Tablet Computer Successes Could Mean Tough Times for Hard Drive Makers

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Hard drive makers such as Seagate and Western Digital are looking at how to change their businesses in the wake of the unbridled success of tablet computers.


Unlike netbooks and notebooks, which generally use hard drives for storage, tablets use flash storage manufactured by companies.

Flash is considered more rugged and faster than hard drive technology, which manufacturers view as an advantage for tablets, which need fast boot times and can easily be dropped.

IDC still expects total hard drive shipments to rise 16.7 percent to 650 million units this year, because of heightened need for storage for everything from security videos to business data. But next year, amid an overall increase in hard drive shipments, tablets could cause a 3.8 percent drag on shipment growth, said Fang Zhang, an analyst for iSuppli.

The company with the most to lose from tablets may be Hitachi Global Storage Technologies, a unit of Japan's Hitachi Ltd, because a large share of its hard drives go to notebooks and netbooks, Roy said. Western Digital has the second-highest exposure, followed by Seagate, he said.

The bottom two hard drive companies are Toshiba and Samsung Electronics Co Ltd. Together, the five main competitors are better able to manage inventory to meet demand for hard drives -- which are largely a commodity product -- than when there were dozens of competitors in decades past.

Longer term, uncertainty persists from tablets, but some argue that there is an opportunity for hard drive makers to continue to play in this market.

Seagate and Western Digital expect some future tablets to sport built-in hard drives, taking advantage of the lower cost and higher capacity of hard drives compared with flash storage.

Also, just as RIM's PlayBook will have a USB port, the hard drive industry expects that to be a feature on many future tablets, even though it is missing on the iPad.

"Everything with a USB port allows me to sell them (the consumers) external storage," said Rich Rutledge, senior vice president of marketing at Western Digital.

Seagate views tablets as a "net positive."

"The reason why is because these devices have very limited on-board storage and they will ultimately have to access external storage in one or more forms, whether it is local attached, networked or cloud storage, all of which benefit Seagate," the company said.

Finally, hard drive manufacturers may move more aggressively into flash storage and could eventually provide flash storage for tablets, Roy said.

"They're already coming up with flash drives, it's just that is a market they need to target," he said.

(Editing by Edwin Chan and Steve Orlofsky)