Portable hard disk storage is on the rise due to increasing applications for gaming, digital home and products that act as a kind of digital multimedia adapter, boosting the demand of consumer electronics (CE) and car entertainment peripherals.
Market research firms In-Stat and Gartner Dataquest both predicted that shipments of portable hard disk storage devices will continue their extraordinary growth between 2005 and 2008.
The three key growth drivers for this industry are the boom in portable entertainment devices, the growing complexity of content, and the miniaturization of hard drives.
Among the categories of portable hard disk storage devices, the fastest growth is expected to be posted by devices with disk drives smaller than 2.5 inches, such as MP3 players and portable media players. While other storage options exist for such devices, from a price, mobility and capacity standpoint, they are not as feasible as hard disk storage for many of today's CE devices.
Based on our survey of 16 mainland China makers, 20 Taiwan makers and two South Korea makers of portable hard disk storage devices, the following industry highlights are presented in this report:
Production Centers
• Of the 50 to 60 makers in mainland China, over 90 percent are located in Guangdong province, with Shenzhen accounting for 65 percent of the total.
• More than half of the surveyed Taiwan makers have factories in mainland China. The favored location for them to set up their factories is Dongguan in Guangdong province.
• Shenzhen is the manufacturing hub in mainland China due to its mature electronic components supply chain, good infrastructure and strategic geographical location.
Production Capability
• As the manufacturing of portable hard disk storage devices is a relatively young industry in mainland China, capacity utilization was very low in 2004 and H1 2005.
• Majority of the surveyed makers produce external enclosures, which have the lowest technology barrier in the portable hard disk storage line. However, many new entrants focus on portable hard disks and portable media players, which have higher profit margins.
• The profiled mainland China makers accounted for 49 percent of the estimated 8.35 million devices produced in the mainland in 2004.
• The profiled Taiwan makers produced 6.85 million devices in 2004, out of the island's rated annual capacity of 37.86 million units.
• Including the two profiled South Korea makers, the majority of makers are OEM-oriented and 71 percent market their own brands. Most Taiwan makers have already introduced lead-free manufacturing to meet RoHS and WEEE requirements.
Export Capability
• On average, export sales contributed about 40 percent to the annual sales of mainland China makers. Only three mainland China makers are heavily export-driven, each deriving more than 75 percent of total sales from exports.
• Emerging markets like South and Central America, Asia and the Middle East are up-and-coming export destinations for entry-level and mid-range products from mainland China makers.
• Export business is the thrust of Taiwan makers. Four Taiwan makers in this report rely solely on exports as their revenue generator.
• The major export markets for Taiwan makers are North America and Western Europe.
• Exported products mainly go to OEM buyers.
Industry Overview
Demand continues to grow for portable storage devices based on hard disk drives (HDDs). While such devices represented only about 5 percent of the total hard drive market in 2003, market research firm In-Stat forecasts a significant growth to 33 percent market share by 2008. In fact, shipments of portable hard disk storage (PHDS) devices are expected to post a 67.7 percent compound annual growth rate (CAGR) from 2003 to 2008, In-Stat forecasts.
Based on the 2004 growth in new consumer markets, research firm Gartner likewise expects global HDD revenue to exceed $25 billion in 2005 and 2006, with over 500 million units shipped by 2008. Gartner projects Serial ATA (SATA) HDDs, including external or removable units, to grow from a market of less than 1 million units in 2002 to nearly 350 million units by 2006.
Key Growth Drivers
Notable products in the portable hard disk storage segment include several types of portable digital video and audio players. Digital audio players have undergone a transformation from traditional CD players to MP3 players with songs stored on HDDs.
These portable players have become increasingly popular worldwide as many manufacturers are attracted by the success of Apple's iPod to introduce their own HDD players.
International Data Corp. (IDC) predicts that revenue for digital audio players will enjoy a 20 percent CAGR through 2008.
As the amount of digital content available to the consumer and the desire to store it continue to increase, demand for higher capacity storage grows as well.
Though other storage options, such as flash memory, exist, they are inferior to hard disk storage in terms of capacity and for applications where the file size or the total number of files to be stored is of more concern than total system cost.
This is especially so when it comes to storing digital video content.
Products using 3.5-inch, 2.5-inch, 1.8-inch and micro (1-inch and smaller) hard disks are widely available. The reduction in a hard disk's physical size leads to a variety of new opportunities for portable device manufacturers.
Mainland China
There are approximately 60 manufacturers of portable hard disk storage devices in mainland China, and most of them are located in Shenzhen, Guangdong province due to its well established electronic components supply chain. In addition, makers in Shenzhen have accumulated much experience in exploring overseas markets. Hence, they have the capability to tailor their products according to customers' specifications.
The majority of interviewed makers estimate that the annual sales of portable hard disk storage devices will increase by at least 50 percent in 2005.
Supplier Profile
Anpson Electronics Group (HK) Ltd
Founded in July 2004, Anpson Electronics Group (HK) Ltd's product line includes portable digital data players, HDD MP3 and MP4 players, and 1.8-, 2.5- and 3.5-inch external enclosures.
The company began exporting portable hard disk storage devices in H2 2004. It earned an export revenue of US$2 million that year.
Export destinations include Western Europe, Eastern Europe, Southeast Asia and East Asia. Europe accounts for 70 percent of total overseas shipments.
About 50 percent of Anpson's shipments of portable hard disk storage devices are OEM deliveries. In 2004, external enclosures accounted for more than half of overseas deliveries.
In Q1 2005, the company's monthly portable storage device exports reached 50,000 units.
Anpson's in-house brand DigiMate is mainly sold in mainland China.
Manufacturing Capability
The company purchases all materials and components but subcontracts key production processes.
Anpson's subcontractor is located in Buji, Longgang district of Shenzhen in Guangdong province. The supplier's 2,000-square-meter factory is located on the fourth floor of a five-story building.
The factory is divided into three areas: a 300-square-meter storehouse for incoming materials, a 200-square meter SMT workshop, and an assembly workshop.
Global Sources visited the SMT workshop, which is equipped with two Samsung SMT machines and occupied by 12 production workers and four QC technicians.
The 15-meter long manual insertion line has a wave-soldering machine. It is overseen by 24 workers. Four QC technicians along the line conduct visual inspection and repair all defective products.
Beside the manual insertion line is the assembly line, which is occupied by a total of 24 workers and two QC technicians.
Also nearby is a 50-square-meter testing room where technicians conduct circuit and functionality tests on external enclosures. QC workers in this area conduct 100 percent inspection.
Anpson's QC workers maintain a defect rate of less than 1 percent.
After the products are approved, they are sent to the packaging area, which is occupied by 20 production workers.
The company targets to acquire ISO 9001 certification by the end of 2005.
IC chipsets take up almost 70 percent of production costs. The company sources chipsets from South Korea, United States and Taiwan.
Products and Prices
Anpson's R&D department is divided into two groups: one group has four engineers focusing on external designs, and the other group is made up of six engineers who concentrate on configuration designs and developing value-added functions. The team can introduce more than 12 models every year.
The company used to invest 10 percent of its annual sales revenue on R&D projects, but in 2005, only 3 percent of sales income will be invested in R&D.
All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.
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