Toshiba: 'Hybrid' Hard Drive to Boost Market Share
By JURO OSAWAHONG KONG—Japan's Toshiba Corp. 6588.TO -0.57% expects its share of the computer hard-drive market to nearly double over the next few years as more personal computer makers start using so-called "hybrid" hard drives that can improve laptop performance without adding much to price tags.
Hybrid hard drives that contain flash-memory chips—the same chips that store data in smartphones and tablet computers—are drawing more attention as the traditional PC industry tries to compete against the likes of Apple Inc.'s AAPL +2.43% iPad. Devices using flash memory can start up and access data much faster than those using hard drives, but PC makers can't afford to simply replace all hard drives with flash-memory chips, which cost about 10 times more per unit of memory.
But the longer start-up time for traditional laptops is frustrating consumers. "For PCs to stay competitive, they need to be able to start up instantly," Toshiba Corporate Senior Vice President Hironobu Nishikori, who heads the company's hard-drive business, said in an interview. Hybrid hard drives can help PC makers achieve that with only a little additional cost, he said.
Toshiba said this week that it will soon launch its first hybrid hard drives, which would help PCs start up applications almost twice as fast compared with conventional hard drives. Mass production of the new hard drives will start next month at a factory in the Philippines, the company said.
Hybrid hard drives are still a rarity in the PC market. Apple's MacBook Air and some Ultrabooks—a category invented by Intel Corp. INTC +1.94% for thin, lightweight laptops—use flash-memory chips for data storage, making their price tags relatively high. While high-end laptops can continue to rely solely on flash memory for their storage, demand is strong for more affordable laptops with speedy performance, Mr. Nishikori said.
The competition is stiff: Seagate Technology Inc. STX +3.07% already sells hybrid hard drives, while Western Digital Corp. INTC +1.94% said earlier this month that it has developed a hybrid that is thin enough for the thinnest laptops currently on the market.
In the second quarter of this year, Western Digital held a 45% share of the global hard-drive market, while Seagate followed closely with a 42% share, according to IHS iSuppli. Toshiba trailed behind with a 13% share.
Mr. Nishikori said that Toshiba is targeting a 25% share in 2014, expecting its hybrid hard drives to help increase its market presence.
"We have a thorough grasp of all the characteristics of flash-memory chips as well as hard drives," which helps when designing hybrid hard drives, he said.
Hybrid hard drives require a built-in system that sorts out data based on an algorithm that determines what should be stored on the hard drive and what should go into flash memory. This algorithm is where Toshiba's expertise in flash memory can become its advantage, Mr. Nishikori said.
Still, such technological advantages may be too subtle to help differentiate Toshiba's hard drives when PC makers are struggling to lower costs to squeeze out profit margins in an intensely competitive market, analysts say.
"At the end of the day, whether Toshiba can increase its [hard drive] market share will depend largely on whether its prices are competitive," said Mizuho Investors Securities analyst Yuichi Ishida.
Mr. Nishikori said the fact that Toshiba has its own flash-memory business also helps its hybrid hard drives compete on prices. Analysts said that Toshiba could, for example, sacrifice some of the margins on its flash-memory chips to sell its hybrid hard drives at lower prices, which would help the company increase its market share. Toshiba manufactures flash-memory chips at its factory in western Japan.
Expectations are high for hybrid hard drives, which could provide a much-needed boost to the PC industry. "Tablets—with their slim profile and fast 'instant-on' capabilities—have eaten mightily into the sales of notebook PCs, whose performance and ease of use have suffered in comparison," IHS iSuppli analyst Fang Zhang wrote in a report this month. IHS expects shipments of hybrid hard drives to surge from 1.2 million units this year to 25 million units in 2016.
Toshiba's hard-drive business generated revenue of about ¥400 billion ($5.14 billion) in the last fiscal year, accounting for about 7% of the Japanese technology conglomerate's revenue of ¥6.1 trillion. By the fiscal year that ends in March 2015, the company expects its revenue from that business to double to ¥800 billion, counting on a significant contribution from the sales of hybrid hard drives.
Toshiba said the hard-drive business is currently profitable, without giving a specific profit figure.