Seagate is one of the last remaining hard drive manufacturers, and it shares the stage with Western Digital (WD), Hitachi, and Toshiba mostly because they’ve absorbed everyone else. Hard drives are slowly being relegated to being used as large, long-term storage pools, and we’re seeing that happen in the notebook and desktop markets, as more brands are opting to use a solid state drive for their system drive. In response to the now shrinking hard drive market, Seagate has taken the first big step and announced that they’ll be closing their largest hard drive factory in China. This is the first major restructuring of their business since the 2011 Thailand floods which damaged or outright destroyed several factories belonging to international tech brands.
Seagate’s closing of their Suzhou, China factory follows an employee layoff that took place in 2016 where 8,000 people around the world were let go from Seagate’s international offices. The factory is mostly used for drive assembly, with most of the parts manufactured elsewhere, but it still employs around 2,200 people. It’s one of the company’s largest plants globally as well, producing millions of drives every year.
The shutdown is part of Seagate’s plans to streamline their business to combat the shrinking hard drive market. From an annual production of nearly 60 million drives a year, the company wants to shrink that number down to around 40 million drives annually. This means not only laying off employees, but shutting down factories, ordering fewer parts from their suppliers, and possibly adjusting their warranty coverage periods once more to take advantage of customers needing to replace dead drives early. The writing is on the wall for hard drive manufacturers, and this single decision will have consequences that will affect an entire industry.
What does that mean for Seagate in the short term? It may be a difficult time for the company financially as they make the transition to manufacturing SSDs full-time, which they inevitably have to do. They currently own LSI, the company which designs the Sandforce family of controllers, and they’re pretty close to buying out a flash company with the way they’re going. WD beat them to the punch by buying out SanDisk for its flash production capabilities, but they lack any in-house controller technology.
At the same time, while neither company has ever feared Toshiba in the past, they have a right to now, as Toshiba owns a SSD controller design firm (OCZ Storage Technologies), and can produce its own flash memory at their foundries. Entering the SSD market again will also be difficult with established players like Samsung, SK Hynix, and Transcend making their plays in the market as well. Seagate’s last push to sell SSDs was well received, and the drives performed extremely well for their price point, but they had little control over the direction of their products.
Hard drives are unlikely to die out completely, but it’s going to be interesting to see how Seagate handles this transition.