Western Digital announced today that they would be acquiring Komag Incorporated, formerly one of their suppliers. The decision to acquire was approved on both sides, and is set to begin at the end of 3Q 2007.

For the sum of around $1 Billion, Western Digital's acquisition of Komag will give them a considerable boost for their HDD market, bringing their manufacturing and supply capacity into WD's fold. Komag primarily creates thin-film media, which is a key component in hard drives. This buyout will potentially allow WD to manufacture faster and lower their overhead. They expect it to also potentially enable them to lower production costs, meaning potential cost savings at retail:

While the primary purpose of the acquisition is strategic in terms of access to technology and supply, we expect to realize meaningful cost benefits. Those cost benefits should enable the company to achieve incremental gross margin and net margin improvements before the amortization of acquisition-related intangibles within 12 months as we integrate Komag into our operations."
You can read the full details in the press release.