China Says Western Digital Buying Hitachi Unit Hurts Competition

December 27, 2011, 2:14 AM EST By Bloomberg News

Dec. 27 (Bloomberg) -- China said Western Digital Corp. must address concerns that its proposed acquisition of Hitachi Ltd.’s storage business will hurt competition before regulators approve the purchase.

Western Digital’s acquisition will hurt competition in the market for computer hard-disk drives “to a certain extent,” Shang Ming, head of the Ministry of Commerce’s antimonopoly bureau, said in Beijing today. The ministry will seek “appropriate solutions” to address its concerns, he said.

“China is the world’s biggest computer consumer and so naturally the deal will exert a negative impact on Chinese consumers,” Ming said at a briefing held to review the bureau’s activity in 2011.

The importance of Chinese approval for acquisitions has increased as economic growth averaging 10 percent in the past three decades transformed the nation into the world’s biggest consumer of products including computers, automobiles, and mobile phones. China’s Ministry of Commerce said it received 43 percent more antitrust review applications from January to mid- December of this year than it did in 2010.

The ministry is also reviewing Google Inc.’s acquisition of Motorola Mobility Holdings, Shang told reporters after the briefing, without giving more details.

Western Digital won European Union approval for its purchase of Hitachi’s unit last month after agreeing to sell off some disk-drive production. The sale of “essential production assets” for 3.5-inch hard disk drives eliminates concerns that Western Digital would only face Seagate Technology Plc as a rival supplier, the European Commission said.

Seagate Acquisition

Seagate won EU approval to buy Samsung Electronics Co.’s computer hard-disk drive operations in October. That purchase, combined with Western Digital’s proposed acquisition, would reduce the number of large manufacturers of mechanical hard-disk drives for computers to three from five. Western Digital would have a 50 percent share of the market, Seagate would have 40 percent and Toshiba would have 10 percent, according to research by IHS Inc.’s iSuppli.

China approved Seagate’s acquisition earlier this month after the ministry and the companies reached an agreement aimed at protecting competition, Shang said. China may “make a similar ruling based on the law” if Western Digital addresses the ministry’s concerns, he said.

Shang said he expected the ministry to receive more antitrust applications next year.

--Victoria Ruan. Editors: Bloomberg News, Nicholas Wadhams

To contact Bloomberg News staff for this story: Victoria Ruan in Beijing at vruan1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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