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Toshiba's HDD Strategy

X-bit labs: Now that you own Western Digital's 3.5" HDD production capacities/equipment, should we expect any tangible strategy shifts when it comes to hard drive business?

Joel Hagberg: Toshiba’s HDD business has continued to evolve and grow to meet market and customer needs. The past few years, Toshiba has expanded market coverage to include enterprise products with its strategic acquisition of Fujitsu’s storage business. Last year, it consolidated its HDD and SSD businesses under one group to provide customers with leverage and efficiency for everything from consumer to cloud. The addition of the 3.5” drives for desktop and consumer electronics (CE) is the latest in this series of expansions to support market changes and customer needs, ultimately meeting our strategic goal to double our revenue during the next few years.

X-bit labs: How will your HDD strategy change with the recent acquisition?

Joel Hagberg:
We expect incremental growth resulting from the addition of the desktop business. The acquisition is another demonstration of Toshiba’s strategy to expand the scope and depth of our offerings as well as our commitment to storage technologies.

X-bit labs: While previously you did have a couple of 3.5" enterprise HDD in the product line, now that you own WD's manufacturing equipment, will you introduce consumer-oriented 3.5" hard drives, or continue to concentrate on 2.5" HDDs for consumers and carry a couple of enterprise 3.5" models?

Joel Hagberg:
To Toshiba, 3.5” 15K enterprise is no longer a growth market; we are now fully supporting customers in the transition to small form factor (SFF) in servers and storage. Our transaction with Western Digital includes products and equipment (not facilities) and will enable a quick, cost effective ramp for both desktop and CE products. Our portfolio now includes the full range of what our customers need, including 3.5” desktop and CE drives, 2.5” mobile drives, 2.5” enterprise drives, 3.5” nearline (capacity optimized drives) as well as client and enterprise solid state drives.

X-bit labs: Toshiba is known for breakthrough 2.5" hard drives for laptops. But is not known for leading-performance or leading-capacity HDDs for desktops. Why is that?

Joel Hagberg: In the past, Toshiba has concentrated on development of small form factor mobile HDDs and enterprise HDDs. We have not participated in the desktop market segment until the recent acquisition of the HGST desktop design from WD. Toshiba is committed to both the rotating media and solid state segments of the storage industry. Over the years, we have built upon the solid foundation we established on 2.5- as well as 1.8-inch HDDs. In 2010, Toshiba acquired Fujitsu’s HDD business and added enterprise-class HDDs to its portfolio. Then in 2011, the Toshiba semiconductor and HDD businesses joined forces, resulting in the addition of enterprise and client SSDs to our portfolio. This year’s acquisition of WD’s 3.5-inch desktop HDD assets and IP launches us into the client 3.5-inch HDD space with models optimized for both the computing and consumer electronics markets. There is no other company in the industry that has the breath of products, storage technologies and IP ownership that Toshiba owns.

X-bit labs: Now that you own WD's manufacturing facilities/equipment, how many hard drives a quarter can you ship?

Joel Hagberg: Toshiba does not provide public forecasts of product shipments. However, as was previously announced, we obtained manufacturing equipment from WD, not an entire facility.

X-bit labs: Does it mean that unlike Seagate and Western Digital, Toshiba does not indicate how many drives a quarter it produces? For example, how many drives did you ship in calendar Q3 2011 and in calendar Q1 2012? What kind of increase, in percentages, perhaps, should we expect thanks to addition of WD's equipment?

Joel Hagberg: In 3CQ11 we shipped more than 21 million HDDs, and we were able to exceed that level with our existing product lines in 2CQ12. The addition of the desktop product lines will enable Toshiba to increase its capacity by 30% in late 2012.

X-bit labs: When do you expect that WD equipment to be installed and start operations?

Joel Hagberg: We expect to begin production in our facility in 3CQ12 and ramp to full capacity of the existing lines by the end of 2012.

X-bit labs: Do you think the hard drive industry is finished with consolidation and no further transactions are logical to expect?

Joel Hagberg: The hard drive industry is still in the consolidation process with both the Seagate-Samsung acquisition and the WD-HGST acquisition. It will be 1-2 more years until this process is final and the companies are fully integrated. The consolidation was driven by the need for increased R&D to advance areal density, and the challenge to achieve ROI as a result. Consolidation beyond this point is hard to predict.

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