Seagate and Western Digital appear to have locked up the majority of the hard disk drive (HDD) market with their respective acquisitions of Samsung and Hitachi’s business. Leaving Toshiba with just a sliver, the American companies will soon become giants, each with more than 40% of the total HDD share and a full line of products. Despite the noise made by solid-state disk (SSD) lovers, the HDD market is likely to continue to rake in profits for decades, and these two giants will battle it out for the foreseeable future.
Western Digital Looks To The Enterprise
Originally maker of integrated circuit chips, Western Digital entered the storage market in the early 1980s, producing hard disk drive controllers. It wasn’t until 1988 that Western Digital produced its first hard disk drive, after acquiring Tandon. These were decidedly low-end products, competing in the desktop PC business with the likes of Quantum and Maxtor, two companies that would later merge and sell to arch-rival Seagate.
Western Digital moved steadily upmarket after the year 2000, expanding buffer cache and platter speeds. This culminated in the Raptor line, the first 10,000 rpm serial ATA (SATA) hard disk drive, and Western Digital is still known as a purveyor of high-performance desktop hard disk drives today. The VelociRaptor, for example, is popular among gamers for its small low-latency platters and high spindle speed.
Although Western Digital sells a wide variety of hard disk drives, they’re not a familiar face in the enterprise storage market. They’ve produced a number of raid storage devices but have never been able to break in the high-end, and have similarly been left out of many OEM contracts.
All this will change shortly, as Western Digital will soon acquire Hitachi Global Storage Technologies (HGST). Formed as a merger of the hard disk drive businesses of IBM and Hitachi, HGST is a formidable competitor in many OEM areas, including enterprise storage. The combined company will control nearly half the storage market, offering products in every niche.
Seagate Expands In Asia
In contrast to Western Digital, Seagate is a familiar name in much of the storage market. Founded by a group of industry legends, including Al Shugart and Finis Conner, Seagate move rapidly from the personal computer space into the enterprise. By the late 1990s, Seagate was prime supplier for enterprise storage companies, competing with IBM and Hitachi.
Although formerly dominant, Seagate was surpassed in market share by Western Digital even before they acquired HGST. The new Western Digital would have dwarfed Seagate, whose 30% market share left them in a distant second place. It is perhaps easier to understand Western Digital’s moves that Seagate’s, but there is much logic in acquiring the hard disk drive assets of Samsung.
First, the transaction, worth 1 1/3 billion dollars, bring Seagate back within spitting distance of the new Western Digital. It also opens up the vast Asian OEM market, where Samsung has had much success, and guarantees a market for Seagate hard disk drives in Samsung products. But the relationship between these two companies goes much further: Samsung and Seagate are now related companies, just as Hitachi and Western Digital will be once the acquisition is complete. In both cases, the new companies will have a strong East-West alliance.
The NAND Angle
Although much of the attention in both transactions has revolved around a hard disk drive business, one should not overlook the solid-state implications. Samsung is the world’s largest supplier of NAND flash memory, and Seagate will gain an important relationship with the company. This may be the furthest reaching aspect of the transaction, since Seagate will be able to leverage this relationship as high-performance storage transitions to flash memory.
HGST had already been working with Intel to develop high-performance flash-based storage, and their combination with Western Digital will continue and expand this relationship. Intel, partnered with Micron as IMFT, is another leading supplier of flash memory chips, and the collaboration with HGST looked promising in the enterprise space. Therefore, both companies gain access to key flash memory technology thanks to these transactions.
Both Seagate and Western Digital have much to gain from these transactions. Western Digital becomes a full line giant of the industry, a credible competitor, and a successful supplier to OEMs. Seagate also retains its credibility in the market, but also gains access to Samsung, one of the strongest electronics companies in the world. Time will tell which of these companies got the better deal.