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, the Pulsar line, a little more than a year ago. Seagate's current Pulsar XT.2 SSD line is based on its own proprietary controller technology.
Last August, Seagate announced an agreement with Samsung to use its 32 nanometer (nm) NAND flash circuit technology.
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.
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.
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