Another one bites the dust. Western Digital's acquisition of Hitachi's disk business and means some things that consumers will like and some things consumers won't. In the big picture it is a continuation of the slowdown in core IT technologies.
Besides making WD the world's largest disk drive firm, the acquisition eliminates a perennial weak sister in the disk drive business. Hitachi has struggled since they acquired IBM's disk business to make it profitable.
Hitachi recently succeeded in that goal, but the $4.3 billion price just covers the cost of the IBM acquisition and the losses they've taken since then. Hitachi came out whole, barely.
- WD is the world's most efficient manufacturer of hard drives. The efficiencies range from their drive yields – commonly the highest in the industry – to the extremely lean corporate staff they've had for years.
- The Hitachi product line and OEM relationships will expand WD's market reach. This means more competition for Seagate, longtime leader in high-end enterprise drives.
- Capital requirements for the next generation of drive technology – patterned media and heat assisted magnetic recording – are enormous, much like the cost required to build new chip fabs. A larger company can bear those costs were easily.
- If the physics and the materials science cooperate that means we'll continue to have higher capacity drives for at least another decade.
- Bargain hunter alert: with one less, sometimes desperate, competitor on the field of we won't see as many firesale pricing events.
- The per gigabyte price declines we've seen for years won't be as steady or a steep. Beginning next year expect to see annual price declines drop to about 30% per gigabyte per year, down from the traditional 40 to 50% declines in we've seen for years.
- The pressure on the remaining drive vendors – Toshiba, Seagate and Samsung – to consolidate will increase. The world only needs three hard drive manufacturers and it looks like we'll soon be there.
- The rate of technological improvement will slow. The investments in next-generation hard drive technology will be easier to finance, but the urgency to bring them to market will decrease.
The Storage Bits take
After more than 50 tumultuous years of wild innovation that saw hundreds of disk drive companies come and go the industry is moving into end-stage maturity. Once down to three or four vendors and no new markets - other than archive-quality disks - it comes down to wringing out modest improvements from stepwise enhancements day after day, year after year.
Inevitably, the slowdown in capacity improvements and price declines will shift the opportunities for technological innovation from drives to how we architect the systems that use the drives.
New filesystems, lower cost interconnects and novel nonvolatile memory techniques will all enable improved ways of utilizing venerable disk drive technologies. But like the slowdown in CPU improvement, the slowdown in drive technology will have a long-term and profound impact on how we manage and use massive data.
Comments welcome, of course. I like WD's approach to business. All in all, the good outweighs the bad for the industry and consumers.