Western Digital and Samsung -- Possible Major consolidation in HDD market

Commission opens in-depth investigations into two proposed acquisitions in the hard disk drive sector

By Amelia Torres Esq. and Marisa Gonzalez Iglesias Esq.

SUMMARY: "Two separate investigations under the EU Merger Regulation were opened into two proposed concentrations in the hard disk drive ("HDD") sector. The first concerns the planned acquisition of the HDD business of Korean firm Samsung by Seagate Technology. The second concerns the storage business of Japan's Hitachi by Western Digital Corporation. EU Commissioner Almunia said: "...the proposed acquisitions will further reduce competition."

The European Commission has opened two separate in-depth investigations under the EU Merger Regulation into two proposed concentrations in the hard disk drive ("HDD") sector. The first transaction concerns the planned acquisition of the HDD business of Korean firm Samsung by Seagate Technology of the US. The second transaction concerns the planned acquisition of the storage business of Japan's Hitachi by Western Digital Corporation of the US. HDDs systems are used in a variety of professional and consumer electronic goods to store and access digital data, including computers, digital video recorders and camcorders. Commission Vice President in charge of competition policy Joaquin Almunia said: "Hard drives are the backbone of the digital economy. The sector has already experienced significant consolidation and the proposed acquisitions will further reduce competition. The Commission will carefully examine if effective competition is preserved and innovation encouraged."

The Commission's initial market investigation indicated that both transactions raise potential competition concerns. There are currently five HDD manufacturers worldwide: Seagate, Western Digital, Hitachi (recently renamed Viviti Technologies) Toshiba and Samsung.

A merger between Seagate/Samsung, the first deal to be notified on 19 April, would consolidate Seagate's leading position in the overall market for HDDs, particularly in the manufacture of 3.5" desktop HDDs where it would only face two competitors (Western Digital and Hitachi). The Western Digital/Hitachi transaction, which was examined in the light of the previous deal, would create the world's market leader in the overall HDD market. For 3.5'' desktop HDDs in particular, the only competitor would be Seagate/Samsung. For 2.5'' mobile HDDs, it would only face Seagate/Samsung and Toshiba.

The opening of in-depth inquiries does not prejudge the final result of the investigations. The Commission now has 90 working days, i.e. until 10 October, to reach final decisions on whether the transactions would significantly impede effective competition to an extent that would be detrimental to customers and consumers in the European Economic Area (EEA)

Authors are from the European Commission Press Release Office (Brussells, Belgium).

 

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