There is currently a major change taking place in the Hard Disk Drive (HDD) sector with mergers and acquisitions taking place left, right and centre.
Last month we saw Hitachi purchased by Western Digital (WD) for $4.3 billion dollars making WD by far the largest HDD manufacturer in the world. Today, we see that Seagate, which trails WD in second place, has purchased Samsung’s HDD business for $1.375 billion, made up of equal parts cash and shares. WD now holds around 50 percent of the market following its merger with Hitachi, while Seagate will jump from around 30 percent to a 40 percent share following the merger with Samsung. This will mean that 90 percent of the total HDD market will be controlled by Seagate and WD, which could lead to less competition and higher prices for consumers.
Of course, Samsung’s off-loading of its HDD market is seen as a sign that it wants to concentrate all its storage efforts on Solid State Drives (SSDs). While IHS iSuppli research earlier this year suggested that HDDs would continue to flourish for the next few years, there is no doubt that SSDs are the future and only price will prevent them from becoming more widespread. As part of the Seagate deal, Samsung will get a 9.6 percent stake in the company and be allowed to nominate one executive to sit on Seagate’s Board of Directors. More interestingly however, the agreement also sees enhanced cross-licensing agreements and a NAND flash memory supply agreement, whereby Samsung will supply it flash memory for Seagate’s SSDs. Conversely, Seagate will supply Samsung with HDDs for its laptops and PCs.
The deal is one which is obviously good for both of these companies but in general terms, it may lead to a lack of competition which in the technology world is never a good thing.