TMO Reports - Hitachi Expands iPod Mini Microdrive Production To Meet Apple Demand

by , 7:00 AM EDT, May 17th, 2004

As Apple Computer struggles to fill orders for its popular iPod mini digital music player, the maker of its internal hard drive, which sources have confirmed is causing the shortage, announced Monday it is expanding its manufacturing facility to meet much if not all of Apple's demand by years end.

Hitachi Global Storage Technologies, maker of the popular 4GB Microdrive told The Mac Observer Monday it has already begun expansion of its production lines in Thailand to make more of the 1.68-inch mini drive, which is being used by Apple in the iPod mini.

"We are rapidly expanding our 4GB Microdrive production line and our customers will start feeling the effects of a lot more of these drives almost immediately," John Jackson, director of business development at Hitachi, told The Mac Observer. "Our customers will be very happy by years end."

While Mr. Jackson is optimistic more of the drives can be in the hands of its customers very soon, he was unable to speak about the short term over the next four months. Mr. Jackson said some 200,000 of the Microdrives are being manufactured each quarter and that the goal is to be making "several million" per quarter by next year.

Mr. Jackson would not be held to exact numbers for the calendar third and fourth quarters, but he did say Hitachi would be manufacturing "substantially increased volumes" of the drive very soon as the additional production line slowly comes online.

While the news from Hitachi will be seen as a positive sign by Apple, it may not totally fill its needs over the next few months. There are no guarantees Apple will be able to fulfil large numbers of existing orders over the next few months, no matter how fast Hitachi produces the drives.

Currently, the wait on Apple's online store for the iPod mini is listed as over six weeks. Extremely high demand for the mini, introduced in the United States in January, led Apple to the delaying of the smaller iPod model internationally until the end of July.

The news from Hitachi will come as welcome news for customers clamoring for the iPod mini and from Apple who is wanting to sell as many units as they can. Availability of the iPod mini is virtually at a standstill as Apple tries to get its hands on more components to manufacture as many units as possible to meet the overwhelming demand in the US. iPod mini demand is "far exceeding supply that we had planned," said Tim Cook, Apple's executive vice president - worldwide sales and operations.

Apple said the mini has been in short supply due to the lack of an unspecified component, but the company said it hopes to be caught up to demand by the fourth-quarter.

"There is no manufacturing constraint at all," Mr. Cook said. "It is a component constraint. I'd rather not go into the details of that."

Although neither company will confirm publicly that the Hitachi Microdrive is being used by Apple in the iPod mini, it is widely known that the drive is at the core of the portable music device, and that its supply shortage is directly affecting Apple's availability of the product.

"Apple is using the Hitachi 4GB Microdrive in the iPod mini," Rob Enderle, principal analyst of The Enderle Group in San Jose, Calif., told TMO. "It's widely known in computer industry manufacturing that this is the drive that Apple is using. It's also widely known that Apple's shortage of the mini is because Hitachi can't make enough of the drive components."

In addition to Mr. Enderle's confirmation, further evidence is a photo of the drive labelled with the Hitachi logo and Microdrive name on it in the June issue of MacAddict.

In-coming CFO Peter Oppenheimer told analysts iPod and iPod mini units accounted for about half of the company's 29% revenue growth came from iPod sales in the fiscal second-quarter, on US$264 million in sales.

"We shipped 10 times the number of iPod's compared to a year ago," Mr. Oppenheimer said. "We expect our strong (iPod) momentum to continue as we catch up with iPod mini demand, and as HP launches their digital music player this summer."

Mr. Oppenheimer said the company would not estimate how many iPod and iPod mini units would ship in Q3, only saying, "we expect to be very constrained and hope to catch up our balance supply in demand in the (fiscal) fourth quarter."

Hitachi Global Storage Technologies