Hitachi to crank up efforts in consumer drives

Despite losing money recently, company's hard-drive division is doubling bets on the market because of consumer demand.

Sensing big demand for hard drives in consumer markets, Hitachi Global Storage Technologies will greatly expand production and set up design centers to promote its products.

This year, Hitachi GST will double its production of models with 1-inch diameter platters, triple the number of 1.8-inch drives and increase its output of 2.5-inch drives by 50 percent, said Bill Healy, senior vice president of product strategy and marketing at the company.

The company, the hard-drive division of Japanese conglomerate Hitachi, is also setting up five design centers worldwide that will help small and medium-size companies build consumer electronics devices around its drives.

Music players and digital video recorders--two of the most popular consumer electronics items in the past two years--have breathed new life into the drive industry. Fancy phones that can handle video conference calls and receive TV signals have also begun to incorporate hard drives.

By 2008, roughly 200 million drives will get shipped into the consumer market, according to analyst firm IDC. Last year, only 46 million hard drives went to the consumer market.

By contrast, "the enterprise growth rate is negative to zero," Hitachi GST's Healy said.

The hard-drive industry remains one of the most notoriously difficult in all of computerdom. The capacity of hard drives doubles almost on an annual basis, a rate of improvement faster even than that of semiconductors. Yet most companies struggle with profitability and often report quarterly losses. Hitachi, for instance, lost money last quarter.

Toward the end of the year, drive makers will face the challenge of perpendicular recording, a complex technique for storing data on platters.

"This is going to be a tough jump," Healy said. "Hitachi is well-positioned, but some companies will have a tough time."

Hitachi GST's drives are largely targeted to various markets by their size. The drives with 1-inch platters will be sold to phone and music player makers. Hitachi GST supplies drives to Apple Computer for the iPod Mini, for instance, though it struggled to meet Apple's demand for drives last year. A smaller version of the current 1-inch drive, code-named Mikey, comes out later this year. (The 1-inch platters are the same, but the overall drive is smaller.)

At the same time, the 1.8-inch drives will be aimed at music players. Drives of 3.5 inches--which can hold up to 500GB--are intended to be sold to makers of DVRs and home servers. Hitachi GST also makes 3.5-inch drives for desktops and servers.

Hitachi GST plans to open a factory in Shenzhen, China, by the end of the year that will double overall capacity, from between 70 million and 80 million drives annually to about 150 million drives.

Though some analysts have said flash memory will begin to compete more effectively against hard drives in music players and cell phones, Healy predicted that increasing demand for video will help the drive industry. Video requires inordinate amounts of storage, and hard drives can hold far more data than flash can for similar prices.

"Flash and hard drives compete, but they compete in a limited boundary," he said.

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