Seagate plans to purchase Samsung's hard drive industry in the next year

The hard disk market is increasingly concentrated.

On the 12th, the Ministry of Commerce issued an announcement approving additional restrictive conditions to approve the acquisition of Samsung Electronics Co., Ltd. ("Samsung") hard disk drive business by Seagate Technology Corporation (STX) (NASDAQ, hereinafter referred to as "Seagate"), for the alliance between the two in China. Development paves the way.

One month before Seagate announced its acquisition of Samsung’s hard disk business in April this year, Western Digital (“Western Digital”) announced the acquisition of Hitachi Global Storage Technologies (HGST). The transaction is expected to be completed by March next year.

If the above two mergers are completed, the global hard disk market will basically be reduced to the two strong ones by the disputes of the five manufacturers. This also means that the era of highly integrated and centralized hard drives has come.

Oligopolistic pattern?

Seagate is an enterprise engaged in the production and sale of digital storage products such as hard disks. US time on April 19 this year, Seagate officially announced the acquisition of Samsung hard drive business. According to the Asset Purchase Agreement signed by Seagate and Samsung, Seagate will acquire the company for US$1.375 billion and pay Samsung with 50% stock and 50% cash.

In October this year, the European Commission announced its approval of the acquisition. With the Chinese Ministry of Commerce conditionally approving this acquisition, Seagate expects that this transaction will be completed by the end of this month.

However, according to a survey conducted by the Ministry of Commerce, there are only five manufacturers of Seagate, Western Digital, Hitachi Storage, Toshiba and Samsung in the hard drive market. In 2010, the five manufacturers’ global market share was about 33%, 29%, 18%, 10% and 10%, respectively, while the Chinese market share was similar.

For Seagate, which is surpassed by Western Digital's competitors, the acquisition of Samsung’s hard drive business will change the passive market situation.

Samsung is currently the world's largest NAND flash memory manufacturer. The cooperation with Samsung will rapidly enhance Seagate's ability to develop SSD hard disk products, and Seagate will also use it to reach more Samsung customers in the Asian market.

However, the combination of Seagate and Samsung’s hard drive business is still lost to Western Digital. According to data released by iSuppli in May, after the market was merged, Western Digital ranked first in terms of market share of 48.9% and shipments of 319.5 million units. Seagate ranked second with 261.2 million units shipped and 40% market share. Second, Toshiba shipped only 71.7 million units, accounting for 11.0% of the market.

The hard disk industry often depends on the scale to obtain profits. With a series of mergers and acquisitions integration, the current hard disk market is mainly confronted by Western Digital and Seagate. Analysts believe that this will stabilize long-term competition in the hard disk market and help companies improve their profitability.

Behind the merger is the test of merger. The merger also reveals the helplessness of the hard disk industry. Fang Zahang, an IHS storage system analyst, said earlier: "The combination of Seagate and Samsung means that the two companies also acknowledge that the storage market will face increasingly severe tests in the future."

Hot selling of tablet computers has already exerted tremendous pressure on the hard disk industry. Because the tablet mainly uses flash memory instead of traditional mechanical hard disks. Earlier, Western Digital's CEO John Koeni once publicly admitted that tablet computers such as the iPad have hindered the development of the hard disk industry, especially for the development of low-end products. In the next few quarters, iPad sales may lead to Sales of low-end laptops and netbooks fell by 10% to 20%.

The floods in Thailand are also testing hardware vendors and their supply chains. Thailand is the world's second-largest manufacturer of hard disk drive after China. The number of hard disk assembly plants accounts for 25% of the world's total, and several major hard disk giants with factories in the country are affected to varying degrees, including the Seagate factory.

Matthew Wilkins, chief analyst of IHS iSuppli, believes that the shortage of hard disks will be eased in the first quarter of next year, but it will take some time to supplement supply chain inventory, and the entire hard disk industry will continue until the third quarter of next year. The balance between supply and demand will be reached at the end.

Firms such as PC makers and chip makers that are closely related to their industries may also be affected. The IHS iSuppli report pointed out that floods in Thailand have caused severe damage to the global hard disk supply chain and will result in a decrease of 3.8 million PC shipments in the first quarter of next year.

Due to the lack of hard disk supply, the PC supply chain reduced its inventory, and Intel lowered its fourth-quarter revenue forecast by US$1 billion. Analysts expect that other major chip makers such as AMD and NVIDIA may soon make the same statement as Intel.