In the early 1980s, German gunmaker Heckler & Koch began to design a new submachine gun that would improve on the existing MP5, in response to a US Navy solicitation for an advanced submachine gun as part of the Joint Services Small Arms Program (JSSAP). The SMG I, which was the product of this development, is not the focus of this article, so instead I’ll refer readers to the HKPro article on the weapon:

Not a tremendous amount of information is available about the submachine guns that were designed and built in the 1980s as attempts to improve the MP5. The SMG I, the SMG II, MP2000 and MP5-PIP are designs that became functioning firearms, but never reached full production status. All but the MP5-PIP and the MP2000 included a valve that was just forward of the magazine for the selection of super or subsonic ammunition. All of these prototypes with the exception of the MP5-PIP were designed with integral suppressors. The SMG I and II are covered here.
The SMG I was designed in 1981 for the United States Navy under the JSSAP (Joint Services Small Arms Program) Advanced 9mm Submachine Gun program.

The magazine in question was developed around the same time as the SMG and its HK54A1 stablemate, and was a transversely mounted 30 round 9mm drum. An article by Jim Schatz for Small Arms Review mentions a drum and its association with the earlier HK54A1, but fortunately we also can read the original H&K proposal, also available through that website:

The proposed drum magazine shall have a capacity of not less than 30 cartridges. The proposed magazine viewing apertures arranged at 10-round intervals shall indicate loaded conditions. The proposed magazine shall conform with 3.2.2.2 performance requirements.

The HK SMG (later SMG I), with transverse 30 round drum.

The drum magazine for the SMG I was as one might expect not compact enough to justify the additional weight, complexity, and cost versus a traditional 30 round stick-type magazine, and as a result its development appears to have been dropped early in the project.

H/Ts to Maxim Popenker and Daniel Watters