1. 1 The Enigmatic HDD Industry – Where Smaller IS Better IDEMA San Jose September 2004

2. 2 Here We Go Again. Does the HDD Community spend Their days looking up redundant in a thesaurus, only to find the Definition as: Please see redundant ??– it sure feels that way!

3. Demand is Not an Issue  Desktop year-year demand strong  2004 Desktop to be up ~8-10%  Enterprise holding its own  2004 Enterprise to be up ~12%  Notebook PCs surging  2004 Notebook to be up ~25%  CE demand remains white-hot!  2004 CE shipments will surpass 30M representing an 85+% growth – and ~10% of global market opportunity

4. Global HDD Shipments Units, Millions

5. Global SFF HDD Shipments Units, Millions

6. CAGR Comparisons ! 2003-2007  3.5” CAGR = 9%  2.5”-and-below CAGR = 26%  2.5” CAGR = 22%  1.8” CAGR = 44%  <=1.0” CAGR = 90%  Total HDD Market CAGR = 13%  Thus, 3.5” lags the market, but all others are leading the charge!

7. 2.5” HDD Demand Drivers  Final 2003 result: 46.9 million HDDs  Updated 2004 forecast: 58-60 million  Why so strong?:  Notebook PC demand insatiable  CE applications heating up  Still some MP3 – but dwindling  AIS, routers, switches, printers  Desktop not yet a factor  Enterprise offerings on the way!

8. 2.5” HDD Capacity Forecasts Units, Millions

9. 2.5” HDD Markets and Thoughts  Strong notebook PC demand in 2003 – units up 33% sequentially  2004 Notebook PC forecast: up ~30%  Enterprise is coming – 2H 2004!  Is 2.5” for CE getting squeezed?  CE opportunity not taking hold  MP3 players opting for smaller HDDs  Printer market aimed at high-end  AIS – is HDD needed globally?

10. 1.8” HDD Demand Drivers  Final 2003 result: 2.7 million HDDs  2004 forecast: 6.0 million  Why so strong?:  Did you ever hear of an iPod?  Apple and HPQ relationship for hPod  Copycat MP3 players coming full steam  Are pretenders now pPods?  Numerous other CE opportunities  Notebook PC opportunity  Thin, lightweight models

11. 1.8” HDD Capacity Forecasts Units, Millions

12. 1.8” HDD Markets and Thoughts  MP3 opportunity is largest – 2003 shipments topped 2 million  2004 1.8” MP3 forecast: up 115%  Notebook niche expanding  No threat on desktop/enterprise  Today only Toshiba and HGST – where are the others? GS soon?  Many are looking to skip this and go to 1.0” – what does this mean for 1.8”?

13. <=1.0” HDD Demand Drivers  Final 2003 result: 923,000 HDDs  2004 forecast: 3+ million  Why so strong?:  Did you ever hear of iPod mini?  Now 4 suppliers – more coming  Digi-Cam (DSC,DVC) demand rising  Mini MP3 (other than iPod mini)  0.85” announced  Cell phones – the holy grail!

14. <=1.0” HDD Capacity Forecasts Units, Millions

15. <=1.0” HDD Markets & Thoughts  MP3 now getting all the press  2004 1.0” MP3 stumbles early in year doing little to stem demand  Digi Cam picking up – prices lowered!  Now 4 players – HGST, Cornice, GS Magicstor, and STX– more coming  Patent issues hurting GS and Cornice  0.85” addressing the holy grail of the cell phone market – is it real? YES!!

16. Inhibitors  Capacity – is there too much?  New facilities all around!  Media Issues in SFF  Limited glass supply  Technology Spending Crisis  Long-term issue, or election year issue  Flash will NOT go away  As much as this has not yet been a large factor, work is ongoing

17. Infrastructure Readiness  Believe it or not…….  Disk supply is tight  Hoya/NSG controls 70+% of glass  Only a few remaining OEM media suppliers  Head supply is tight  OEM supplier base down to two  Technology challenges hurting output  Areal density curve too challenging?  Perpendicular recording is coming  Who has the technology and money

18. 18 Size Does NOT Matter

19. Any Challengers to HDD?  NO, but in the next 5-10 years…  OPTICAL: varying formats, speeds not a threat despite huge market in consumer, PC applications for recording, archiving  FLASH: competitive with 1" HDD in some applications, cost premiums to remain huge – BUT these guys ARE persistent!  OTHERS: MEMS???  Watch for perpendicular recording (2006?), heat-assisted magnetic recording, millipede- type technologies  HDDs will not be challenged in capacity, bit cost, but watch for flash changes!

20. 20 Thank you! johnd@trendfocus.com