Sub-$1,000 PCs squeeze drive makers

Posted on November 01, 1999

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Sub-$1,000 PCs squeeze drive makers

Mark Ferelli

Squeezed by razor-thin margins and fierce competition, it`s getting more and more difficult for disk drive manufacturers to make money these days. Recent quarterly reports from major disk drive vendors reflect losses, and steep PC price declines aren`t making matters any easier. To reverse the trend, the conventional wisdom is to improve densities and reduce drive parts count. And nowhere is this effort more evident than in the push to dominate the sub-$1,000 PC segment.

International Data Corp., a market research firm in Framingham, MA, estimates the sub-$1,000 PC market will total nearly 38 million units by 2001. This kind of pricing demands that disk drives be sold in OEM quantities at about $90 per drive.

In an effort to gain a significant foothold in this burgeoning market, many disk drive manufacturers are trading profits for market share. Not surprisingly, the end-user and OEM communities are benefiting from the vicious price wars.

Seagate Technology fired the opening salvo in the low-cost, high-capacity market about a year ago with its 4.3GB U4 drive. Seagate trimmed costs by using only one read/write head that can read only one side of a platter.

Naturally, other drive manufacturers followed suit. This summer, Quantum announced its Fireball lct desktop disk drive, the first in a low-cost product line. The 5,400rpm drive features Quantum`s Shock Protection System II (SPS II), Data Protection System (DPS), an Ultra ATA/66 interface, and the third generation of giant magneto-resistive (GMR) heads. The drives offer various capacities up to 8.6GB.

More recently, Seagate introduced the third generation of its U-series disk drives, doubling capacity to as much as 17.2GB and significantly improving performance. The U8 includes GMR heads, Seagate`s G-Force Protection technology, and an Ultra ATA/66 interface. The drives are available with capacities of 17.2GB, 13.0GB, 8.4GB, and 4.3GB.

Fujitsu Computer Products of America has also entered the higher capacity, low-cost market with its single-platter, 5,400rpm XV8 drives, which offer 4.3GB or 8.4GB. The drives are available with one or two read/write heads (two for the higher capacity). Transfer rates are up to 34.4MBps, and access time is less than 10ms.

While sub-$1,000 PCs are coming from a variety of major players, including Dell and Compaq, the future of disk drives for this market threatens to repeat the cycle of "cost-cutting in favor of market share" that`s been previously exhibited in the low-end disk-drive industry.

In an effort to gain market share, will drive manufacturers create the excess capacity that leads to plummeting prices? Some analysts don`t think so, because low-cost drive makers won`t confine themselves to the computer industry. In fact, market opportunities for non-computer applications, such as digital video recorders, set-top boxes, and entertainment electronics.

But even this expanded market may not provide the break that would allow better profits. As noted by Jim Porter, president of Disk/Trend Inc., a storage market research firm in Mountain View, CA, consumer electronics markets are even more price-sensitive than the computer industry.


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