History (1998): 3-Inch HDD Form Factor?

3-inch form factor? “No” replies JTS and Western Digital. “Yes” counters its last bastion, Integral Peripherals.

JTS is probably not as categorical as they claim, since there are no doubt old stocks and backorders yet to satisfy.

Tom Mitchell, president and CEO, stated: “Though strategically we believe the 3-inch platform continues to offer opportunities, tactically we decided not to continue to support this program; we plan to focus our resources on our desktop product offerings.”

“The technology itself is not at issue,” said Firiwan Keawchanslip, in charge of JTS’ sales in Southern Europe. “We just prefer to focus our resources on 3.5-inch, which doesn’t mean we won’t come back to 3-inch one day.”

For Western Digital, however, it’s more cut and dry. Officially, “the company will exit the 3-inch portable hard drive business.”

Will Integral Peripherals, the last of the 3 firms still involved in this form factor, continue alone?

Annadell Poindexter, in charge of the firm’s marketing and communication, responds: “Integral remains committed to the 3-inch form factor as do our notebook manufacturing partners. With JTS and WD’s recent announcements a number of you have expressed concern about Integral’s continued support of the 3-inch market. Let me assure you – Integral still believes that the 3-inch form factor is the future of notebook storage. And that the reasons we entered the 3-inch market haven’t changed...”

She also added that her firm is already working on a single platter 2.1GB drive.

It’s this slight worldwide hesitation that explains why Seagate, Quantum and WD decided to put the brakes on their production, which could cause them to lose some market share to competitors with a little more stamina, be they IBM, Fujitsu or Korean manufacturers Hyundai/Maxtor and Samsung.

The last 3, moreover, are often blamed for doing the most to hurt prices. Yet it is difficult to reproach a company like Samsung. Lacking the brand recognition of its major competitors, what else can the firm do but sell for less? The fact that WD has asked the US government to investigate the possibility that Asian manufacturers are dumping disk drives on the US market will not really solve the larger problems.

Such aggressive pricing policies also come from OEM PC manufacturers. In addition to their Christmas sales blitz, also more sluggish than expected, PC manufacturers are inclining towards the cheapest possible micro-computers, at less than $1,500, some even less than $1,000. To get there, they need HDDs at minimal costs. Which means 1GB units at $100 or 2GB devices at $150 in order to be competitive, which in turn means a minimal gross margin for HDD manufacturers.

In the high-end storage device arena, curiously, demand is flat, most likely because server manufacturers tend to favor less costly high-end desktop drives for building solutions.

The relatively late release of Microsoft Windows 98, even more memory hungry than Windows 95, is not going to help matters for HDD makers.

HDD manufacturers transferred the drive surplus they couldn’t place with OEMs to the distribution channels, and that’s where the pricing floor gave in.

The fallout of this latest crisis has been considerable, but some kind of equilibrium should hit with in 6 months, when WW production capacities realign with demand. No doubt then we’ll see the phenomenon of allocation once more, with investment in new plants, followed by overproduction and slashed prices: all over again.

This is simply the normal movement of the HDD industry, with a relatively long cycle.

A highly competitive industry
The current somersault is just the result of a competitive industry. The largest HDD manufacturers are listed on the stock exchange, and refuse to be underpriced, which explains the bloody and never-ending battles that are so good for consumers. It’s the logical result of a capitalist system, which forces, by means of the stock market, to run their business in a healthy but ruthless manner. Better days lead eventually to some bulletbiting, and painful restructurings that follow give way tomorrow to another golden era (at least a few months) before another crash.

This article is an abstract of news published on issue 120 on January 1998 from the former paper version of Computer Data Storage Newsletter.

Note: No other companies revealed 3-inch HDD, finally unsuccessful, the last one being announced on November 1997.