Western Digital CEO David Goeckeler told investors this week that the company had fallen behind in hard drive technology, so he decided to restructure executive management.
Goeckeler explained to the Morgan Stanley 2022 Conference on Technology, Media and Telecommunications“I’ve spent the last two years rebuilding Western Digital, the leadership team, the way the business is structured, all kinds of things…we’ve spent a lot of time over the last two years, finding really good leadership in place and getting the structure in place in the company [so] that we could really produce and make the most of the franchises that we have.
These are commercial hard disk (HDD) and flash (SSD) units within WD.
He continued, “We’ve split the product portfolio in half, set up business units, brought in general managers so they can really focus on executing and driving the right roadmap decisions to wallet. And I feel like our technology roadmap is in a much better position. The two managing directors are Robert Soderbery for flash and Ashley Gorakhpurwalla for hard drives.
WD and Kioxia JV
Upon arriving at WD, Goeckeler found that the flash foundry joint venture with Kioxia had relationship issues. Previous CEO Steve Milligan oversaw litigation legal wrangling with Toshiba as it attempted to spin off its foundry business.
Goeckeler told the conference, “I’ve invested a lot in making sure this relationship is very, very strong. And that’s, I mean, on an engineering basis, you probably wouldn’t know there’s two different companies… I’m talking to my peer [Kioxia CEO Nobuo] Hayasaka every two weeks and make sure we’re really tightly engaged in what is a very, very important relationship for both of us.
Goeckeler also revealed at the event that the latest BiCS5 112-layer 3D NAND technology has proven to be very capital efficient, saying that WD “can use many of the same tools in the factory that are used for BiCS4”, the previous 96-layer technology. . More than half of the bits coming out of fabs are now built with BiCS5 technology.
He said: “Our portfolio of SSD customers is very strong, [in a] very good position… There has been a complete transition from… our client hard drives to client flash… The company has played this transition extremely well… We have a strong position in the consumer. It’s always good to have a captive franchise in your portfolio. The SanDisk brand is very, very strong. We have a strong position in mobile. The game has been very good for us. But the only pillar of the portfolio we had to build was the enterprise SSD…it’s an important TAM [total addressable market].”
Unlike the client disk area, where flash cannibalization is quite complete, data center hard drives remain strong, with nearline disks dominating. WD has struggled to break into the enterprise SSD market, but is making progress. Goeckeler said: “We are building our own controller. It’s been a big goal of mine since I arrived here and I really think Calendar Year 21 has been a breakthrough for us.
He said: “We started the year with…our first qualification at one of the web’s big players. We deployed throughout the year on this player. As the year went on, we qualified for second and third, and then also two big enterprise OEMs in the storage space.
“It’s a multi-step story. Qualifying is the big chunk of that and we feel very good where we are.
The recent chemical contamination incident caused a production loss of $250 million. Prices are rising and Goeckeler is selling earmolds in more expensive devices: “We don’t have as much volume as before. So we’re going to mix it up in whatever way has the most value.
Goeckeler admitted to WD’s failures with the 16TB drive, saying, “We’ve fallen behind… I don’t think it’s a secret. I’ve been very open about it.
WD is now back on par with rivals Seagate and Toshiba, regaining parity at the 18TB level, according to the CEO. “Our main focus on 18 was to get back on our front foot and lead that point of ability, which we did.”
The company has used its NAND technology to increase hard drive capacity through higher track density with its OptiNAND drives. A 20TB drive is a sample shipment and there is a roadmap of up to 30TB through the use of Microwave Assisted Recording (MAMR), after which HAMR technology will be required.
Another track density-increasing technology, magnetic shingle recording (SMR), which slows data write-back speeds and requires drive or host system software management, is becoming increasingly popular with customers and important to WD. Goeckeler said, “Now we’re seeing customers really starting to embrace this.”
He explained, “SMR is going to give you 10-20% more capacity on a disk, and when disks hit 20 terabytes, that’s significant. And we’re seeing really good adoption now on SMR, where if you go back a year ago, it wasn’t quite there.
Overall, Goeckeler does not expect WD to be affected by component supply shortages following Russia’s invasion of Ukraine. He was asked: “Issues with the Ukrainian supply chain, whether it’s neon gas, palladium from Russia, something like that, that you can see affecting you?”
He replied, “No, we looked at it very, very closely. This is obviously a very tragic situation. But from our business point of view, we have several suppliers for all gases and at very low risk.
The Goeckeler medicine works. WD healed the relationship with Toshiba/Kioxa and helped the hard drive company recover. If it can grow the enterprise SSD business as well, WD should be in great shape for the future. Goeckeler wasn’t asked about supplying flash to the automotive industry, but we don’t assume he and Soderbery are going to let that market escape their notice.