Japanese electronics maker Fujitsu said on Friday that it would start producing 1.8-inch hard disk drives used in portable music players and video cameras, entering a market dominated by Toshiba.
Fujitsu's move is prompted by expectations that growth in hard disk drive demand will be driven by consumer electronics such as Apple Computer's iPod and mobile PCs in the coming years.
Fujitsu, a chips-to-computers conglomerate, currently makes 3.5-inch drives used in servers and the 2.5-inch variety for notebook PCs.
"We are entering the consumer electronics arena and the market for smaller drives because that's where growth is," Fujitsu Senior Vice President Ichiro Komura said during a news conference.
Fujitsu will be going head-to-head with Toshiba, which is the world's sixth-largest hard drive maker overall but leads in the 1.8-inch variety. Toshiba supplies small drives for Apple's iPod.
"Fujitsu's 2.5-inch drives fetch a premium over similar products from other suppliers because of their quality and dependability," Mizuho Investors Securities analyst Yuichi Ishida said.
"Now, armed with this strength, Fujitsu is entering the 1.8-inch market. I see a pretty good chance for them to succeed."
Following the announcement, shares of Fujitsu closed up 5.06 percent at 1,058 yen ($9.26), outperforming the broader market, which was virtually flat. Toshiba ended the day unchanged at $7.01.
Fujitsu's Komura said the launch of 1.8-inch drives will help Fujitsu boost sales of hard disk drives to $3.49 billion by 2009. By then, it aims to become one of the world's top three makers.
The company, which projects hard disk drive sales of $2.45 billion in the current business year, ending in March, ranked fifth, with 8.4 percent of the $22.9 billion market, in 2004, according to research firm Gartner.
U.S.-based Seagate Technology took the top spot, with about 27 percent, followed by Hitachi Global Storage Technologies, Maxtor and Western Digital.
Fujitsu aims for an operating profit of $175.066 million at its hard disk drive operations by 2009, up from an estimated profit of $52.5 million in the current business year.
The company will jointly develop 1.8-inch drives with U.S.-based Cornice for consumer electronics and aims to launch a 120-gigabyte model September 2007.
The drives will be used in music players and video cameras, which are increasingly employing hard drives instead of conventional media to store moving images.
Fujitsu also plans to develop by itself another set of 1.8-inch drives for "ultra portable" notebook PCs.
