Western Digital Scores While Others Stumble

Posted on December 1, 1996 
Filed Under Julian, Nikkei Electronics Asia

By Julian Matthews

The recent upheavals in the hard disk drive (HDD) manufacturing industry appear to have left US drive maker Western Digital Corp unscathed.

According to International Data Corp, Western Digital Corp is set to gain 18% market share in 1996 from 14% a year ago and is ranked third behind leaders Seagate Technology Inc and Quantum Corp.

At the opening of its second facility in Malaysia in October, chairman, president and CEO of Western Digital Corp, Charles Haggerty said in its 1996 fiscal year the company made about 15.3 million HDDs up from 10 million the previous year, raking in revenues of almost US$3 billion. The company is targeting to make 21 million HDDs in fiscal 1997.

Analysts say Western Digital has benefited because it has stuck to thin-film media technology, when others have committed to superior magneto-resistive (MR) technology.

MR heads allow manufacturers to pack more data onto the disk, increasing capacity without adding more disk platters. But these heads have been slow out of the gate.

In July, new MR entrant IBM Corp announced a US$380 million investment to manufacture MR heads and sliders for the merchant market over the next two years. But IBM’s MR head components, now in their fifth generation, are still only being used internally.

Read-Rite Corp and Seagate Technology Inc, the industry leaders in head production, were also slow to increase volume production of their own MR heads.

Western Digital has been the real winner because it has successfully resisted the transition into integrating MR heads, forced its suppliers into reducing prices, and divested itself of its non-disk-drive-related businesses.

Consolidation among drive-makers has also benefited the company. Haggerty says in 1989, there were 29 hard drive suppliers in the US, 22 in Asia and five in Europe. “Today, there are six in the United States and five in Asia. That’s the whole industry,” he said.

“Consolidation is producing a better outlook for stability and profitability,” said Haggerty. He expects pricing, which was dropping about 8-10% per quarter up until a year ago, will stabilize as a result.

Haggerty estimates that 80% of disk drive unit shipments worldwide are now produced by four companies: Seagate, Quantum, Western Digital and IBM. Most are used in PCs.

Haggerty says brand awareness is also reshaping the market and users buying replacement or upgrade drives often choose the brand they want.

Headquartered in Irvine, California, Western Digital recently expanded its operations and capability at its two assembly bases in Malaysia and Singapore.

Second Malaysian Assembly Plant

In October, Western Digital opened a second HDD assembly plant in Malaysia, located next to its existing plant in the Sungei Way Free Industrial Zone, near Kuala Lumpur.

The new seven-storey 25,083 sq m facility boasts a 1,254 sq m Class 10 cleanroom. It manufactures printed circuit boards (PCB) for internal use and WD’s Caviar line of low profile 3.5″ Enhanced IDE drives ranging from 850MB to 3.1GB for the desktop PC OEM market. The combined output of the two plants is about 30,000 drives a day and has the capacity to ramp up to 50,000 drives daily.

This year, the Malaysian plants are expected to produce between 7 and 8 million drives worth over US$800 million. By 2000, Western Digital’s cumulative investment in Malaysia is expected to total US$150 million from the present US$100 million.

Overall, Haggerty says Western Digital is expected to employ about 15,000 staff by the year 2000 of which 12,500 will be located in Malaysia and Singapore. This is up from the current staff-strength of 10,000 worldwide.

Apart from its drive plants in Malaysia and Singapore, Western Digital also has a disk media facility in Santa Clara, California and research and development facilities in San Jose, California and Rochester, Minnesota.

Published in Nikkei Electronics Asia, Dec 01, 1996

by Julian Matthews, Malaysian correspondent


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