AI-beneficiary HDD stocks plummet... Competition intensifies due to TDK acquisition

(Seoul = Yonhap News) Reporter Joo-ho Jeong = Stock prices of American hard disk drive (HDD) companies such as Seagate and Western Digital, which had soared thanks to demand for artificial intelligence (AI) data centers, plummeted due to concerns about intensifying competition.

On the 6th (local time), Seagate and Western Digital stock prices fell 9.2% and 6.9%, respectively, on the New York Stock Exchange.

This is due to concerns that HDD companies, which have enjoyed pricing power amid supply shortages, are losing their investment appeal as they are embroiled in competition to acquire key component companies and increase production.

Bloomberg News reported today, citing multiple sources, that Seagate and Japan's Toshiba are competing to acquire Japan's TDK's HDD magnetic head business.

According to sources, Toshiba began negotiations with TDK first this spring, and Seagate offered a higher price in the summer. The acquisition size is expected to reach up to several billion dollars.

The magnetic head is a key component that actually records and reads data from the HDD. TDK is the only independent company that makes this, and supplies it to all three companies: Seagate, Western Digital, and Toshiba.

Seagate and Western Digital produce their own heads but use TDK products when demand is high, and Toshiba relies entirely on TDK.

This is why there is analysis that the winner of the takeover battle can increase pricing power and limit competitors' production increases.

Toshiba was acquired by a consortium led by investment fund Japan Industrial Partners (JIP) in 2023 and has been delisted. The stock price of TDK, the selling entity, rose 5.3% on the Tokyo stock market on this day.

Here, on the 2nd, Nippon Keizai reported that Toshiba plans to invest $380 million (about 500 billion won) to double its HDD production capacity for AI data centers by fiscal year 2027.

Toshiba's goal is to increase its market share from about 10% to 30% by increasing production, mainly at its Philippine plant.

According to market research firm Trend Force, Seagate and Western Digital each have about 45% of the market share based on supply capacity.

Even on the day this report was published, Seagate and Western Digital stock prices plummeted 10% and 7%, respectively.

As demand for AI data centers has surged, Seagate's stock price has soared more than 200% and Western Digital's stock price has surged more than 140% this year.