Published Date : Oct 26, 2015
The Chinese government has finally approved Western Digital’s integration of Hitachi’s hard-drive business, HGST. Though Western Digital had acquired HGST three years ago, the integration of its supply and manufacturing operations was delayed owing to the antitrust concerns of the Chinese authorities. However, the approval has its own terms and conditions. Western Digital and HGST need to sell products under their respective brands while separate sales teams would be maintained for the next two years. For integration, research and development, manufacturing, engineering, corporate leaders, and media operations have been cleared.
Western Digital is one of the largest global manufacturers of hard-disk drives (HDDs). Seagate is its arch rival in the business. In the recent past, Western Digital’s HDD business has been affected with the introduction of solid-state drives (SSDs) that are costlier than HDDs but are ideal for tablets and notebooks. To expand its SSD portfolio, the company went ahead with a number of acquisitions including Virident Systems, sTec, Velobit, and Skyera. The company is also planning to acquire SanDisk for US$19 billion. This is expected to double Western Digital’s revenue in 2016.
However, it is yet unclear that why the company acquired HGST when it is focussing to expand its SSD portfolio. Analysts have pointed out that in order to increase its manufacturing capacity and cut costs, Western Digital has bought HGST. By selling HDDs at a lower price compared to Seagate, Western Digital would increase its market share and keep growing its SSD revenue. However, experts are of the opinion that the slow growth of the PC market will negatively affect the sales of SSDs and HDDs and hence, Western Digital’s earnings would decline this year.