Seagate’s takeover of Samsung’s disk operations - means there are only 3 hard drive vendors - WD, Seagate and Toshiba - left in the world. What does that mean to you?
Short term
It will take time for regulatory approval - which shouldn’t be a problem - so the short term impact is limited. The bigger problem today are component shortages that affect PC vendors due to the earthquake and tsunami in Japan.
The disk spot market - where most of the drive deals come from - has tightened due to higher demand. You won’t be seeing any jaw-dropping deals on disk drives over the next few months.
Long term
The WD/Hitachi and Seagate/Samsung deals should close before the end of the year. 2012 is when we’ll start seeing the real effects of this consolidation.
Despite the buzz around SSDs, demand for disk capacity is growing. Given the explosion in data production that won’t change anytime soon.
At the same time the growth in areal density has slowed. It is harder to get higher densities out of current technologies.
Thus the industry has 2 choices: either grow disk capacity through new technologies - such as HAMR and/or patterned media - or build more disks.
Either path is expensive. New technologies will require a lot of investment, refinement and time. Building more disks using current technologies is less risky, but new factories are also expensive.
Having 2 giant companies will make either choice easier to finance. And since drive customers like having 2 sources of supply, both vendors will have to make the same choice.
Expect to see areal density increases slow and prices stabilize. Disks will continue to offer incredible value, but great deals will become less common.
And SSDs?
As previously noted, SSDs won’t replace disks. But they are devastating the lucrative high-end drive market.
Both WD and Seagate have to carve out a healthy position in SSDs and a relationship with Samsung - a major flash manufacturer - obviously helps Seagate. But the bulk of the revenue and margin dollars remain in disks and will for years.
It is consumers, not vendors, who will drive SSD uptake.
The Storage Bits take
Since the first disk drive shipped over 50 years ago some 200+ companies have entered the disk drive business. And now just 3 of them remain.
In its short life the industry has seen vibrant competition and incredible advances that rival anything in the chip industry. But the industry has matured, and with maturity has come the need for size to make continuing investments.
With only 2 major vendors a market that was once a wild-west brawl is becoming a genteel garden party. So the action moves on to other technologies: non-volatile memories; system architectures; software.
But the industry has brought us to a world where we can carry the Library of Congress in a briefcase in just 50 years. May the next 50 be just as amazing.
Comments welcome, of course.
