Fujitsu to end 3.5 inch IDE hard disk manufacturing

Faced with declining sales as a result of the sharp drop in the desktop personal computer market, Fujitsu Ltd. has decided to end production of 3.5-inch IDE hard disk drives within the year, the company said Thursday. Fujitsu will continue to make 3.5-inch SCSI (Small Computer Systems Interface) drives for the server market, the company said.

The Tokyo-based company has already stopped development of new 3.5-inch IDE drives and expects to cease manufacturing the drives sometime before the end of this year, company spokesman Bob Pomeroy said. Instead, it will focus its efforts on developing 2.5-inch and smaller hard disk drives for use in notebook computers, digital consumer electronics and personal digital assistants (PDAs).

"Our view is that the high end server market and mobile market have a greater growth potential in the medium to long range and therefore we will focus our resources on those markets," said Pomeroy.

The 3.5-inch drives, named for the diameter of the platters on which data is stored, made up more than half of Fujitsu's total hard disk drive production last year although the contracting desktop computer market is hitting demand.

In fiscal 2000, the year to the end of March 2001, Fujitsu manufactured 23.8 million hard disk drives of which 58 percent were 3.5-inch types. At the beginning of the new fiscal year in April it had forecast total production would hit 26 million units this year, however, the collapse in demand has forced Fujitsu to revise its estimate to 17 million units, down 28.5 percent on the previous year.

"I think it is terribly logical given the fact that there is a world downturn in demand for PCs and excess capacity," said Graham Penn, storage products research director at market research company International Data Corp. Asia-Pacific. "What they are doing is fundamentally following what IBM (Corp.) has done and pulling out of the 3.5-inch disk drive space which is dominated by Seagate (Technology Inc.) and Maxtor (Corp.)."

"Broadly, we've never seen Fujitsu as being a leader in the 3.5-inch market space but being an important supplier. It is natural that those that are second-level players should re-evaluate their positions and move their production capacity to areas which are perhaps a little less competitive where they may have some type of advantage," said Penn. ""(2.5-inch) is still apparently a profitable part of the market and as we know these form factors enable the storage devices to go into a whole new range of devices apart from PCs (such as) digital entertainment equipment and for that the market is massive -- way beyond what we have seen for PCs," he said.

The smallest drives the company currently produces are 2.5-inch types although it will begin research into smaller drives as a result of the change in focus, said Pomeroy. Already two of the company's main competitors, IBM Corp. and Toshiba Corp. have produced smaller size drives. IBM's Microdrive can store 1G byte of data and fits into a Compact Flash card while Toshiba recently announced a 5G-byte drive that fits into a type II PC Card. [See "Toshiba squeezes 5GB hard disk into PC Card," July 13.]Fujitsu produces all its hard disk drives at two plants in Thailand and the Philippines. "We are obviously looking at our production structure in those areas and intend to adjust that structure in a way that will improve efficiency," said Pomeroy although he declined to speculate on what changes may take place.

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