Fujitsu exits 3.5-inch disk drive business

Fujitsu exits 3.5-inch disk drive business

Fujitsu Computer Products, America has announced it will phase out production and sales of 3.5-inch desktop disk drives over the next two years to focus on 2.5-inch drives targeted for use in servers, storage arrays, mobile devices and other non-PC applications.

The move wasn't a complete surprise, rumours have been floating around the industry for several months that at least one of the six big manufacturers of 3.5 inch drives - Maxtor, Seagate, Western Digital, IBM, Samsung Electronics and Fujitsu - would bow to competitive pressures created by the sluggish economy and marketplace saturation.

Fujitsu Computer Products, a unit of Fujitsu in Tokyo, said the decision was made after its 3.5-inch drive revenue fell during the first half of the year. The company plans to concentrate on improving the capacity, performance and cost of its 2.5-inch drives, with new products expected to be ready for introduction in the first quarter of next year.

As part of the 3.5-inch exit, Fujitsu said it will also refocus its resources on enterprise-class disk drives and products that support mobile users and other emerging non-desktop markets. The 3.5-inch business currently accounts for 60 per cent of the company's drive production and 45 per cent of its revenue, but Fujitsu officials said it was being hit hard by pricing pressures.

Fujitsu sells its 3.5-inch drives for US$60 to $70. Mike Chenery, Fujitsu's vice president of advanced product engineering, said the target price was expected to drop to $50 to $60 per drive next year. Manufacturing of those products will stop later this year, but he added that Fujitsu is "working with customers to ensure all their needs and contracts are fulfilled."

Dave Reinsel, an analyst at market research firm IDC, said Fujitsu's decision was a "gutsy one." But it makes sense given the first-half sales decline, added Reinsel, who predicted the 3.5-inch disk drive market as a whole will experience a 3 per cent drop in annual sales this year - the first time ever business has dropped.

Fujitsu has an 8.5 per cent share of the 3.5-inch disk market, according to IDC. Maxtor leads the pack with 36 per cent, followed by Seagate with 23 per cent and Western Digital with 16 per cent, Reinsel said. IBM and Samsung hold respective shares of 9.7 per cent and 7.3 per cent, he added.

Tim Johnson, a Fujitsu spokesman, said the company would release "more specific capital expenditure, corporate realignment and personnel plans" in the next 90 days. He couldn't say if the upcoming product shift will result in layoffs at Fujitsu's manufacturing plants in Taiwan and the Philippines.

After 3.5-inch manufacturing stops, the plants "are not going to be producing as many drives," Johnson said. "We want to hold production capacity for the expected increase in production in 2.5-inch drives. Obviously, there's going to be a lag."

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