Toshiba Could Stop or Sell HDD Business

We have already mentioned this possibility formerly: Toshiba going out of HDD Business.

Nikkei Asian Review just wrote: “The HDD business is in a tough spot, and selling it is a possibility, [Toshiba’s] president Masashi Muromachi told reporters on December 21 – suggesting that restructuring would be on the way soon. (…) Toshiba is considering layoffs at a HDD factory in the Philippines. It plans to gradually scale down the division, which employs roughly 8,000, and could eventually bow out of the business entirely. It will switch over to production of SSDs.”

There are several reasons for Toshiba to bow out of HDD business entirely:

• The Japanese company has a small market share since a long time, currently 17%, far behind Western Digital (43%) and Seagate (40%) and has few chances to increase this percentage.
• Unlike its two big competitors, Toshiba is not vertically integrated, acquiring outside two main components, magnetic disks and heads.
• The HDD market is definitely slowing down.
• Some HDDs, especially 2.5-inch units, are directly competing with its SSDs where Toshiba owns only 5% of the worldwide market but in a sector growing very fast and the advantage to manufacture its own flash chips.
• Toshiba could be a strong partner of Western Digital in flash if this latter acquires finally SanDisk, working with Toshiba to manufacture chips, and it’s always a difficult situation to work and compete with the same company.

But some difficulties will appear to sell this HDD business:

• Seagate and Western Digital may be interested but they can encounter problems with China’s Ministry of Commerce (MOFCOM) for non-competitive situation like formerly with their acquisition of Samsung HDD and Hitachi GST, respectively.
• Which other firms could acquire this business? We don’t see anyone or maybe a big OEM of HDDs to get drives at a better price or eventually a Chinese company as China is searching since several years to be involved in HDDs.
• The interest of Seagate and Western Digital is more to let Toshiba just closed this activity being sure to recuperate all the clients of the Japanese company.

Toshiba is manufacturing HDDs in Laguna, Philippines, in a plant acquired from Fujistu in 2009, and apparently also through contract manufacturing partner, SAE/TDK, producer of disks and heads, in Shenzhen, China.

At the end, if only two manufacturers remain on the market, prices could increase or remain stable. That’s not good news for HDDs in competition with SSDs having all the advantages compared to HDDs, but the price.