HDD Market Update: Steadier, Simpler Times Ahead, or More of the Same? November 7, 2007 IDEMA Analyst Breakfast

Topics HDD Industry Update –2007 HDD forecast, adjustments –What is driving storage demand? SSD/flash: is the threat real? Conclusions

HDD Industry Update 2007 shipments have tracked as expected CE is disappointing, or is it? SSD/flash threat growing, or is it? Consolidation is the buzzword –Seagate/Maxtor, WD/Komag –Is there more HDD consolidation? Media? Overall, the HDD business is normal

2007 Forecast, Adjustments Desktop PC market as expected Slightly stronger mobile computing demand – capacities mirroring desktop No surprises in enterprise totals –Quicker SFF adoption, SAS rising fast CE reevaluation –DVR/PVR solid in US, Japan, slower elsewhere –Game consoles and HDDs have hit speed bump –PMP – life expectancy?

Original 2007 Forecast Original 2007 Forecast (February, 2007) Computing-driven demand throughout CE portion – >20% in ’07 – to – 27% by ’11 2.5” engine for growth – notebooks! 2.5” to surpass 3.5” by end of forecast 1.8”-and-below weak Units (M)

Revised 2007 Forecast Revised 2007 Forecast (August, 2007) ’07 lowered 1% - to 495+ million CE portion – >20% in ’07 growing to 24% by ’11 2.5” outlook bolstered – notebook growth! Roughly reduced each year by 3-4%, mainly in CE <=1.8” demand changing Units (M)

Seasonality is Here to Stay

HDD Growth – Computing Market Traditional PC market still growing Mobile market surging Average capacity growing Mobile society STILL needs some form of PC Desktops NOT dead Units (M)

HDD Growth – External Market External HDDs booming Used in both computing, CE – <=2.5” externals gaining Video, music content grows exponentially every year –Much higher capacity than embedded HDDs Margins shrinking – looking more like (traditional) HDD market Source: TFI, Seagate Units (M)GB

HDD Growth – CE Market CE market evolving Inflection point is going to come, but when? DVR/PVR will be a primary market Other applications are small……. ……..but add up to fuel growth Units (M)

How to View CE After 7 Years Hype has outpaced results – but STILL an important piece of the long-term growth outlook PVR/DVR has been frustrating – but promise is intoxicating – for both 3.5” and 2.5” 2.5” – gaming, AIS, MFP, now some PVR <=1.8” – iPod and other handhelds……soon to be invisible in a flash?

Consolidation Leading HDD, component companies profitable, so which will have a strategic view? Media market looks heavy, and incremental investment looms in 2009 Hitachi GST is on the rumor mill, but will something actually happen? Where else can consolidation occur?

Is SSD a Legitimate Threat? Short-term, impact not significant Longer-term, the threat grows for small HDDs But, there are two key assumptions –NAND flash doubling in density, halving in price annually –NAND technology sustains and then transitions easily in

SSD vs. HDD – (Today’s) Winner Is…

SSDs in the Enterprise There is margin to accept higher costs There is a business case to use SSDs here –Power is lower than HDD –Random IOPs times higher than HDD –25% cheaper than DRAM today Costs are still not in line with segment building, but……. …… GB SSD can replace many 15krpm drives

Conclusions SSDs face serious obstacles –Cost Advantages worth the premium? Comparing SSD to 1.8” is invalid; 1.8” is niche 2.5” is the real battleground –Low-capacity –SSD specs still in question –OEM relationships Will PC OEMs accept price increases when flash supply is tight? –There is ZERO precedent for that with HDDs

Conclusions (continued) HOWEVER…. –HDD suppliers still have time to PLAN! –New technologies (PMR, patterned media, HAMR, etc…) will keep HDD capacities well ahead of SSD –While the capacity gap is shrinking, it is still sizable and should remain so for years –Flash-based CE devices means more HDD-based storage modules – lots of pictures/video/music –Steadier times are coming, so hang on!

Thank you!