Seagate-Samsung deal to spur HDD, SSD, hybrid drive development

Analysts note that once the $1.4B deal closes, all HDD vendors will also be SSD manufacturers

Seagate's proposed purchase of Samsung's hard disk drive operations will likely lead to faster development of new hard disk drive (HDD) technology and improved solid state drive (SSD) and hybrid drive output, according to industry observers.

Seagate said today that it has agreed to purchase Samsung's hard drive operations for about $1.4 billion. The deal also calls for Samsung, the world leader in NAND flash chip production, to continue supplying Seagate with flash memory technology, and for Seagate to supply HDD products for Samsung's PC, notebook and consumer electronics products.

The deal means that Seagate will be able to more easily step up development of enterprise-class SSDs and consumer-class hybrid drives, which marry mechanical hard drives with solid state technology.

The two companies also plan to expand an existing patent cross-licensing agreement and collaborate on development of enterprise storage systems. That means Seagate will be able to tightly integrate its SSDs with Samsung's NAND flash controller chip technology, according to John Rydning, research director for IDC's hard disk drive research arm,

To date, Seagate has been an industry follower when it comes to SSD technology.

The company only announced its first full enterprise-class SSD line a little more than a year ago. Seagate's current Pulsar SSD line is based on its own proprietary controller technology.

Last August, Seagate and Samsung announced an agreement for Seagate to base its SSDs on Samsung's 32 nanometer (nm) NAND flash circuit technology. For example, Seagate's refresh of the Pulsar line, the Pulsar XT.2, is based on Samsung's NAND flash.

Last year, the market for enterprise-class SSDs was around $850 million, while the market for consumer-class or client SSDs was about $1.3 billion, said IDC analyst Jeff Janukowicz. Next year, the enterprise-class SSD market is expected to grow to $1.8 billion and the consumer-class SSD business to over $2 billion.

Recent consolidation in the hard drive industry, which includes Western Digital's agreement to buy Hitachi GST, means there are only three major players left, including Toshiba.

"I think there will still be plenty of competition between the three remaining players. Ninety percent of the market will be split pretty much evenly between Western Digital and Seagate, with Toshiba playing in some niche opportunities," said John Webster, a senior partner at market research firm Evaluator Group.

Webster believes the HDD market consolidation is being driven by two converging forces; price drops in non-volatile memory used in SSDs, which offers vastly higher performance than HDD; and the fact that manufacturers believe "the mechanical disk has hit a performance wall relative to continuing gains in processor performance.

"I/O to disk is now perceived to be a drag on overall system performance. Clearly, the smaller players (Hitachi and Samsung) have opted to position themselves to ride the next wave," he added.

The marketplace consolidation is good news on two fronts, according to Rydning and other industry experts.

For one, it means more stable HDD pricing in a market that is still competitive. And, it means a boost for the development of next-generation hard drive technology, which has the potential to produce 2.5-in mobile drives with more than 1TB of capacity.

"Some of the next-generation HDD technology is pretty complex and pretty expensive. If you had five players all chasing that, it means you've got five R&D centers, and you've got five sizeable capital investments," Rydning said.

Over the next year, Seagate and other vendors will be able to ramp up development of heat-assisted magnetic recording (HAMR) and bit-patterned recording technologies.

Bit patterned recoding, announced by Toshiba last year, breaks up the recording surface into numerous magnetic bits, each consisting of a few magnetic grains, onto which a bit of data can be stored.

HAMR uses a laser to pre-heat a platinum alloy as a material onto which bits of data can be recorded. The technology allows smaller bits of data to be written closer together without causing the superparamagnetic effect, which simply means that as two magnetically-charged nanoparticles are placed in close proximity, they have a tendency to randomly flip direction causing data corruption.

"There are products that will be announced over the next 12 months," Rydning said. "It's a long runway to develop those technologies and bring them to market."

On the client side, Seagate's only offering has been a hybrid drive, or an HDD that includes a small amount of NAND flash with a controller. The hybrid drive aims to provide improved performance without the high cost of pure a SSD.

Seagate's first attempt at selling hybrid drives failed to gain market adoption.

Last spring, the company launched its second attempt at a hybrid drive, the Momentus XT. The device is priced at $113 for a 250GB model. That drive ran into some performance problems that Seagate said it has fixed.

"I would say ... Seagate's strategy is for both its hybrid HDD and SSD. It will drive significant consumption of NAND by Seagate over the next several years, so the supply agreement will be a huge benefit for Seagate," Janukowicz said.

Rydning believes the three players left in the business will also ramp up production of SSDs and hybrid drives, even though system manufacturers have been reluctant to include the technology in laptop and desktop computers.

"Only a few PC [manufacturers] are offering SSDs and in most cases it's only an upgrade and not a standard feature. But all the HDD companies are now also SDD companies." he said. "A year from now, we do expect to see more suppliers of hybrid drives."

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