Toshiba, WD Work Out HDD Facilities Deal

Toshiba on Feb. 28 said that it has arranged a trade of sorts with hard disk drive (HDD) manufacturer Western Digital.

Toshiba will acquire a portion of WD’s 3.5-inch hard-drive manufacturing equipment and some related intellectual property. As part of the transaction, the Japanese company will transfer its wholly owned Thailand-based HDD manufacturing subsidiary over to WD. Shares of stock from both companies are also involved in the transaction.

Financial details of the arrangement were not made available.

Under terms of the agreement, Toshiba will acquire from Western Digital manufacturing equipment for 3.5-inch HDDs for use in desktop PCs and other consumer applications along with manufacturing equipment for near-line HDDs for server applications.

WD is taking a risk here in taking over the Thailand factory. Last fall’s record-setting monsoon season in the Southeast Asia country flooded a number of HDD manufacturing facilities, and some of them have yet to come back up online.

Toshiba acquired Fujitsu Limited’s HDD business in 2009, expanding its product portfolio of small-form-factor HDDs for mobile applications with Fujitsu’s enterprise HDDs. Since then, the company has developed a lineup of new storage products for enterprise applications.

In July 2011, Toshiba unified its semiconductor and storage products divisions€”covering NAND flash memories, solid-state drives (SSDs) and HDDs€”positioning itself to carry out coordinated sales promotions to a wide range of customers.

The purchase of part of Western Digital’s 3.5-inch HDD manufacturing equipment€”and with it the capability to produce 3.5-inch HDDs for desktop PCs, DVRs and other consumer applications€”will expand Toshiba’s portfolio and enable the company to supply products covering all segments of the HDD market, Toshiba said.

It will also expand Toshiba’s supply capacity in the market for near-line HDDs, which is expected to expand with the continuing growth of the server market, further reinforcing a strategic segment of the company’s HDD business.

The deal is interesting in one aspect because 3.5-inch HDDs are seen by a large portion of the market as old-school IT. Demand for newer, faster, 2.5-inch disk drives is on the rise, as well as for solid-state disks. However, there are hundreds of millions of 3.5-inch drives currently in production, and replacements for them will be needed for years to come.

Toshiba and Western Digital aim to complete the acquisition and transfer by the end of March after obtaining approval from the relevant authorities.
Chris Preimesberger is Editor of Features and Analysis at eWEEK. Twitter: editingwhiz.