by Anton Shilov
10/20/2011 | 06:59 AM
The European Commission this week approved under the EU merger regulation, following an in-depth investigation, the acquisition of the hard disk drive (HDD) business of Samsung Electronics of Korea by Seagate Technology of the U.S.
Although the merger will further consolidate markets that are already highly concentrated, the commission concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it. The commission’s examination showed that there are separate worldwide markets for hard disk drives based on their end use application (such as desktop computers, mobile computers, servers). The commission also identified a separate market for external hard disk drives in the EEA, which is downstream from hard disk drives.
The main impact of the transaction is on the markets for 3.5" desktop hard disk drives and 2.5" mobile hard disk drives where the investigation revealed that Samsung is not a particularly strong competitor. There would remain three strong suppliers on the 3.5" desktop market: Seagate, Western Digital of the U.S. and Japan's Hitachi Global Storage Technologies, and four strong suppliers on the 2.5" mobile market: Seagate, WD, HGST and Toshiba.
"With at least three suppliers, customers will retain sufficient possibilities to switch suppliers. The commission also found that the removal of Samsung is not likely to lead to a risk of coordination among the remaining HDD suppliers," a statement by the EC reads.
The commission found that the proposed transaction would not jeopardise the business of Japan's TDK, an independent supplier of heads for HDDs, as the merged entity will continue to buy a sufficient volume of components from TDK post-merger. Finally, the commission found that there would be no effect on the market for external hard disk drives in the EEA as non integrated suppliers of external hard disk drives would retain sufficient alternative sources for hard disk drives.
The Seagate/Samsung deal was assessed independently of Western Digital's proposed acquisition of the HDD and solid-state drives (SSDs) businesses of Hitachi GST which was notified one day later and is still pending.
Apart from the five HDD manufacturers there are also several non-integrated external drive suppliers such as LaCie, Freecom, Buffalo and Iomega, which depend on the HDD producers to supply them with HDDs.