Hitachi, Fujitsu and Toshiba Together for a New Japanese Conglomerate in Hard Disk Drives?

This rumor is circulating all over the Web but wait for the confirmation.

The truth is that HDD manufacturer Hitachi GST was approached by some buyers like Silver Lake Partners and others as it is losing money since its acquisition of IBM disk business for more than $2 billion in 2002.

Hitachi GST, Fujitsu and Toshiba together will be an enormous change in the hard disk drive industry with only five HDD manufacturers remaining on the market if we add tiny Iomega/Excelstor, Samsung, Seagate and Western Digital. We have counted 192 HDD makers that enter this specialty since the origin of the industry in 1956 by IBM. Now only 5! And with just two being active in enterprise drives with Seagate and the new Japanese conglomerate.

Based on the best figures in this industry provided by TrendFOCUS for 3Q07, the new venture will be not far from Seagate in term of units shipped:

• Seagate: 35.3%
• Hitachi GST + Fujitsu + Toshiba: 33.4%
• WD: 22.0%
• Samsung: 8.9%
• Iomega/Excelstor: 0.5%

It will be a complicated deal. Combining two companies is not an easy job, but three! And which company will head the merger? The biggest one but the non-profitable HGST? Will there be a parity between Fujitsu and Toshiba which are producing about the same number of drives. And what about the restructuration! Which manufacturing plants to keep? How to combine R&D teams in Japan and in California as well as sales and marketing forces all around the world? It will not be easy to find a new name for the NewCo: HGST-Fujisu-Toshiba Hard Disk Drive Co.? Too long. Why not simply JapanDisk?

Historically, big Japanese companies don’t like to shake hands. And here, the three ones are competing in a lot of other products, and not only in IT. But there are few cases in (optical) storage: NEC and Sony with Optiarc, Hitachi and LG with Hitachi-LG Data Storage, and also Toshiba and Samsung with Toshiba-Samsung
Storage Technology Corp..

Will it change the historical continuing war on prices? We don’t think so. In this competitive industry, if there were only two manufacturers remaining on the floor, the boxing scheme will not change.

It’s hard to believe that leader Seagate and successful WD will not try to do their best to avoid this incredible consolidation that will completely change the face of the worldwide disk drive manufacturing industry.

And don’t wait for any start-up to add actors in this field. Cornice and GS Magicstor, the last two ones trying to enter HDD, collapsed. For two reasons: 1/ this activity needs a huge investment; 2/ all the patents you need to design your fist unit are owned by the current makers and the price to get them will be as high as the Eiffel Tower.