Tuesday, April 19, 2011

Disk Drive Mergers vs. Kryder's Law

A few weeks ago there were five disk drive manufacturers. With the announcements of Western Digital's acquisition of Hitachi's disk drive business, and Seagate's acquisition of Samsung's disk drive business, there will shortly be only three. Western Digital will have about 48% of the market,
Seagate will have about 40% of the market, and Toshiba will be in a marginally viable place with the remaining 12% or less.

Part of the reason for this abrupt consolidation must surely be the much higher than expected costs of the transition to the next recording technology, which I have been discussing for more than a year. This consolidation will allow the two market leaders to amortize the costs of the transition across more of the market. These costs will be much harder for Toshiba to bear, so they are likely not to survive. Even if Toshiba survives, its impact on the ability of the market leaders to increase margins will be negligible. Paying for the transition and increasing margins will both act to slow the Kryder's Law cost per byte decrease, as I have been predicting.

Update: here is the view from industry commentator Tom Coughlin.

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