IBM, Western Digital drive down to 1.8-inch; via Japanese funding

Electronic News, April 27, 1992

IRVINE, CALIF. -- A joint agreement between Western Digital Corp. and Nippon Steel Corp. Last week continued what has become a steady flow of Japanese funding into American development efforts involving 1.8-inch drives, suggesting that the Japanese may be intent on gaining a firmer foothold in the burgeoning form factor than they have managed to win in other size ranges so far.

The agreement came just as IBM's Japanese unit has begun to show its own prototype of a 40MB, 1.8-inch drive, in what constitutes the strongest endorsement yet for the fledgling form factor. IBM in Tokyo last week said the new drive likely would move th volume production by next spring, either in the 40MB capacity range or in larger 60MB or 80MB configurations, if demand so warrants. The drives are expected to be sold on an OEM basis as well as used for IBM's internal needs, a spokesman said.

The two developments signal that the formative 1.8-inch drive segment, which has so far been populated largely by start-up companies, is about to reach critical mass, as the notebook-size and smaller computers that are the prime market for the tiny drives proliferate. And this time, observers said, there are signs that the Japanese are preparing to play a more active role in defining and supplying that market than they had man aged with the previous 3.5-inch and 2.5-inch form factors.

Only weeks earlier, a Saratoga, Calif., design house, Aura Associates Inc., had unveiled a single-platter, 42.6MB unit and announced a dual-platter 85.3MB unit developed in collaboration with NEC of Japan. Under terms of the Western Digital agreement, Nippon Steel is to support half the costs, including staff, of an ongoing development effort located primarily in WD's northern and southern California facilities, where a working engineering model already has been devised. While WD would provide few details of the program, industry sources believe it is targeting the high end of the capacity range, 80MB, possibly using data-compression techniques.

IB's Fujisawa plant in Kanagawa Prefecture has been handling development of the prototype drive.

"We want to monitor the market and see what the needs are at that time," an IBM spokesman said about possible production in the spring of next year. "The possibility is very real that we will OEM (manufacture) the drive since this is the direction that IBM is going in the PC hard disk drive market," an IBM spokesman added. The spokesman says there are no concrete plans at this time but he cited factories at Fujisawa and Rochester, N.Y., as typical locations for PC hard disk drive production.

NEC Corp. is also trying to squeeze into the 1.8-inch form factor market through a hookup with Aura. An NEC spokesman in Tokyo says that Aura is supplying the basic design of the drive and that NEC will take the design and bring out a prototype this summer. "If the final product is good, NEC will probably go ahead with production, with a timetable for volume production sometime this fall," the spokesman said. At this point, NEC is targeting a 40-megabyte drive, according to the spokesman.

The first two companies to market in the new form factor were Integral Peripherals of Longmont, Col., which is funded in part by Sumitomo Corp., several other Far Eastern companies and an asvet-unidentified Japanese manufacturing partner, and MiniStor Peripherals Corp., a San Jose company with funding from Korean sources. Integral last fall unveiled 20- and 40MB drives, while MiniStor recently brought out 32- and 64MB units.

Observers said Nippon's WD investment thus internsifies a trend in which Japanese manufacturers, who so far have made little headway against U.S. producers of hard drives, appear to be making a renewed effort to boost their competitive strength in that sector, choosing an emerging form factor that will be particularly critical to their ability to defend Japanese manufacturers' market strength in notebook and sub-notebook computers.

While major U.S. drive builders have sometimes relied heavily on Japanese and other Far Eastern patners for their manufaturing prowess, as Quantum Corp. has done with its Japanese partner MKE, several market watchers said the recent deals go beyond that in getting the Japanese in on the ground floor of development in a form factor that is just getting established. And the WD deal announced last week, involving as it does an explicit transfer of technology from a major if financially hard-pressed U.S. drive builder, was viewed as far more significant than the deals involving a small design house like Aura or a start-up like Integral.

MiniStor president Jim Miller said the investments also have a defensive motivation, as the Japanese try to preserve their strength in the notebook and sub-notebook computer segment. "They've got to protect themselves," he said. "They absolutely have got to have this product to be viable."

But Mr. Miller criticized the WD deal as "another situation where a U.S. manufacturer gives the family jewels to the Japanese." While equity participants in MiniStor include Samsung of Korea and the Korean Technology Development Corp., he insisted that "We've been very careful not to give away any of our technology to any of our investors. There are other ways to do it."