western-digital-logoWestern Digital, the US disk drive manufacturing giant,  clearly sees a bright future for China, both as a market and as a manufacturing base.

The firm’s board recently went to China to visit the firm’s operations in the PRC, but this trip went beyond the usual round of factory visits as WD seems to leveraged some pretty impressive guanxi

For instance,  it secured a meeting with Chinese Vice Premier Wang Yang, which presumably is not something that many Western firms manage to pull off.

US Ambassador to China Gary Locke hosted the board at a reception at his residence in Beijing. Former Secretary of State Madeleine Albright accompanied the board to Beijing and all of its activities on behalf of Albright Stonebridge Group.

Steve Milligan, president and chief executive officer, said:

China is both a very important market for Western Digital as well as a key manufacturing base. As China further develops its technology industries, we look forward to expanding our relationships with a wide range of Chinese entities for the benefit of our shareholders, as well as our Chinese partners.”

The last decade has seen the likes of IBM, HP and Dell all realise that the computer hardware business has lost a lot of its shine. But the upheavals have been nothing coompared to those in the disk drive industry, where changes in technology, market structure, global scope, and vertical integration have been pervasive, rapid and unrelenting. So much so, in fact, that it is estimated 200 HDD manufacturers have disappeared over the past three decades.

Today the market is concentrated in the hands of just two two major players, Seagate and WD.  The latter acquired Hitachi Global Storage Technologies, the third man standing, last year for $3.9bn from Japan’s Hitachi. After their Beijing visit, WD’s board were scheduled  to also take a trip to visit the newly-acquired HGST’s facilities in Shenzhen.

What is the endgame in the hard disk business? Less attractive than it used to be,  the disk drive industry is mature but its not going to disappear any time soon. Data centers and enterprise computing systems still need disk drives, even if consumer devices like smartphones have abandoned the disk drive in favour of solid-state storage.

Meanwhile, the pace of innovation in the industry continues unabated. Last year, Seagate  claimed it had become the first HDD manufacturer to achieve the milestone storage density of 1 terabit per square inch using an innovative technology called heat-assisted magnetic recording (HAMR).

But while manufacturers continue trying  to outgun each other in innovation front, they know that the industry’s best days are behind it.

As such, I suspect that more and more of the value chain in the HDD business will relocate to China, which is already the world’s largest manufacturer of hard disks.   Just as Huawei has shown with networking equipment, China is keen to prove to the world that it is much more than a low-cost assembly base for technology designed in the West.

The hard disk business might be the next to experience the China innovation effect.