ITHome News on 10/6: According to Bloomberg, Seagate Technology Holdings and Toshiba are competing for TDK's hard disk drive head business. Both rivals hope to use this to keep up with the booming demand for storage devices in AI data centers.
Sources familiar with the matter said Toshiba took the lead in opening acquisition talks with TDK this spring; Seagate subsequently made a higher offer in the summer. As the negotiations remain confidential, the sources asked to remain anonymous and said the deal could be worth up to several billion dollars.
If one of the parties successfully wins the business, it will control a key link in the hard disk drive supply chain. The mechanical hard drive market is currently held by three manufacturers, and the existence of an independent head supplier is crucial to maintaining the industry's competitive landscape. TDK is the only independent manufacturer in the world producing hard drive magnetic recording heads; the heads are the components inside hard drives that actually read and write data. TDK also supplies both bidders in this deal, as well as Western Digital.
Although Seagate and Western Digital can produce some heads themselves, they still rely on TDK's supply whenever market demand surges. Toshiba, meanwhile, depends entirely on this Japanese company for this tiny core component; Toshiba plans to mass-produce high-capacity heat-assisted magnetic recording (HAMR) hard drives to close the gap with leading competitors, a plan that cannot be realized without TDK's technical support.
If the acquisition goes through, it will shake up this increasingly important storage segment within the AI data center field. As more general-purpose computing tasks are taken over by AI, the market needs large quantities of low-cost storage media capable of holding data long term, and mechanical hard drive sales are experiencing a boom. Whoever ultimately wins this bidding war for the head business will gain stronger pricing power, as well as the ability to limit competitors from expanding hard drive production capacity.
Sources said both bidders are deeply worried that if they lose this acquisition, they will lose this independent source of heads. The sources said executives from the three companies met in Tokyo last week to discuss how to secure a continuous supply of this key component, and also explored the possibility of establishing a joint venture. The talks are still at a preliminary stage, and the deal could still fall apart.
Whichever party completes the acquisition, the deal will face antitrust review by regulators; regulators increasingly view data center storage capacity as an important component of economic security. According to TrendForce data, measured by storage capacity market share, Seagate and Western Digital each hold about 45%, while Toshiba holds about 10%.
TDK has benefited from the surge in overall demand for AI-related hardware. But the Tokyo-headquartered company is considering selling its hard drive head business; this business has long had low profitability and also requires continuous investment in R&D funds to keep pace with the iteration of magnetic recording technology.
Sources said TDK is allocating more internal resources to consolidate its leading position in battery, passive component, and sensor businesses; the company is optimistic about AI-related demand growth brought by wearables such as smart glasses. By selling the hard drive head business now, TDK could free up ample cash and accelerate its investment in these emerging business directions.