EN This text is made available for information purposes only. A summary of this decision is published in all Community languages in the Official Journal of the European Union. Case No COMP/M.6214 - Seagate/ HDD Business of Samsung Only the English text is authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 8 (1) Date: 19/10/2011 EN EN Brussels, 19.10.2011 C(2011) 7592 final PUBLIC VERSION COMMISSION DECISION of 19.10.2011 addressed to: Seagate Technology Public Limited Company declaring a concentration to be compatible with the internal market and the functioning of the EEA Agreement (Case No COMP/M.6214 - Seagate/HDD Business of Samsung) (Only the English version is authentic) TABLE OF CONTENTS COMMISSION DECISION addressed to: Seagate Technology Public Limited Company declaring a concentration to be compatible with the internal market and the functioning of the EEA Agreement (Case No COMP/M.6214 - Seagate/HDD Business of Samsung) ................. 5 I. THE PARTIES............................................................................................................. 6 II. THE OPERATION...................................................................................................... 6 III. Union DIMENSION.................................................................................................... 6 IV. THE FRAMEWORK OF THE ASSESSMENT ......................................................... 7 V. THE COMPETITIVE ASSESSMENT........................................................................ 9 5.1. INTRODUCTION TO THE HDD INDUSTRY.......................................................... 9 5.1.1. Hard Disk Drives.......................................................................................................... 9 5.1.1.2. The product.................................................................................................................. 9 5.1.2.2. HDD manufacturing process...................................................................................... 10 5.1.2. HDD end-uses............................................................................................................ 10 5.1.2.1. Enterprise applications ................................................................................................ 13 5.1.2.2. Desktop applications ................................................................................................... 14 5.1.2.3. Mobile applications..................................................................................................... 14 5.1.2.4. Consumer Electronics applications (CE) .................................................................... 14 5.1.2.5. Volumes of HDDs by end use and growth forecasts .................................................. 15 5.1.2.6. External hard disk drives............................................................................................. 16 5.1.3. The HDD ecosystem .................................................................................................. 16 5.1.3.1. HDD manufacturers .................................................................................................... 16 5.1.3.2. HDD component makers upstream ............................................................................. 18 5.1.3.3. Different HDD customer groups................................................................................. 19 5.1.4. Innovation and technology trends .............................................................................. 19 5.1.4.1. Innovation in the HDD industry.................................................................................. 20 5.1.4.2. Technology trends in the storage industry .................................................................. 21 5.2. THE RELEVANT MARKETS.................................................................................. 24 5.2.1. Relevant product markets (HDDs)............................................................................. 24 2 5.2.1.1. Demand-side substitutability....................................................................................... 24 5.2.1.2. Supply-side substitutability......................................................................................... 39 5.2.1.3. The significance of competition from SSDs ............................................................... 55 5.2.1.4. Conclusion on the relevant product markets (HDDs) ................................................. 62 5.2.2. Relevant product markets (XHDDs).......................................................................... 63 5.2.2.1. The View of the Notifying Party................................................................................. 64 5.2.2.2. The Commission's assessment .................................................................................... 64 5.2.3. The geographic market definition .............................................................................. 66 5.2.3.1. HDDs........................................................................................................................... 66 5.2.3.2. XHDDs........................................................................................................................ 66 5.3. ASSESSMENT OF NON-COORDINATED EFFECTS........................................... 68 5.3.1. Introduction................................................................................................................ 68 5.3.2. The Commission's general approach on the HDD markets ....................................... 70 5.3.2.1. The View of the Notifying Party................................................................................. 70 5.3.2.2. The Commission's analytical framework .................................................................... 71 5.3.2.3. Common issues on the HDD markets ......................................................................... 72 5.3.3. The market for 3.5'' Desktop HDDs........................................................................... 81 5.3.3.1. The View of the Notifying Party................................................................................. 81 5.3.3.2. The Commission's assessment .................................................................................... 82 Introduction .............................................................................................................................. 82 The impact of the proposed transaction ................................................................................... 83 5.3.4. The market for 2.5'' Mobile HDDs............................................................................. 90 5.3.4.1. Introduction ................................................................................................................. 90 5.3.4.2. The Commission's assessment .................................................................................... 90 5.3.5. The market for 3.5" Business Critical Enterprise HDDs ........................................... 95 5.3.5.1 Introduction................................................................................................................ 95 5.3.5.2. The Commission's assessment ................................................................................... 96 5.3.6. The market for 3.5" CE HDDs................................................................................... 99 5.3.6.1. Introduction................................................................................................................ 99 3 5.3.6.2. The Commission's assessment ................................................................................. 100 5.3.7. The XHDDs market ................................................................................................. 102 5.3.8. Conclusion on non-coordinated effects.................................................................... 109 5.4. ASSESSMENT OF COORDINATED EFFECTS................................................... 109 5.4.1. The View of the Notifying Party.............................................................................. 110 5.4.2. The Commission's assessment ................................................................................. 110 5.4.3. Conclusion on coordinated effects........................................................................... 112 5.5. ASSESSMENT OF VERTICAL EFFECTS: CUSTOMER FORECLOSURE ...... 112 5.5.1. Heads........................................................................................................................ 113 5.5.1.1. Introduction ............................................................................................................... 113 5.5.1.2. Ability to foreclose.................................................................................................... 114 5.5.1.3. Incentive to foreclose ................................................................................................ 114 5.5.1.4. Impact on effective competition................................................................................ 116 5.5.1.5. Conclusion................................................................................................................ 116 5.5.2. Media........................................................................................................................ 117 5.5.2.1. Introduction ............................................................................................................... 117 5.5.2.2.