The Future of Microdrives

The buzz at the Diskcon hard-drive show was all about the drive industry's shift to smaller and smaller form factors. staff reporter Mark Hachman sat down with John Osterhout, director of business development at Hitachi, to discuss the changing

Last week, the buzz at the Diskcon hard-disk-drive show in San Jose, Calif., was all about the drive industrys shift to smaller and smaller form factors. While IBMs 1-inch Microdrive led the charge in 2000, the technology was transferred to San Joses Hitachi Global Storage Technologies Inc. during IBMs merger of its hard-disk assets with Hitachi in 2002. Staff Reporter Mark Hachman sat down with John Osterhout, director of business development at Hitachi, to discuss the changing landscape.

Hitachi was the first vendor to ship products in all of the major disk-drive market segments, all the way down to the 1-inch Microdrive. But analysts have said that the mobile hard-disk landscape is going to be more competitive than the market for desktop drives by next year. How do you view the market for 1-inch and smaller drives over the next few years?

Well, this is a general comment. Miniaturization has been a characterization of the drive industry since its inception, and youve had companies go out of business because they didnt survive this. The companies that are here today are all probably thinking about how to participate in sub-1-inch hard drives. Some companies that even just now are in [the] 2.5-inch [sector] have to be thinking of how they get in 2.5-inch or smaller… more importantly the markets have been established for those products. So there really shouldnt be a great deal of fear that if I invent it, if I design it, will there be a market for it? No one is clairvoyant, but its part of the trend toward miniaturization.

So what will the competition be? I dont have any insight that I can share with you; there have been companies that have announced theyre getting into it, and companies that are shipping, and as the market grows those companies will be more readily seen in the market as opposed to today. I wouldnt be surprised to see other companies, out of necessity saying, "Were keeping up, planning to do it, ready to do it or thinking of planning to do it."

If you looked at all the people in my panel today, the drive companies, a couple of customers—or if you will, stakeholders—there is no lack of feeling that small hard drives have a significant role to play. With the Microsoft talk—boy, I wish I could package that up and take it out myself. The demand for capacity on hard drives, the higher and higher storage capacities, are major drivers. Of course it works with Microsofts corporate vision, but its still a very positive message for the drive industry.

Do you think more and more people are looking at microdrives because the pace of real density increases is slowing, so that drive vendors are looking at new areas to improve margins?

I think that if youre in the drive business, youre looking to participate in growth sectors. So once you have a conviction that there is a category thats going to demand a million drives a year, then every quarter, and then each month, you have to participate. And much of the value you have may have to come from the growth in those sectors. At the same time there is a tremendous challenge in this whole growth aspect of the consumer-electronics sector, which is no longer dealing with IT products with very high price points, where the entire cost of the drive can be hidden in a minor component. Youre down to products that can be given away for free, as part of a service like mobile phones.

Hitachi was the first company to establish the modern resurgence of the 1-inch form factor. What does Hitachi have to do to maintain its leadership position in that space?

A leader is someone who is innovative not just innovating for innovations sake but innovating coincident with changing market needs. So thats one aspect. And we need to continue innovating. The second one is that to retain the leader whos got the most business. To get the most business you need to be attuned to specific market makers. … The companies that zeroed in on an experience are the ones that are successful in making big volumes in new categories, and Apple [Computer Inc.] is the quintessential example. I think of the image of Sony. Sony is a company that looks at all aspects of putting out a new technology, but also makes the experience a rich consumer experience and then putting the marketing behind that as well as the hardware and the software media, etc. I think that any drive manufacturer will have to realize quickly which companies really to spend the time with. You have to figure out who really is going to be a market maker in these segments, and then do your best to meet their needs—not only designing the right products but what sort of support they need, down to the supply chain—the total package. So if you can do that successfully you are a leader and presumably get some benefits, [including] cost benefits and scale.

That was a very business-oriented response. Is that the way disk-drive markets today are won, or is Hitachi going to have be consistently first to a specific capacity point, or some other metric?

Of course when I say innovative, Im capturing a lot of things that are under the hood you know. We need to keep driving capacity. Microsofts pitch was that the appetite for capacity is going to be tremendous here over the next coming years especially in handheld products, even in stationary products, and we have to be innovative in terms of cost, how we design the drive for low cost because these are very price-sensitive markets. … I cant think of a hard-drive company thats not planning to participate in small hard drives, 0.85-inch, 1-inch or any other small size.

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