Hard-disk drive maker Hitachi Global Storage Technologies (Hitachi GST) will build up production of its one- and 1.8-inch hard drives over the next few years to meet growing demand from the consumer electronics sector. 'Asia will be key for us in this expansion. We need to get ahead of this [demand] curve,' said Dirk Thomas, Hitachi GST's vice-president of business development and strategy. He predicted that China, as the manufacturing base of many information technology and consumer electronics firms, would probably account for about 90 per cent of the company's hard-drive sales over the next few years from about 50 per cent now. 'Hitachi GST is aggressively investing in consumer electronics and emerging applications as the highest growth segment of its business,' he said. Market research firm International Data Corp (IDC) estimates that worldwide hard drive shipments for consumer electronics will grow to more than 70 million units in 2007 from 20 million. These drives will be used in MP3 players, personal video recorders, set-top boxes, digital cameras, personal digital assistants and car stereos. IDC also predicts that China will become the world's third-largest IT market by 2010. Launched in January last year, Hitachi GST was the result of ?Tokyo-based electronics giant Hitachi's acquisition of IBM's hard drive business in December 2002. Since then, the new company has moved to extend the benefits of disk storage - from one-inch to 3-1/2-inch drives - to various consumer electronics products. Research firm TrendFocus has projected consumer electronics applications could account for about 30 per cent of global hard drive shipments by 2006, up from 5 per cent in 2002. Mr Thomas said the strategy to penetrate new markets had worked, based on Hitachi GST's first-year results, which totalled US$4.2 billion. The company projected it would lose US$330 million in its first year of business. Instead, it ended the year with just $87 million in operating losses, representing a 70 per cent improvement against target. Hitachi GST is expected to show a net profit this year and a 6 per cent profit margin in 2006. Xia Yang, general manager at Legend Group's notebook business unit, said: 'Despite the year-long integration, the company continues to execute new product introductions, technology innovations and unique methods of strengthening its customer relationships.' Hitachi GST last month set up a new mainland operation, Hitachi GST Consulting (Shanghai), to provide customer support services related to logistics and warranty. This entity will focus on large international original equipment manufacturers, domestic manufacturers and Taiwan-based original design manufacturers. In August, Hitachi GST announced a three-year initiative to relocate most of its media manufacturing operations from San Jose, California, and Odawara, Japan, to its plant in Shenzhen to meet demand from its Asian IT and consumer electronics customers. The media is the key component of the hard drive on which electronic data is written in the data-recording process. Hitachi GST expects to begin media manufacturing in Shenzhen by the fourth quarter and will be in full production by the first half of 2006. The company plans to keep critically skilled media development and manufacturing pilot lines in San Jose and Odawara for innovative drive technology such as perpendicular recording. It also entered into a multi-year hard-disk manufacturing agreement with Great Wall Technology last August. ExcelStor, a subsidiary of Great Wall, will manufacture 40- and 80-gigabyte versions of Hitachi GST's 3-1/2-inch Deskstar 7K250 desktop hard drive.