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Robert Castellano

The hard disk drive (HDD) business has undergone some incredible developments in the last 25 years. Dozens of former HDD manufacturers have exited the market business by going out of business, closed their HDD divisions, or merging. The market underwent significant consolidation in the late 1980s -- the number of hard disk drive manufacturers dropped from 136 in the 1980s to only 8 today. Yes 8.

And it’s not for lack of business either. In 1995, only 89 million HDDs were sold, 69 million of which were sold in PCs. In 2007, more than 480 million HDDs were sold, nearly 250 million of which were sold in PCs. In 1995, more than 75% of HDDs went into PCs compared with slightly more than 50% in 2008.

While HDDs were originally developed for use with computers, applications have expanded far beyond to include digital video recorders, PDAs, digital cameras, video game consoles, and cell phones. All consumer related items.

With the downturn in the worldwide economies, consumer items are one of the major sectors to be affected. The HDD market was on track for an 18.5% gain in 2008, but a rapid downturn in end-user purchases in Q4 will result in a growth of 12.5% for the entire year to 567 million units, according to our analysis. Under our forecast assumption that the economic downturn will be steep but short lived, we project the shipments to reach 618 million units in 2009, a growth of 9%.

Average selling prices (ASPs) have been relatively flat over the past several years and are expected to continue to do so in 2008. Competitive market forces will reduce ASPs 5.7% in 2008 to $62.20 for each HDD.

Seagate Technology (Nasdaq: STX) will maintain its lead of the total HDD market on a shipment basis but will lose share to Western Digital (Nasdaq: VECO) while Hitachi Global Storage Technology will maintain a comfortable third-place position.

What’s the future for this business? Innovation. In 2009, we will see pilot lines for Discrete Track Recording (DTR) technology. The evolutionary methodology will be an opportunity for equipment manufacturers to enter the HDD market. These tools include nanoimprint lithography, etch (either reactive ion etch (RIE) or ion beam etch), deposition (sputtering), planarization, and CD Metrology. Besides processing issues, the disk holding stage must be perfected to handle automated double-sided disk patterning capability and throughput of 180 disks per hour and the ability to generate rates over 1000 disks per hour in the near future. Key equipment suppliers to the DTR market include Nanomex and Molecular Imprints in the lithography sector and Veeco Instruments (Nasdaq: VECO) in the etch sector.