COMPETITIVENESS OF OPTICAL DATA STORAGE PRODUCTS

The Data Storage Market

The data storage market includes drives and media for secondary and tertiary storage applications. Up to very recently, its growth was fueled by various information processing and storage applications. A new application, multimedia entertainment systems, has started to further enhance the growth of this market sector. The volume of the data storage market approached $100 billion in 1994, of which the hard disk segment was $47 billion, the magnetic tape segment $42 billion, and the optical disk segment $6 billion. The U.S. share of the total was 40%, due to dominance of magnetic storage drives (White 1994). The share of optical products in the data storage market has been noticeably small, resulting mostly from their relatively long access times. Other factors, such as the lack of rewritable products, lack of industry standards, and lack of consumer awareness, have impeded introduction of optical storage products to office and home markets. Deterrents have also included the high initial cost of the optical drives and the existence of other competitive products for backup applications. Furthermore, U.S. firms, driven by short-term product strategies, have concentrated on marketing the well-established magnetic storage products.

As Figure 3.4 shows, standard format optical storage products start becoming economical when storage needs exceed 1 GB. In the past, the majority of desktop computing users did not need such a high capacity. However, during the 1993-95 period, the advent of image computing and processing of multimedia documents with still images has quickly raised the floor of the minimum useful desktop storage capacity closer to 1 GB. This has made optical storage devices more attractive. As a consequence, demand for optical storage devices exceeded supply in 1994 for the first time. With increasing demand, most optical storage manufacturers have dropped prices (some firms did so three times in 1994) to increase their market share.


Fig. 3.4. Competitiveness of optical storage (Asthana 1994).(Endnote 2)

Many in the industry now believe that optical storage systems may be on the knee of the shipment growth curve.(Endnote 3) It is expected that as the majority of PC users venture into video multimedia document processing, the need will grow for high-capacity removable media. Therefore, there is a shift of interest towards multimedia entertainment systems that only require modest access times. This shift of interest also makes CD-R products increasingly attractive (at about $0.002/Mbit).

Figure 3.5 describes the worldwide disk drive revenues and the potentially rapid growth in the optical disk segment. At the time these figures were compiled, optical disk drive revenues were projected to significantly increase in 1993 and 1994; unfortunately, actual data for these years were not available at the time this report was compiled, but the 1994 (U.S.) Optoelectronics Industry Development Association (OIDA) survey supports the forecast with a separate prediction of an explosive growth in the optical storage market to $50 billion by the end of the next decade (2010). As Figure 3.6 shows, this growth will be mostly supported by video- and computing-related products.


Fig. 3.5. Worldwide disk drive revenues (Disk Trends '93).


Fig. 3.6. OIDA predictions on optical storage market growth (OIDA 1995).

Relative Japanese and U.S. Positions in Optical Storage Manufacturing

The optical storage industry has played and should continue to play a key role in the development of Japan's optoelectronics industry, which has now reached annual sales of $40 billion. Indeed, it was the need for low-cost packaged lasers for CD optical heads that prompted the company Rohm to initiate automated manufacturing of these devices. Similarly, companies like Matsushita, NSG, and Sony have been prompted to study unconventional optical components for use in optical heads. It is for the assembly of the optical heads for CDs that advanced optoelectronic packaging techniques have been developed and highly automated precision assembly lines initiated.

During the 1980s, the number of U.S. optical storage manufacturers declined as a result of slow acceptance of optical storage products and U.S. industry's focused interest on hard disk drives. Due to their short-term strategies, optical storage remained an area of minimal interest for U.S. industry. Consequently, small companies and research teams involved in optical storage remained isolated, and many disappeared during the 1990-93 economic recession. A handful of small U.S. R&D groups in companies such as 3M (for media) and Hewlett-Packard (for drives) survived the 1980s and are now working hard to catch up. Kodak, once a leader in this area, now mostly focuses on photo CDs and 14 in. disk systems for niche markets in government applications and banks. IBM has remained active in R&D but does not itself produce any optical drives. Thus, the United States has lost a key manufacturing capability that could have fueled the growth of other optoelectronic consumer products. Not surprisingly, U.S. optoelectronic market share is only $6 billion. At the same time the United States was losing capabilities in optical storage, the number of Japanese companies investing in optical storage grew considerably, as shown in Figure 3.7. By 1994, 14 of 18 manufacturers of rewritable optical drives in the world were Japanese, including manufacturing giants Hitachi, Sony, Toshiba, Sharp, and Matsushita. U.S. industry is not well positioned to compete effectively with Japanese manufacturers in optical drives.


Fig. 3.7. Manufacturers' geographical distribution (Disk Trends '93).


Published: February 1996; WTEC Hyper-Librarian