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November 4, 1997

Hard Disk Drive Magnetic Head Technology Agreement

Under the terms of the agreement, Hitachi will provide Hitachi Metals with technical information on magnetoresistive (MR) and GMR heads, license related patents. Hitachi Metals plans to expand its disk operations to achieve a top-ranked global position in MR and GMR heads.

Engineers from both companies will work on the development of next-generation head technology and volume production technology, using facilities of Hitachi's Data Storage & Retrieval Systems Division. Hitachi also plans to commission Hitachi Metals to produce a portion of the heads.

The increasing use of servers and personal computers in recent years has spurred a rapid expansion in demand for hard disk drives, and their market volume is expected to continue to grow at a high pace. At the same time, the downsizing of corporate computer systems and the growth in the amount of multimedia information processing are fueling a need for higher drive capacities in a smaller form factor.

Head technology is a major element in efforts to develop smaller hard disk drives with higher capacities. Read/write speeds and capacities have gradually risen as ferrite heads gave way to thin-film heads. More recently, thin-film heads are being supplanted by heads which utilize the magnetoresistive effect to achieve further increases in speed and capacity. Now, the focus is on developing giant magnetoresistive heads to achieve even higher speeds and capacities for the next generation of hard disk drives.

Hitachi is one of the world's leading manufacturers of disk array subsystems, products that have an unrivaled reputation for performance and reliability. With respect also to hard disk drives, Hitachi has always been on the cutting-edge of head technology development, and in March announced the successful development of a chromium-manganese-platinum based antiferromagnetic material that is highly corrosion- resistant and will play an essential role in the achievement of a commercial GMR head.

Hitachi Metals has a major share of the market for ferrite heads. To sustain and expand this sector of its operations, it is now necessary for the company to make an early transition to MR heads, which involves more than the heads themselves. Instead, it involves development of the overall hard disk drive, and of related evaluation technology. For Hitachi Metals, this meant it was necessary to collaborate with a hard disk drive manufacturer who possesses MR head technology.

After reviewing the current state of the business and studying future strategies, the two companies decided that the agreement was in their best interests, in terms of development expenses, the lower costs resulting from the merits of scale, and the strengthening of their competitive positions.

Looking to the future, each company will be working toward a goal of achieving a leading share of the international market, in hard disk drives and disk array subsystems in the case of Hitachi, and in heads in the case of Hitachi Metals.

Hitachi Metals, Ltd., a subsidiary of Hitachi, Ltd., specializes in manufacturing and marketing of materials such as high-grade specialty steels, automotive components, magnetic & electronic materials and parts. Its fiscal 1996 (ending March 31, 1997) sales amounted to 319, 928 million yen.

Hitachi, Ltd., headquartered in Tokyo, Japan, is one of the world's leading global electronics companies, with fiscal 1996 (ending March 31, 1997) consolidated sales of 8,523 billion yen. The company manufactures and markets a wide range of products, including computers, semiconductors, consumer products and power and industrial equipment. For more information on Hitachi, Ltd., please visit Hitachi's Web site at http://www.hitachi.co.jp.

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