p2pnet.net News:- News this week that Hitachi is going to double its production of high capacity disk drives gives us a hint at the volumes in the coming war on disk based music systems like the Apple iPod. And also on the widening range of devices that are now made feasible by cheaper, smaller, more resilient, disk drives.

Hitachi makes the 1 inch drive for the new low end mini iPod. Earlier iPods featured 1.8 inch disks made by Toshiba.

The war, while not restricted to these two players, has been around 20 Gigabyte and 40 GB devices, and the iPod mini, has shifted the battle down to lower densities like 4 GB.

Now not only has Hitachi said that it will make 60 million low end disk drives, double what it made last year, including 8 million 1 inch drives. But in the last few weeks Toshiba has hit back with the world’s smallest disk drive at 0.85 inches, with 2 GB and 4 GB versions.

It is hard to get a gauge on just how many such devices Toshiba plans to make, but if we assume for a second that it was previously geared up to make enough for the iPod, before losing the contract over to Hitachi, and that already 2 million iPods have shipped with Toshiba drives in them, then it must be a similar amount. Toshiba certainly makes about 60 million 2.5 inch drives already, mostly for laptop PCs.

If that estimate is right, just these two companies, with many industry mimics due to start joining them, will be making more than 120 million micro disks of one variety or another.

Both companies began life designing these disk drives for digital cameras and video cams. That’s where much of this technology ends up. Toshiba’s Flash is also an option for instance for running as buffer capacity while changing video cassette tapes etc.. Other drives are used purely for still cameras.

But the invention and success of the iPod has given both of these miniature storage specialists an option to fit them into portable music players, as long as they can keep the prices down. It is only a matter of time before the higher capacity 1.5 inch and 1.8 inch drives (the capacity goes ever upwards) end up in portable video players, such as the Microsoft inspired Portable Media Centers, due out in the second half of 2004 from mostly Far East manufacturers Creative, iRiver, Samsung, Sanyo, and ViewSonic.

These will have capacities of between 20 GB and 60 GB, so right in the ball park for our two Japanese suppliers.

Each device to come out with such a disk, tends to be priced at the low end about $250 and at the high end close to $600. So does this mean that in the next 12 months we will be consuming between $30 billion and $60 billion worth of devices for consuming either portable digital music, video, pictures or even in phones? Perhaps that’s too many, since laptops will take much of this production, but then again there are many other suppliers of laptop disk drives who themselves might be eyeing this market jealously and thinking that it might be a profitable shift to make.

Fujitsu, Samsung, Maxtor, Seagate and Western Digital, to name a few, might suddenly see that consumer micro disk drives are worth investing in, and join the party any minute now, departing from their traditional 3.5 inch and larger form factors. Hitachi certainly came from there and still makes 3.5 inch and 2.5 inch devices at the same Thailand factory.

Hitachi Global Storage Technologies (GST) described Microdrive storage as experiencing ‘exponential demand’ and plans a substantial manufacturing expansion for the 4 GB microdrive product at its Thailand facility.

It will cost Hitachi $200 million to double the output of the plant, but although it now says that it will make at least 2 million a quarter, of the smallest 1 inch drives, it probably made only 250,000 a quarter up until it landed the Apple contract, which would represent an 8 times increase over a very short period. The wording that Hitachi used was ’several million,’ so it is likely that it can exceed that 2 million a quarter target, if the demand is there.

The Microdrive was introduced in 1999 by IBM initially at 340 MB and later at 1 GB capacity. With the acquisition of IBM’s hard drive business in 2003, Hitachi GST launched the 2 and 4 GB Microdrive products the same year. This year it plans to improve their output speed by 70%.

Toshiba may have queered its pitch with Apple when it introduced its own Gigabeat hard drive music player in Japan back in august, but it might just as easily have been a reaction to losing the Apple contract to Hitachi and a product to use up its excess inventory.

Either way we have seen Sony in the last week launch a hard drive music player under the Vaio brand (Vaio Pocket) and although it never declared its disk drive supplier, it is hard to consider it would be anything other than Toshiba, a long term partner. And where Sony treads, Samsung and Panasonic are rarely far behind, not to mention Sanyo, Sharp and others.

At the moment the smallest drives are not shock proof enough to survive being put in mobile phones, but they’re getting there, and with the potential of a 1 billion device market in mobile phones, these Microdrive makers are not going to stop until these disks survive a fall from your top pocket, which is what it takes to get them into Mobile phones. In the meantime the success of Apple iPod has given them another, unexpected staging post on the way, and enough confidence to double up production.

More production will mean increased competition and cheaper prices and suddenly the proliferation of huge amounts of data, in form factors there were previously only capable of holding a 2.1 cm Flash memory card, with less than a quarter of the storage. These devices are costing between $100 and $200 now in volume and will be $50 to $100, before the end of 2004.

Peter White – Faultline, UK

This entry was posted on Monday, May 24th, 2004 at 6:34 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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