMR applications.”
Consequently signs of interest for new machines or substantial upgrades to installed ones are of interest from a quarterly financial reporting point of view.
A relevant background point is that a second Intevac product line for TRIO coating systems for consumer and automotive touch screens has been closed down due to poor sales, making the company more dependent in its 200 Lean machine sales.
Intevac has just announced its third fiscal 2024 quarterly earnings and stated: “The company’s focus has shifted to the Hard Disk Drive (HDD) sector following the underperformance of its TRIO technology. … Intevac’s HDD business is anticipated to generate approximately $200 million in revenue over the next three years, driven by industry-wide adoption of Heat-Assisted Magnetic Recording (HAMR) technology, which is expected to meet the growing demands of datacenters and artificial intelligence.”
Further: “The company has secured a second significant customer for HAMR, with initial upgrades completed. Intevac’s restructuring aims to increase efficiency and streamline operations, focusing on its core HDD business. The company’s CEO Nigel Hunton expressed confidence in the leadership team and the company’s strategy to enable the HDD industry’s transition to HAMR.”
In the fy2024 3Q earnings call, Hunton said the order cancellation had created substantial problems: “We encountered an unprecedented order cancellation more than eight months ago, but still have yet to resolve the transfer of inventory and material receipts off our balance sheet. For this quarter, we have made a decision to temporarily suspend our fulfillment of HDD orders and to let customers fulfill their obligations regarding payables and inventory. We are confident that we can get the business back in alignment with our standard terms but we are not using Intevac’s cash to fund our customers. I know our investors will understand the position we have taken.”
Analyst Mark Miller asked: “Western Digital during its recent conference call indicated that they were going to wait until 4 terabytes per platter to phase in HAMR. Do you have any feeling when that will be? Will that be later this year or 2025?”
Hunton responded: “I think Western Digital’s announcement was very positive for us. I think as you see the industry move towards HAMR was traditionally focused really around one customer. I think now you’re seeing the industry following. And I think on prior calls, we’ve sort of said that WD might be a year behind, I think we’ll see towards the end of this year into 2025, I think it’s a very positive thing for the company.”
Intevac said it has “retained Houlihan Lokey Capital, Inc. to advise on strategic alternatives to increase shareholder value.”
