Showa Denko has announced the construction of a new R&D centre that will produce a coin-sized 40GB hard drive.

The Japanese manufacturer produces disks for drive makers including Toshiba, and will spend 3 billion yen (£15 million) on the centre. Situated just east of Tokyo, it is due for completion in April next year.

The storage needs of computer and digital consumer electronics users are growing rapidly, and drive makers are racing to produce drives that are both smaller and offer higher capacity. The key to doing this is the ability to cram data bits closer together on the disk.

A big step forward was taken earlier this year with the first commercial drives employing perpendicular recording. With this, a magnetic field for data runs perpendicular to the disk surface and so requires less space. This means more bits can be stored on each disk and leads to an overall increase in capacity.

Showa Denko is making the disks for the first perpendicular recording drives, which are available from Toshiba, said a company spokesman. They are capable of storing about 133 gigabits in each square inch of disk space. That's roughly the same as drives using existing longitudinal recording technology but while that method is hitting its limits, the perpendicular method is only in its infancy.

Showa Denko hopes the new research center will help it reach a capacity of 1,000 gigabits per square inch by 2010. At such a capacity, a 0.85-inch hard-disk drive would be able to store 40GB of data.

Although not as well known as disk-drive makers, companies such as Showa Denko are vital to the hard-disk drive industry. The company's maximum disk production capacity is 10.7 million disks per month, and it is currently in the process of expanding this so that it will be able to make 13.75 million disks per month by March 2006.