Market Watch

Western Digital Acquires Hitachi Global Storage


Display Driver IC Forecast


Hard disk drive (HDD) manufacturer Western Digital (WD) has entered into a definite agreement to acquire Hitachi Global Storage (HGS). The deal is worth $4.3bn of which WD will provide $3.5bn in cash and the remainder in common stock.

Both companies manufacture HDDs for use within digital video recorder (DVR) set-top boxes (STBs). WD also produce their own media streaming device, the WD TV Live.

Currently, WD is the second largest HDD manufacturer after Seagate.

Analysis
This deal looks set to make WD the largest HDD manufacturer by revenue and therefore one of the most important component suppliers to the STB industry. There are two major trends which STB manufacturers, and therefore HDD suppliers, will need to prepare for: in the medium-term, growth in DVRs, in the long-term, the prospect of networked DVRs (nDVRs) taking their place.

Over the next three years the majority of demand for HDDs within the STB industry will come from DVRs. Globally, there will be 181.5m DVR shipments in 2011 representing 14.8% of all STB shipments. This will grow to 230m DVR shipments in 2014 representing 15.4% of all STB shipments. As well as this growth in DVR shipments, demand for HD will also drive storage requirements: an HD recording requires on average six times more storage capacity. In 2011 84.8% of all DVR shipments will be HD growing to 87.4% in 2014.

However, in the long-term, storage will move away from consumers' homes and into operators' networks. nDVRs allow consumers to record a programme and store it on their operator's servers. When the programme is watched back, it is simply sent from the server to the consumer's home on the fly. This also offers an easy way for operators to implement multi-room DVR (mDVR) as the data can be sent to multiple devices. Furthermore, this provides the potential for operators to address, and so charge for, devices beyond STBs. As the data is stored in the network, it can be delivered to tablets, mobiles and PCs with relative ease.

To date, there have been 14 operator nDVR deployments worldwide and, if this trend takes hold, it will radically shift the demands for storage. Firstly, nDVRs have the potential to reduce the total amount of storage required by operators; if a programme is recorded by more than one individual in a given vicinity, there is no technical need to store it twice. However, the legal situation has proved more complicated and, for the time being in US at least, operators such as Cablevision are required to make duplicate recordings. Secondly, the type and scale of storage required will change. Rather than individual HDDs of a few hundred GBs, operators will require server-optimised storage in the thousands of TBs. Additionally, the potential need to make duplicate recordings will create demand for storage capable of being partitioned on a user-by-user basis.

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