Another hard drive gold rush: vendors target the handset

As I covered in “Nokia better go back to the N91 drawing board,” some handsets will definitely integrate miniature hard disk drives. And surely some will be fairly priced unlike the Nokia N91. But how big will the disk-based handset trend become? In “A gold rush in little hard disks,” posted on Yahoo Finance by Business Week Online, a Hitachi executive projects that by 2008, 80 million mobile phones – 10% of the market — will ship with hard drives. Other drive vendors quoted are even more optimistic. The article also points out that 80 million is a larger volume that the current market for hard-drive-based MP3 players.

While I don’t question the fact that some segment of the phone industry will turn to hard drives, I do think the projections are overlooking the capacity ramp and cost decline in Flash memory. Once SD cards hit 4-Gbyte capacity, how many people will really need a hard drive?

But the most interesting aspect of the article is the “gold rush” theme. All of a sudden all of the drive vendors are rushing to the miniature form factor that most have viewed as a limited niche until now. If the market materializes, my guess is the vendors once again get into a price war in which no one can win. Disks just seem to be one segment where the vendors never learn from their past experience. No technology segment features a more complex electromechanical technical challenge than the flying head, the magnetic read/write element, and the high-speed read channel found in disk drives. Yet the vendors never get a fair price for their commodity products with one or more vendors always willing to sacrifice margin for market share. When the demand for small drives comes, I’m sensing that it will be deja vu all over again.