Lawsuits Against Cornice Spotlight Severe Competition Over 1-inch HDDs
August 30, 2004 (TOKYO) -- A patent litigation broke out in the 1-inch hard disk drive (HDD) market. Seagate Technology LLC and Western Digital Corp, leading US HDD manufacturers, successively filed complaints against Cornice Inc, a US venture developing a 1-inch HDD.
Click fig to enlarge: Global shipments of 1-inch HDDs. IBM Corp of the US had been the only manufacturer up until Cornice and GS Magicstor Inc of China entered the market in 2003.
Source: Nikkei Electronics in reference to data provided by Pixie Pinnacle Corp
Behind the lawsuits is the super micro HDD market, which is rapidly expanding due to the great popularity of portable audio players, and these two companies' speculation of its use in mobile phones (Chart 1).
Before the huge mobile phone market, HDD makers, which have developed their products mainly for PC applications, are likely to enhance development in alliance with digital home appliance manufacturers.
1-In. HDD Market Likely to Grow Drastically
Seagate filed a patent infringement lawsuit on six HDD-related patents against Cornice in the US District Court for the District of Delaware on June 22, 2004.
The company sought an injunction that bars Cornice from making, selling and importing the allegedly infringing products in the US, and monetary damages. Just one week later, on June 29, 2004, Western Digital also filed a patent infringement lawsuit on seven patents against Cornice in the US District Court in California. The firm sought to prevent Cornice from illegally using its patented technology and recoup monetary damages resulting from patent infringement by products Cornice had already sold.
The controversial 1-inch HDD market on the volume basis accounts only for 0.1% of the overall HDDs shipped in 2003. However, HDD manufacturers are boosting output because they sell as many as produced.
Click fig to enlarge: Shipment volume of mobile phones is far larger than that of AV equipment. Although shipments to PC manufacturers currently account for more than 90% of total HDDs produced, the profit driver for HDD makers will be highly likely to change, if their use in mobile phones increases.
Source: Dataquest at Gartner Inc of the US, Japan Electronics and Information Technology Industries Association (JEITA) and Camera and Imaging Products Association (CIPA)
Hitachi Global Storage Technologies Inc (HGST) of the US, which is providing HDDs to Apple Computer Inc, will increase output at its plant in Thailand to several million units per quarter, nearly 10 times larger than the previous production capacity, by the end of 2004. In addition, 1-inch HDDs are expected to be loaded into mobile phones. If embedded in mobile phones, whose market is predicted to reach more than 600 million units in 2004, the HDD market can transform into a huge one at once (Chart 2).
In light of such circumstances, leading HDD manufacturers started to become frenzy. Cornice, GS Magicstor Inc of China and HGST have been the only companies providing 1-inch HDDs thus far, but fierce competition is expected to start when the number of players in the market rise.
The legal battle above is literally a prelude. Seagate had just announced its entry to the 1-inch HDD market and disclosed its 5GB model, the largest capacity in the industry, on June 9, 2004, about two weeks before the lawsuit. Its mass-production is slated to start in the third quarter of 2004. On the other hand, Western Digital currently manufactures only 3.5-inch HDDs and has not announced its 1-inch model yet, but it is highly possible that the company is waiting for the right time to enter the market.
To Eliminate Fledgling Threats Early
Some HDD officials indicate as purposes of the lawsuits by Seagate and Western Digital: (1) to nip upcoming threats like Cornice in the bud, (2) to import Cornice's technology via cross-licensing and a takeover, and (3) to put the brakes on start-up makers planning to participate in the market of 1-inch or smaller HDDs.
Cornice achieved overwhelmingly lower price in comparison with other competitors by using its proprietary interface in their products. Despite the large gaps in the market size between the leading HDD manufacturers, the number of portable audio players to introduce its product exceeds 10 models in less than one year since the firm started marketing its 1-inch HDDs. The lawsuits appear to be aimed at controlling such move and preventing other industry peers from entering the market. Though GS Magicstor is also one of the start-ups like Cornice, most HDD officials consider that "the company seems to be uneasy to take into court for its backup by the Chinese government."
The filing procedures and the patents Seagate and Western Digital pleaded as infringed also show that these companies are serious about their lawsuits. For example, Seagate took measures to quicken the injunction. On July 2, 2004, soon after its lawsuit to the court, the company filed a complaint against Cornice with the US International Trade Commission (ITC), whose deliberation period is shorter than the court's. Seagate sought an order to exclude any systems or products using or containing Cornice HDDs from entry to the United States.
In addition, the total 13 patents on which Seagate and Western Digital filed infringement lawsuits appear to include key basic patents. Both companies explain that these are all technologies concerned with general HDDs, not specialized for 1-inch HDDs. Although whether Cornice actually infringed these patents or not is left to the court to judge, HDD-related researchers estimate that it will be difficult for Cornice to prove its non-infringements, after seeing these patented technologies extend from those related to signal processing and control to others concerned with media, mechanism and chassis. They believe most HDD manufacturers, putting aside Cornice, seem to use these technologies in their products.
Upcoming Installation to Mobile Phones
Click fig to enlarge: One-inch HDDs featuring inventions in view of use in home appliances
Seagate and Western Digital persist with the 1-inch HDD market so much, because they are almost sure that mobile phones will feature a 1-inch or smaller HDD. Though no mobile phone carrier has announced its concrete plan to develop an HDD-featuring handset at the present moment, HOYA Corp, which provides disk substrates to HGST and Seagate, deposed that these firms have initiated their projects to use 1-inch HDD in their handsets.
According to some HDD officials, many other HDD manufacturers seem to be preparing to market 1-inch and smaller HDDs as well. For example, Toshiba Corp is planning to start mass-production of 0.85-inch HDDs in Fall 2004, while Matsushita Electric Industrial Co, Ltd admitted it is developing a 0.85-inch HDD, although its marketing schedule is not determined yet.
Of course, the manufacturers need to overcome a lot of hurdles such as reduction of price and power consumption, confirmation of durability against vibration and shocks, and others before adopting micro HDDs in mobile phones. However, such specs are already being polished for use in the existing mobile audio players.
