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China wants Western Digital to address monopoly concerns

After winning the approval of regulators in Europe, Australia, and Japan, Western Digital may have hit a snag in its bid to acquire Hitachi’s disk drive arm. Chinese regulators are concerned that the deal could hurt hard drive competition.

In March, Western Digital announced its proposed takeover of Hitachi Global Storage Technologies (HGST), the disk drive arm of Hitachi Ltd., in a cash and stock deal worth about $4.3 billion.

Over the past several months, the acquisition has won approval in several key markets.

Late last month, however, Shang Ming, head of China’s Ministry of Commerce’s anti-monopoly unit, said he fears the buyout will hurt competition. Ming said his agency will look for “appropriate solutions” to address those concerns.

“China is the world’s biggest computer consumer and so naturally the deal will exert a negative impact on Chinese consumers,” Ming said, according to news services .

Western Digital is the leading supplier of hard disk drive technology worldwide, with about 31% of the market, followed by Seagate Technology with 29%. Hitachi GST’s business represents about 18% of total hard drive units shipped, according to market research firm iSuppli. Once combined, Western Digital and HGST will handily dominate Seagate in the market.

The deal would give Western Digital, a company focused mostly on the consumer external hard drive segment, a greater foothold in the data center internal disk drive space.

Also last month, Seagate announced it completed its $1.4 billion acquisition of Samsung Electronics’s hard drive business, after it received approval for the deal in Australia, China, and the European Commission.

The European Commission also approved WD’s HGST takeover after WD agreed to sell off some disk-drive production.

HGST’s manufacturing locations in China and the Philippines would provide WD with its first foothold in those markets.

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