The Birth, Boom and Bust of the Hard Disk Drive

The Birth, Boom and Bust of the Hard Disk Drive

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The hard disk drive used to be the  most expensive part of a good PC. And it remains a wondrous piece of  technology. Magnetically enabled heads,   literally flying over glass platters  - writing or reading gobs of data. How can such a technical miracle also be such  a graveyard for profits for years on end? In this video we look at the birth, boom,  and bust of the Hard Disk Drive industry. ## Beginnings In 1952, IBM asked a former high school teacher   named Reynold B. Johnson to lead  a new research lab in San Jose. Johnson was a talented inventor. Early  in his life in the 1930s, he invented  

a machine that could grade pencil-marked  multiple choice tests. Yes. The bubbles. Soon IBM bought the rights  to his machine and hired him.  After inventing several new things,   IBM asked him to go out to San Jose and  work on some new interesting projects.

Back then, San Jose was a small agricultural  city of about 100,000. IBM chose to put its new   research lab there largely because it was between  major customers in Los Angeles and Seattle. Johnson had wide leeway to hire 30-50  people and work on whatever interested   him. They took on a variety of  projects, but one stood out:  

A random access processing system to  replace something called "tub files". Now, I have never heard of a tub file before.  It is a part of a punched card system that   very quickly helped you access certain  information out of the whole. It worked   okay in some use cases, but not so much  in others like invoicing and inventory. Tub files are a form of "random access" -  meaning that we can access any arbitrary   piece of information in a sequence  at roughly the same amount of time.

This is different from sequential  access, where you have to cycle   through everything in the sequence  first to get to the thing you want.   When it comes to memory systems,  random is better than sequential. ## Disks The IBM team decided to explore magnetic recording  systems to provide this random access function. A magnetic recording system stores  data on some form of magnetic media.   A mounted head would then read or  write that data off that media.

The IBM team evaluated several forms  of magnetic media - magnetic tape,   magnetic drums, magnetic plates,  and even magnetic wires and rods. Johnson eventually used a stack of rotating  magnetic disks, with each accessible using   read/write heads mounted on a common actuator. He  liked this format because of how much surface area   it gave you for the size as well as the potential  to access data on multiple disks at once. In an early prototype, they took about 120  aluminum disks and stacked them together on   a shaft. Each disk was about two feet  wide and spaced about a quarter of an  

inch apart. The whole array spun  at about 3,600 times each minute. ## Buiding RAMAC There were two major technical issues to overcome. First, they needed to figure out  how to evenly and smoothly apply   the iron oxide paint onto  the surface of the disks. One engineer suggested spinning the disks at  a high speed, and then pouring the paint - the   same paint used for the Golden Gate Bridge,  by the way - at its center so that it spread   uniformly across the whole surface. This  technique is now known as "spin-on".

The second major problem had to do with wobble.  The disks will wobble as they spin. How do you   keep all of the heads at least a thousandth of an  inch above the disks' surface if there’s wobble? A team led by Bill Goddard and John Lynott  integrated an air nozzle into the head.   So then we can use air pressure to  push air through the head nozzles,   creating an air cushion that kept the  head stable. Mounted on a single arm,   it would move up and down to the  right disk to stick the head in. In 1956, IBM introduced the 305 “Random  Access Method of Accounting and Control”   or RAMAC. RAMAC is a transaction processing system   built around what is widely acknowledged  as the first hard drive as we know it.

The drive was made up of 50 iron oxide-coated  disks, each about 61 centimeters wide. It cost   a quarter of a million dollars, held about 4.4  megabytes, and was the size of two fridges. These stats might sound ridiculously comedic  today, but back then it was an engineering   marvel. Particularly mechanically - being  able to retrieve data in less than a second.

In his RAMAC product announcement  on September 4th 1956, IBM President   Thomas Watson Jr. said that it was the  "greatest product day in IBM's history". Production ramped up in the San Jose  factory. The first RAMAC was shipped   to the Zellerbach Paper Company  a short whiles away. In 1959,   Soviet leader Nikita Khrushchev visited  the RAMAC factory as part of his US tour. ## An Industry is Born IBM made the disk drive a necessary part  of the computer and an industry was born.

First, the other computer makers  like General Electric and Burroughs   started producing their own hard disk drives. Then independent disk companies -  Bryant Computer Products and Data   Products - popped up. They offered third  party hard disk drives to those computer   makers lacking the expertise or  capital to produce their own.

During the mid-1960s, Japanese players  like NEC, Fujitsu, and Hitachi started   producing their own hard drives too.  Being vertically integrated players,   what they made was only for internal consumption. Then in 1966, IBM introduced its 2314  File Facility and their disk packs.   It not only offered more speed and performance,   but its 29-megabyte disk pack format made it  easier for people to swap storage in and out.

A new wave of independent companies  copied the disk pack format and marketed   those products to IBM customers as being  "plug compatible" with their hardware. ## Winchester Throughout the 1960s, IBM continued to come out with world-leading innovations  in hard disk drive storage. Their crowning moment came about in 1973  when they first introduced the Winchester   drive. The name derives from a comment by  IBM San Jose manager Kenneth E. Haughton. The original project spec was to  have two spindles of 30 megabytes   each. Haughton heard people calling it  a "30-30" and said: "If it's a 30-30,   then it must be a Winchester".  The project nickname stuck. Up until then, the disks in the packs  or the HDDs had been removable and   accessible. But this accessibility came  with particle contamination issues.

So IBM sealed off the disks, their individual  arms, and motors inside a dust-proof container.   This not only fixed the contamination issues,  but also gave the disks more storage capacity. That's because it let them cut the distance  between the head and the disk surface to a   thousandth of what it had been with the RAMAC.  The closer the head, the more data-dense  

the disks can be. So the Winchester cut the  cost-per-megabyte over competing designs by 30%. The Winchester design became an  industry standard. IBM set the   blueprint for all other such devices  since. For a long time thereafter,   people didn't call HDDs "hard drives".  They called them "Winchester Drives".

## Shugart One of the guys working on the Winchester's  early development was a guy named Alan Shugart. Born during the Great Depression,  Shugart graduated from the University   of the Redlands and went to work  for IBM at the San Jose lab. There Shugart led various memory  projects. One of which was a small,   cheap read-only device for transferring very small  programs from one computer to another. IBM called  

it the "Type 1 Diskette" at its release in 1973,  but nowadays we more know it as the floppy disk. Anyway, Shugart would have stayed at IBM his  whole career. But then IBM transferred him   to New York. He did not want that. So badly he  literally commuted back to San Jose on weekends. Thus he quit in 1969 and joined a company called  Memorex, a memory tape maker, for three years. Then after that, he started his own  company - Shugart Associates. But he   clashed with his fellow cofounders  over direction and equity and left.

Shugart Associates went on to dominate the  eight inch and then the 5.25 inch commercial   floppy drive markets. Xerox acquired them  in 1977 for $41 million. Not a bad exit. ## Shugart 2 After leaving the company with his name on  it, Alan Shugart tried some other stuff. Did some salmon fishing. Ran a bar or  whatever. In the end, he decided to come  

back to memory and found another company  in Scotts Valley in Santa Cruz County. The company's original name  was Shugart Technology,   but that was too similar to Shugart  Associates. So Alan tried to think   of a different name - with an S at the  start, T at the end, and a G in the middle. He went with Seagate. In founding  Seagate, Shugart sought to adapt   the IBM Winchester drive for the then-burgeoning  microcomputer - what we today would call the PC.

PC-makers had adopted Shugart Associates'  5.25 inch floppy drive. Seagate decided to   build a hard disk drive that can fit in the  same space but also offer far more capacity. By the way, the 5.25 inch floppy itself  came about at the behest of the brilliant   Dr. An Wang of Wang Laboratories.  Wang felt that the original 8-inch  

floppy was too big and expensive  and had asked for a cheaper version. Anyway, in 1980 Seagate announced  their ST506 hard drive. Its 5   megabytes of storage far outclassed a  floppy disk's 160 kilobytes of data. Despite being priced at over $1,000 each,  the HDD was an immediate hit. The company   made $9.8 million revenues in 1981. And then $40  million and $110 million the years after that. ## Engineering Marvels We should take a pause to catch our breath and  revisit the technologies behind the 5.25 inch HDD.

The core concept had not changed all  that much from the days of the floppy   disk or RAMAC. There are four key sub-components: The platters, motors, read-write  heads, and the supporting electronics. Bits of data are stored on tracks  written onto these double-sided platters,   which today are made from glass substrates. We mount the platters on spindles and use the   motors to spin them 3,600  to 7,200 times per minute. The data is then accessed by the heads,   which "fly" over those platters  - positioned by actuators. Electronics help position and support these  items. They monitor the heads' movements as  

they align and un-align. They feed  information back to the actuators. So yeah, HDDs today work the same way  as the RAMAC. But that is kind of like   saying that the Ford Model T shares  the same core concept as the Lexus LS   400. The engineering to achieve the core  concept has been completely overhauled. Even that first 5-megabyte Winchester  HDD from Seagate was an engineering   marvel. Seagate's engineering VP Doug  Mahon remarked then that it was like  

a Boeing 747 flying at Mach 4  just an inch off the ground. That was back then. Today, the heads fly as  little as 3 nanometers above the disk surfaces. Producing these machines requires lots of capital  expenditure to build or source the components,   assemble them inside expensive cleanrooms, and  test them before shipping out to the customer. ## Commoditization So how did the market turn all this  amazing engineering into a commodity? There have been a few reasons. Computer memory  - particularly secondary memory - is generally a  

commodity. The customer always wants more storage,  and is willing to jump to someone else to get it. "Brand value" never really gained traction  in the HDD industry. PC users upgrade their   systems because of something new. Like a new  version of the Windows OS or an Intel CPU. I   cannot imagine many people would buy a new PC  because Seagate or Quantum released a new HDD. As a result, PC assemblers played each HDD  maker off each other - buying whoever met   the spec for the lowest price. IBM is  notorious for this. They sourced almost   all of the HDDs for their rapidly growing PC  business in the early 1980s from startups.

In 1983, IBM released their PC-XT - the  followup to the legendary first PC. It   had a 10 megabyte HDD sourced largely from  startups - Seagate, MiniScribe, and IMI. IBM demanded heavy qualification  programs and second-sourcing from   those suppliers. They also refused  to enter into long term contracts,   rightly thinking that it did not make sense  to when the market was moving so fast. ## Piling In So that is from the customers' perspective.  Let us talk a bit about piling in.

The HDD itself is a modular device. The  four components are precisely engineered,   but separate. And only two contribute to storage   capacity and other performance metrics  - the platters and the read/write heads.

So new HDD firms can tweak one of these two  critical parts to create a new improvement.   Then integrate those bits and quickly bring a  new product to a market hungry for innovation. Furthermore, the HDD firms did  not at first protect their trade   knowledge and innovations  with patents. The community   of HDD researchers was small and ideas  flowed freely from one firm to another. But whenever a new firm managed  to come out ahead by deriving a   new hit format or technology, the  competition very quickly pulled   together something of their own. That  then sucked out any profit to be had.

For instance, in 1983 the Scottish firm  Rodime first produced - and more importantly,   patented - a 3.5 inch HDD format. They were one   of the few European HDD startups  to be seen as a relative success. The 3.5 inch format did not gain  substantial popularity until 1986,  

when another company called Conner Peripherals  started selling it in large quantities to Compaq. The new format's popularity invited massive  competition and Rodime could not keep up with   their competitors' scale and capability. They  filed for bankruptcy twice in 1989 and 1991,   and evolved into a patent troll. Which is sad. Here is a later example. Giant  magnetoresistance or GMR is a   Nobel-winning quantum effect discovered in  Germany and France. It revolutionized the  

HDD's read/write head, allowing for  more area density and thus storage. Despite being discovered in Europe, an  American firm IBM first commercialized   GMR in 1997 with a 16.8 Gigabyte  HDD. American competitors Seagate   and Read-Rite had their own GMR  heads two years later in 1999. And then there were the Japanese,  who rapidly licensed and bought their   own GMR technology. Toshiba announced  their first GMR-equipped HDDs in 1998.

One of Toshiba’s later products was a tiny 1.8  inch HDD. Famously, they had no idea what to do   with it. But Steve Jobs and Jon Rubinstein  did, using it for the Apple iPod in 2002. ## Venture Capital This wave of new firms crashing into the market was funded by a flood of  hot venture capital money. The end of the 1970s saw changes in the  capital gains tax rates and pension fund   investment regulations, which enabled  the rise of venture capital or VCs.

Seagate went public in September 1981, a  little over a year after first launching   their HDD in 1980. They raised $26 million, and  the market assigned them a favorable multiple. Seagate's VCs made good money. After the IPO,  their $1 million investment was worth over $32   million. It paved the way for how VCs would  invest and cash out their investments today. By mid-1983, there were 12 VC-backed  HDD manufacturers publicly traded   on the stock market, and their  total market cap was $5 billion. The market was hot. So VCs raised big funds and  poured that money into the disk drive industry,   recruiting smart people from established  companies to found these startups.

From 1977 to 1984, 43 different disk drive  manufacturers raised $400 million. In 1983   and 1984 alone, 21 startups raised over  $270 million over 51 rounds of funding. By then there were something like seventy  firms in total. So when the PC market first   pulled back in 1983 and 1984, it triggered a huge  shakeout. Many of the startups did not survive. Nevertheless, this Zerg rush of entrants vastly  changed the market. In 1978, 84.8% of the market  

was held by the old vertically integrated  HDD companies. A little over ten years later,   the Old Guard had just 7.9% share. They  were essentially driven out of the market. ## Globalization In the beginning, US firms dominated the  industry. But competition came in from abroad. Japanese and European companies  did enter the market. The four   big Japanese computer makers - Fujitsu, Hitachi,   NEC and Toshiba - originally produced their HDDs  for internal use only but shifted to an OEM model. However, despite some interesting innovations they  initially failed to make serious headway into the   market. That is because the Americans themselves  aggressively globalized their manufacturing.

In 1984, Seagate began outsourcing the assembly   of its HDDs to Singapore. Several  other American HDD-makers followed. This move was facilitated by the Singapore  Government's Economic Development Board in   one of the most famous cases of  Asian industrial policy. By 1990,   Singapore was the world's largest producer  of HDDs with 55% share of shipments. When Singapore's labor costs also rose, low-value  work like assembling the actuator arm holding the   read/write head emigrated to other Southeast Asian  regions like Malaysia or Thailand. Singaporeans   took on new tasks like fabricating the platters  or assembling more specialized HDD systems.

For information about this, I did  a video a long time ago about the   history and challenges of Thailand's HDD industry. The Japanese did eventually "cache up",  outsourcing their production abroad as   well. And in the early 2000s they even  captured majority share of the HDD market   when Hitachi merged with IBM before competition  and mergers again eroded their advantage away. ## Responses This intense competition and globalization  created enormous benefits for the consumer. From 1976 to 1987, the HDD's  data density grew 20 times over.

In 1977, a megabyte of data storage cost  $560. In 1986 it was $11.89. By 1990,   that had fallen to just $6.86.  And then 1998, 4.3 cents. Cents! But that was a situation that  cannot sustain. The technology   matured and companies began exiting the market. There is a whole Wikipedia page  about all the defunct hard drive   firms and when they exited the market. It is long.

The number of HDD firms peaked in 1990 with 66.  The next four years saw the number of firms cut   in half to 33. Failures included companies  we never heard of like Peripheral Memories,   Comport, PrarieTek, Priam, and Tulin. By  1998, there were “only” 16 firms left. Yet even after that vicious shakeout, the  market still had too many players. Between   2006 and 2015, the top four HDD vendors  had total average market share of 52.5%.

So four more major HDD firms exited  the market from 2000 to 2010 - Quantum,   IBM, Maxtor and Fujitsu. They were  laggards and with the market maturing,   saw no way forward other  than to combine to grab size. Even IBM - the HDD's inventor - decided to exit.  While they made some money from patent-licensing,   their own HDD division struggled to gain  more than 25% of the market. In 2002,   they merged their HDD operations with  Hitachi's. A sad end to a storied history.

## Conclusion Today, there are three major HDD makers in the  market - Seagate, Western Digital and Toshiba. They continue to manage their market  share as the HDD fades into history,   replaced by new items like Solid State  Drives. It is unlikely that they will   ever be totally replaced, but the growth  - and the innovation - is largely gone. Looking at this crazy boom and bust in HDDs,   it is interesting to look at how the  American firms' aggressive globalization   allowed them to retain significant market  share in the face of competition from Asia. By the mid-1990s, there were no more HDD assembly  factories in the United States. But higher-paying   American jobs in R&D, head manufacturing, and  gimbals have remained - essentially saved.

I do wonder what could have been different to  avoid such a brutal knife fight in the industry.   Maybe an architectural decision here, or there.  Or maybe that is how it was fated to play out.

2024-05-17 19:43

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