Seagate and Toshiba are competing to buy TDK's hard-disk-drive recording head business, a deal that could be worth several billion dollars, Blocks & Files reported Tuesday, citing Bloomberg. TDK is the only independent maker of the read/write heads at the core of every hard drive, and it supplies all three remaining drive manufacturers.

What Happened

According to Bloomberg's report, Seagate entered talks over the summer with a higher offer than Toshiba's. Representatives of the three companies also met in Tokyo to discuss how to guarantee a continued supply of heads, including the possibility of a joint venture that would satisfy all sides, according to a summary of the report by tech site Gagadget.

TDK said the reports were not based on any announcement by the company and that no decisions have been made. Seagate declined to comment, and Toshiba later disputed the accuracy of the report, according to market news site Parameter. Seagate shares fell about 2% in premarket trading Tuesday.

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Why It Matters

Only three companies make hard-drive heads: Seagate, Western Digital and TDK. Seagate and Western Digital build most of their heads in-house but buy from TDK when they need extra capacity. Toshiba has no head production of its own and depends on TDK for all of its heads, including the technology it needs for its planned move to heat-assisted magnetic recording, or HAMR.

That dependence is what makes the bidding sensitive. If Seagate wins, Toshiba would have to buy a critical part from one of its two main competitors, and Western Digital would lose its outside source of surge capacity. Seagate and Western Digital each hold about 45% of the hard-drive market, with Toshiba at about 10%, according to Gagadget, which cited TrendForce. Analysts quoted by Blocks & Files said competition authorities could block a sale because of the control it would give the buyer over rivals' supply.

The Business at Stake

The head unit is small within TDK. It had sales of ¥262.9 billion, about $1.74 billion, and operating profit of ¥27.0 billion, about $179 million, in fiscal 2026, according to Blocks & Files. Analysts put its return on invested capital at around 4%, reflecting heavy and continuous spending on new head generations.

Demand is rising. Nearline head volume, used in the high-capacity drives that fill data centers, grew about 14% from a year earlier as AI buildouts consume bulk storage. Toshiba plans to spend about $380 million expanding a plant in the Philippines with the goal of doubling its output of data center drives by 2027, a plan that only works if it can secure enough heads.

For TDK, a sale would mean leaving a capital-intensive, volatile business to concentrate on batteries, sensors and components for AI systems, where Gagadget said the company expects 25% to 30% annual revenue growth.

What to Watch

The outcomes range from a sale to Seagate or Toshiba, to a joint venture that keeps supply open to all three drive makers, to TDK keeping the unit. If Seagate prevails, regulators' view of its control over rivals' head supply could decide whether the deal closes. Watch also for how a prolonged process affects head supply while data center demand for high-capacity drives keeps climbing.