Seagate sees consolidation in Japan's hard drive market

Tokyo: The head of Seagate Technology, the world's largest maker of hard disk drives, said Western Digital Corp's acquisition of Komag Inc would likely spur consolidation among Japanese hard disk makers.

Hard disk drive maker and Seagate rival Western Digital has agreed to buy Komag, maker of hard disks that go into hard disk drives, for about $1 billion in cash, taking a step towards vertical integration of its storage business.

Three players

After the deal, there will only be three major independent hard disk makers -- Showa Denko KK, Hoya Corp and a unit of Fuji Electric Holdings, all of which are based in Japan.

"It was a very smart move by WD [Western Digital]. We believe in vertical integration at Seagate," Seagate chief executive officer William Watkins said at a meeting with a small group of reporters.

"I think the consequence is there can't be three Japanese media suppliers left... Hitachi is vertically integrated. So is Fujitsu. The only customers that Fuji, Showa and Hoya have are Samsung and Toshiba," he said.

Shares in Fuji Electric were down one per cent at 622 yen, while Showa Denko gained 0.5 per cent to 445 yen and Hoya rose 3.3 per cent to 4,100 yen. The Nikkei average was up 1.17 per cent.

Japan's hard disk drive industry has already seen a major reshuffle this year as a result of an acquisition that involved Seagate.

TDK Corp in March agreed to take over Alps Electric's hard disk drive head business, creating the world's only independent maker of hard drive heads, which read and write data on the disk.

Demand to grow

Alps decided to exit the market after watching orders from Maxtor dry up since the key client was acquired last year by Seagate.

Watkins also said that he expected global hard disk drive demand to grow 10-15 percent a year in unit terms over the next 3 years, and that Seagate's own business would grow in line with the industry.

"There's tremendous opportunities for storage in how we digitise your home because what enables this content to be distributed digitally, electronically are storage devices," Watkins said.