Softer outlook for hard disk drive business

GEORGE TOWN: Local hard disk drive (HDD) component producers are reducing their dependency on the HDD business as the market is expected to grow at a slower pace over the next five years.

Eng Teknologi Holdings Bhd chief executive officer Datuk Y.K. Teh said the HDD market had mature and would be growing at a single digit pace starting from next year.

“According to the latest Trendfocus research report, shipment of HDD would be around 708 million units this year compared with 651 million in 2010. Starting next year until 2015, the compounded annual growth rate for HDD is expected to be about 8.9% per annum.
Teh: This is why we are looking to expand further our industrial product division

“This is why we are looking to expand further our industrial product division which makes automated industrial valves used in water heaters for the United States market,” he told StarBiz.

Teh said the group would spend RM50mil this year to expand its HDD component production capacity.

“Two of our customers, Western Digital and Hitachi, are in the process of merging.

“Our expansion exercise is to cater to the higher demand for HDD components, resulting from the merger,” he added.

Eng Teknologi manufactures HDD components such as actuators, base-plates and separators for its customers.

Dufu Technology Corp Bhd also planned to reduce its dependency on the HDD business by focusing on industrial sensor, industrial control, and medical implant device products.

Dufu chief executive officer P.Y. Yong said demand for the group's HDD components such as spacers and clamps were from China and Thailand, while demand from Singapore had fallen.

“We expect contribution from the HDD components business to the company's revenue to drop to about 60% in 2012 from 70% this year.

“We will be investing RM8mil in the Penang plant in Bayan Lepas to upgrade this year,” he said.

Dufu supplies HDD components to Seagate and Western Digital.

AT Systemisation Bhd managing director Beh Lai Lien said the HDD business was very volatile.

“It could slow down for several quarters and demand could suddenly pick up again.

“We still see opportunities for our group in the HDD business,” he said.

AT Systemisation makes precision machining parts for hard disk drive equipment.

Western Digital in Penang focuses on manufacturing magnetic head and media components for HDD, which does not have an impact on the business of local HDD component manufacturers.

According to the California-based Trendfocus report, notebook PC sales should strengthen in the third quarter due to back-to-school sales, which generates higher demand for 2.5-inch mobile HDD.

Mobile HDD shipments worldwide grew 7% to 75.36mil units in the second quarter of 2011 from the first quarter.

The report said Western Digital led in the mobile HDD segment with a 28% market share, while Seagate was second at 24%