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By Julian Matthews


Removable Drives Will Replace Hard Disk Drives, Says Industry Pioneer

August 21, 1998, Penang -- Industry pioneer Syed Iftikar, president and CEO of Castlewood Systems Inc, spoke on August 13 at the launch of manufacturing operations for the ORB 2.16 GB magneto-resistive (MR) removable drive by its first strategic partner Trans Capital Holding Bhd, a local contract manufacturer.

Syed Iftikar was the founder of SyQuest Technology Inc and co-founder of Seagate Technology Inc, where he invented the 5.25-in. hard disk drive.

Castlewood Systems was founded in September 1996 and is a privately-held company based in California.

Syed is pioneering the use of MR technology, and Giant Magneto Resistive (GMR) technology, licensed from IBM Corp, in removable drives.

Q: The disk drive industry is in crisis with weakened demand, staff layoffs and restructuring among the players. It seems awkward that a new player is entering the fray under these circumstances, especially with manufacturing partners based in Asia.

Syed: Being an entrepreneur and a pioneer is never easy. But change is important. We have succeeded in making a high capacity, fast product which no one else can rival in terms of performance and cost.

The ORB is the first removable 3.5-in. MR cartridge drive with a capacity of 2.16 GB and data throughput rate of 12.2MBps, the fastest transfer rate of any removable media product available today, making it completely video capable.

Castlewood will solely focus on R & D and marketing and leave assembly manufacturing and supply of advance components to our partners. We don't expect to have layoffs.

I chose Penang because I want to make it the capital of the removable drive industry of the world, the way Singapore is now known as the leading HDD supplier of the world.

I think we can achieve this by the year 2000.

(Removable storage market leaders Iomega Corp, and SyQuest Technology Inc, already make the majority of their products out of Penang-based plants.)

Q: What kind of targets have Castlewood set for itself?

Syed: Our research indicates we have a demand for over 10 million drives a year from both OEM and retail channels valued at US$2 billion. Every OEM the company has spoken to has expressed the need for large quantities.

By March, 1999, with two plants in Malaysia and one in Japan, we expect to ramp up manufacturing to about a million drives per quarter, and even that won't be enough. We may license Sony Corp and Acer Inc for additional product.

Our next product will have a capacity of between 2 GB and 10 GB.

By the year 2000, we will have the technology and capability to produce 10 GB drives using GMR heads at a very low cost. It'll be like buying a Ferrari for the price of a Volkswagen.

As long as we continue that strategy and we don't fall off that path, then we are safe.

Q: Various proprietary technologies seem to be competing for the same desktop space, why should the ORB succeed?

Syed: The ORB drive outperforms other removable drive technology such as magneto optical, optical DVD, inductive head, high-density floppies and tape.

Iomega has a very expensive MR product which they are re-designing for low cost, while SyQuest has a low-cost product but with limited capacity. With an ORB drive you get a very fast, high capacity drive at an affordable cost.

The CD-ROM took five years to become popular as it was priced at US$250 when it was first introduced. Only when it broke the US$99 price barrier did it become popular, and DVD drives are going through the same thing -- they're too expensive. Price is the magic.

The ORB drive retails at $199.95 with one disk for consumers and US$149 for OEMs integrating it onto PCs. Additional 2.16GB cartridges are priced at $29.95.

Over time, we expect to sell our drives at US$99, and through joint-ventures with Sony Corp, and Hitachi Maxell Ltd, we will introduce the next-generation, low-cost cartridges that can store and play a full-length movie at only US$10. If you buy three cartridges that's a total of 6 GB at US$130. You cannot buy a 6 GB drive today for that price.

The ORB is a far more viable alternative for upgrading capacity, backup and transport applications, and downloading huge multimedia files from the Internet.

Q: Is the PC market the primary market for the ORB drives?

Syed: Information comes in three formats: text, audio and video. Video is the new face of technology and that is why we're targetting the VCR and set-top box markets as well.

I see a new class of computers, low-cost PC-TVs, priced under US$1,000, emerging possibly with integrated ORB drives.

Instead of using the VHS tape, consumers will also be using video recorders with ORB drives. It will have digital quality video and sound. No more time delay when rewinding, and fast forwarding, all instantaneous.

Sanyo Electric Co Ltd already has a product called HDR-1 product which incorporates an ORB drive and will be available on the shelves this Christmas season.

Aiwa Co Ltd, will follow soon after with an ORB drive product in its digital home systems product.

We are also in talks with movie studios to make ORB cartridges a preferred storage medium for distribution.

Q: Do you think removable drives will one day replace HDDs?

Syed: I firmly believe so. The market is gradually switching to removable drives.

Eighty percent of PC consumers do not need more than 2GB of storage anyway. Only professional users need higher capacity and performance and that is a small market.

With our next generation product, consumers will not need a hard drive when you can buy a removable drive for much cheaper, over the long run. No need for costly upgrades every year.

Q: Do you have plans to list the company and are you afraid of being bought out?

Syed: We plan to list on the Nasdaq by July next year. Currently the company is controlled by various private investors. If anyone wants to give us a US$1 billion they can buy us out.

(Published in AsiaBizTech, Aug 27,1998)



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