Hard drives

	The K208 model from Netac has 80 to 500GB memory capacity and is compatible with Windows 98, ME, 2000 and XP, Mac 9.x and Linux 2.4.2.

China suppliers are mainly engaged in the production of external enclosures and ship only 5 percent of output incorporating hard drives. The high cost of HDDs and the difficulty of providing aftersales service are the two main factors hindering companies from turning out portable hard drives.

Further, some buyers find it more cost-efficient to import just the enclosures from China and purchase the HDD in their country.

But even with these challenges, a number of makers are focusing on units integrating hard drives to boost market positioning and broaden export destinations. To cope with high manufacturing outlay, they cooperate with major HDD providers such as Samsung, Hitachi, Fujitsu and Seagate to secure favorable prices.

Currently, ExcelStor is the only China company able to produce hard drives in-house, accounting for just 1 percent or less of global supply.

Complete portable HDDs are exported mainly to South America, the Middle East and Africa where demand for such products is high.

At the same time that some makers are venturing into integrated systems, an increasing number of suppliers are expanding their selections of midrange external enclosures to bring in healthier margins.

This particular segment accounted for about 40 percent of China’s output in 2008, while low-end models had a 45 percent share. Midrange designs are expected to lead production this year.

Such units are quoted between $7 and $30, and usually employ aluminum alloy for the casing. They adopt USB 2.0-to-IDE/SATA interface and have one-touch backup or OTB and encryption functions.

Low-end versions are priced from $3 to $12. They have USB 2.0-to-SATA interface and basic data transfer functions.

Products in the high end generally have features found in midrange units, although they adopt eSATA-to-SATA and come with media playing, high-definition display and network recording functions. Models have a price range of $40 to $70.

Dominating output in all three segments are 2.5 and 3.5in variants, although versions compatible with 1.8 and 5.25in hard drives are also available.

Kintec Information Technology Co. Ltd offers external enclosures in more than six colors and provides units customized for specific markets. For instance, those bound for Europe have simple designs and dark colors, and support OTB, encryption, media playing, high-definition display and network recording.

Units targeted at Asia incorporate basic data transferring function but come in more-fashionable and vibrant colors. They adopt aluminum alloy and leather for the casing.

Shenzhen Freegene Technology Ltd, on the other hand, focuses on HDD dual enclosures and docking stations, optimistic that demand for these types will increase in coming years. Its products are mostly suitable for 3.5in hard drives.

The manufacturer creates its own designs by using proprietary molds, and plans to improve the stability and compatibility of its models. It exports upscale units mainly to the US and Asia.

The main components of external enclosures are the IC, power supply and PCB, each accounting for 35, 20 and 15 percent of production costs, respectively.

Chipset solutions are mainly sourced from Taiwan’s JMicron but some makers choose the Oxford series provided by PLX. PCBs and power supplies are commonly purchased in mainland China.

Most companies expect prices of external enclosures to remain at current levels in the next several months, as material costs have been relatively stable since 1H09.

Thinning manufacturing base

	Kintec’s 3505AB is an external enclosure with a USB 2.0-to-SATA interface and supports 480Mbps USB 2.0 and 1.5Gbps SATA transmission speeds.

There are currently 100 makers of enclosures and portable hard drives in the mainland, down 50 percent from 200 last year. The leaner manufacturing base is due mainly to fierce price competition and sliding revenue. Some companies have lowered quotes by as much as 10 percent in recent months to attract orders.

As such, a number of enterprises are setting their sights on NAS and HDD media players, segments with higher returns and more optimistic demand projections. These products are considered upscale and mainly shipped to the US and Europe. Models have eSATA-to-SATA interface, and support high-definition display and network recording functions.

Despite migration to other lines, China’s turnout of external enclosures and portable hard drives this year is forecast to remain at 2008’s total of 3 million units.

In addition, a dramatic contraction in the supplier pool is not expected, at least in the next two years. This comes as the growing popularity of notebook and netbook PCs stimulates orders for HDDs and enclosures.

Production is heavily OEM-oriented, with most makers dedicating their entire output to customized models. The majority also provides PC peripherals.

SMT, assembly, testing and packaging are commonly done in-house, while mold making and plastic injection are subcontracted.

The average monthly capacity ranges from 40,000 to 60,000 units, 70 percent of which is utilized. About 75 percent of output is shipped overseas.

This year, companies will continue expanding their export market reach in Europe, Asia, South America and Africa.

With its mature supply chain, well-developed transportation network and skilled workforce, Guangdong province is the main manufacturing center for external enclosures and portable hard drives in mainland China.

Privately owned operations, which provide mainly midrange and low-end models, are clustered in Shenzhen. Taiwan- and Hong Kong-invested suppliers, on the other hand, are based in Dongguan. These are mostly large and midsize enterprises that focus on upscale units.

The SSD industry has been growing 74 percent annually, and is likely to reach $10 billion in 2012, according to Web-Feet Research. Further, iSuppli expects the line to account for 40 percent of the NAND flash storage market by 2011.

Currently, SSDs are used in high-end electronics products such as industrial, notebook and customized PCs. Compared with conventional HDDs, SSDs emit less noise and are more durable. They also have a faster data transfer rate.

SSDs are expected to lead in small- and medium-storage capacity markets, although HDDs, with a capacity of 1TB or higher, will continue to dominate the large-memory segment.