hitachi gst business update · 2-3. 2008 market opportunities source: idc 2.5-inch ata 2008 tam:...
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Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved.
Hitachi GST Business Update
Hiroaki NakanishiChairman & Chief Executive Officer
Hitachi Global Storage Technologies
April 17, 2008
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 2
Hitachi GST Business Update
1. 事業の概況
2. 世界市場の動向
3. 事業計画
4. まとめ
Contents
22
Agenda1. 2007 Business Review2. HDD Market Environment & Hitachi3. Critical Success Factors
- Products- Technology- Go-to-Market Strategy- Cost Structure
4. Summary
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved.
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 3
1-1. 2007 Business Review
Strong unit and revenue growth Units: 89.5MRevenue: $5.56B
Product strategyFocus on core segments
Exited 1.0 and 1.8-inchNear-total product line refreshNew lower cost designsTTM leadership on 1 TB 3.5-inch and ½ TB mobile
Executive teamNew CFO, CAO and leadership in Head and Media operations
120
80
40
Shipments
Shi
pmen
t (M
uni
ts)
2003 2004 2005 2006 2007
20072003 2004 2005 2006
6
4
2
Rev
enue
(B$)
Revenue
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 4
1-2. 2007 Business Review (Restructure Head and Media operations)
Media Slider HGAUS - San Jose
Japan - OdawaraMexico
Philippines
China
Thailand
Philippines
Consolidate Slider MFG to Philippines (08/3)
Transfer Philippine HGA MFG to Shenzhen (08/3)
US - San Jose
China - ShenzhenPhilippines
China
Consolidate Slider Developmentto Odawara (08/3)
China - Shenzhen
Transfer Odawara Media MFG to Shenzhen (07/12)
Consolidate Media Development to San Jose (07/12)
HGA: Head Gimbal Assembly
Development
Manufacturing
• Fujisawa / Odawara, Japan• San Jose, California, USA
Current
Future
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 5
1-3. 2007 Business Review (Cost Reduction)
Head and Media operationsCompleted development and manufacturing site consolidationsManufacturing process improvements resulting in double-digit yield increasesRamped media manufacturing to full capacity; drastic per unit cost improvementLeveraged areal density increases to reduce platter count in 3.5-inch ATA and Enterprise drives
HDD cost efficiencies
Procured cost improvements
Headcount efficiencies2006
1.00
0.87
13%
2007
Scrap
Media
Head
Fixed Cost
HDD Cost
Achieved 2007 cost reduction targets
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1-4. 2007 Business Challenges
Operating IncomeO
pera
ting
Inco
me
(M $
)
100
50
0
-50
-100
-150
-200
1Q07 2Q07 3Q07 4Q07
1H2007
Price erosion
Legacy product designs
High cost structure
2H2007
Strong demand and disciplined industry behavior
Ramped new lower-cost products
Continued appetite for high-capacity drives
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 7
Hitachi GST Business Update
1. 事業の概況
2. 世界市場の動向
3. 事業計画
4. まとめ
Contents
77
Agenda1. 2007 Business Review2. HDD Market Environment & Hitachi3. Critical Success Factors
- Products- Technology- Go-to-Market Strategy- Cost Structure
4. Summary
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved.
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 8
2-1. Future Industry Growth
2008 Industry Growth (YTY)
HDD Total: 12%
Enterprise (traditional): 9%
2.5-inch mobile: 28%
3.5-inch ATA: 7%
Digital content and new applications for storage are fueling HDDunit and revenue growth
Source: IDC Worldwide Hard Disk Drive 2007-2011 Forecast Update
Uni
ts M
800
700
600
500
400
300
200
100
02005 2006 2007 2008 2009 2010 2011
EnterpriseNotebookCE
DesktopExternal Storage
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 9
2-2. Industry Dynamics
Improved industry fundamentalsStrong unit demand
More rational and predictable behavior
Better data has led to informed decision making
Stronger, better resourced competitors focused on achieving financial objectives
Industry consolidationSurvival of the fittest
Three major HDD suppliers continue to emerge
Vertical integration is a necessary ingredient
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 10
2-3. 2008 Market Opportunities
Source: IDC
2.5-inch ATA2008 TAM: 204M units
Notebook PC 75%
Gaming 9%Enterprise
Other
Personal Storage 8%
Desktop PC
3.5-inch ATA55%
2.5/3.5-inchEnterprise
7%
2.5-inch ATA38%
2007 Industry Shipments: 497M units
2008 Forecast: 558M units (12% CAGR)
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 10
2-3. 2008 Market Opportunities
Source: IDC
2.5-inch ATA2008 TAM: 204M units
Notebook PC 75%
Gaming 9%Enterprise
Other
Personal Storage 8%
Desktop PC
3.5-inch ATA55%
2.5/3.5-inchEnterprise
7%
2.5-inch ATA38%
Desktop PC 69%
PersonalStorage
14%
Other CE
DVR 12.2%
Enterprise 4.5%
3.5-inch ATA2008 TAM: 300M units
2007 Industry Shipments: 497M units
2008 Forecast: 558M units (12% CAGR)
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 10
2-3. 2008 Market Opportunities
Source: IDC
2.5-inch ATA2008 TAM: 204M units
Notebook PC 75%
Gaming 9%Enterprise
Other
Personal Storage 8%
Desktop PC
3.5-inch ATA55%
2.5/3.5-inchEnterprise
7%
2.5-inch ATA38%
Desktop PC 69%
PersonalStorage
14%
Other CE
DVR 12.2%
Enterprise 4.5%
3.5-inch ATA2008 TAM: 300M units
External Storage
38%
Server Storage
44%
Other 18%
2.5/3.5-inch Enterprise2008 TAM: 32.6M units
2007 Industry Shipments: 497M units
2008 Forecast: 558M units (12% CAGR)
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 11
2-4. Hitachi HDD Portfolio
Hitachi Travelstar2.5-inch
Hitachi Deskstar3.5-inch ATA
Hitachi Ultrastar2.5/3.5-inch
Hitachi CinemaStar
HitachiEndurastar
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 12
2-5. Enterprise Market Opportunity
0
5
10
15
20
25
30
35
40
45
RPM
2007 2008 2009 2010 2011
10K 3.5-inch
15K 3.5-inch
10K 2.5-inch
15K 2.5-inch
Uni
ts M
0
5
10
15
20
25
30
35
40
45
FORM FACTOR
2007 2008 2009 2010 2011
10K/15K 3.5-inch 10K/15K 2.5-inch
Uni
ts M
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 13
2-6. Hitachi’s Enterprise “Triple-play+”
Ultrastar 15K450 – built upon proven technology Designed for high performance, mission-critical enterprise 3.5-inch, 15K RPM, up to 450 GB capacityServer and external storage
Ultrastar C10K147 – Hitachi’s first small form factor enterprise HDDOptimized for power/performance requirements of servers2.5-inch, 10K RPM, capacities up to 147 GBServer storage
Ultrastar A7K1000 – industry’s first TB drive for enterpriseOptimized for cost and power per gigabyte enterprise 3.5-inch, 7,200 RPM, 32MB buffer, up to 1 TBServer and external storage
Trio of new HDDs built for performance, reliability and capacity
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 14
2-7. IT Market Opportunities
Data: IDC 11/07
Desktop PC
Portable PC
Personal Storage
0
100
200
300
400
500
600
2007 2008 2009 2010 2011
Uni
ts M
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 15
2-8. IT Product Strategy
3.5-inch ATAFull range of capacity pointsIndustry leading power consumption to support “green” initiativesSuperior product quality and reliability Improving cost competitiveness with new designs
2.5-inch ATAIndustry’s broadest product line of 5,400 and 7,200 RPM mobile drivesThe world’s highest capacity of 500 GB now in productionInnovating to meet customer needs, with encryption, models for 24x7 usage, etc.Higher levels of commonality to increase flexibility and improvecost
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 16
2-9. CE Market Opportunities
Data: IDC 11/07
Set-top Box/PVR/DVR Automotive
Gaming Digital Cameras/Camcorders
Digital Audio/PMP
2007 2008 2009 2010 2011
120
100
80
60
40
20
0
Uni
ts M
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 17
2-10. CE Product Strategy
2.5-inchCinemaStar is the first and only 2.5-inch HDD customized for digital video use through unique command support and extended reliability
Endurastar designed for automotive applications
3.5-inchCinemaStar product line is customized for digital video use and outstanding reliability
Industry-leading low power on a 7,200 RPM 3.5-inch HDD in the P7K500 (250-500 GB) series
Highest capacity available in 1 TB for the 7K1000 reliability and command support for demanding PVR and CCTV requirements, with “Enterprise proven”reliability
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 18
Hitachi GST Business Update
1. 事業の概況
2. 世界市場の動向
3. 事業計画
4. まとめ
Contents
1818
Agenda1. 2007 Business Review2. HDD Market Environment & Hitachi3. Critical Success Factors
- Products- Technology- Go-to-Market Strategy- Cost Structure
4. Summary
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved.
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 19
3-1. Critical Success Factors
20082005 – 2007
ProductFocused on high-growth opportunitiesQualityTime to market
TechnologyHeadsMediaR&D
Go-to-Market StrategyOEMDistributionGlobal presenceCustomer technical support
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 20
3-2. Critical Success Factors
2008 2005 – 2007
Cost StructureDesign cost
Head and Media cost
Operational efficiency Asset utilization Supply chain management Yield and scrap improvements
Fixed cost structure
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 21
3-3. Financial Objectives
2007
2008
2009 2009 and beyond:sustained profitability
2008 financial target:positive FIV
2H2007:achieved profitability
achieved profitability Positive FIV
2H2007 2008
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 22
Hitachi GST Business Update
1. 事業の概況
2. 世界市場の動向
3. 事業計画
4. まとめ
Contents
2222
Agenda1. 2007 Business Review2. HDD Market Environment & Hitachi3. Critical Success Factors
- Products- Technology- Go-to-Market Strategy- Cost Structure
4. Summary
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved.
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 23
4. Summary
Hitachi is…
Invested and committed for the long-termSolidly backed by Hitachi, Ltd.In an early-stage recovery with more to be completedA company whose customers want it to succeed
Improving its financial positionTackling its challenges and focused on profitable growthAggressively driving cost out of its businessFocus on positive cash flow and becoming self-sufficient
Vertically integrated, with industry leading technical capability Celebrated for product quality and reliability Holder of the industry’s strongest IP portfolio
A company culture in transitionPositive influence of new managementEmployees are engaged and optimistic about the future
Copyright © 2008, Hitachi Global Storage Technologies, All rights reserved. 24
Cautionary Statement
Certain statements found in this document may constitute “forward-looking statements” as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such “forward-looking statements” reflect management’s current views with respect to certain future events and financial performance and include any statement that does not directly relate to any historical or current fact. Words such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar expressions which indicate future events and trends may identify “forward-looking statements.” Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from those projected or implied in the “forward-looking statements”and from historical trends. Certain “forward-looking statements” are based upon current assumptions of future events which may not prove to be accurate. Undue reliance should not be placed on “forward-looking statements,” as such statements speak only as of the date of this document.
Factors that could cause actual results to differ materially from those projected or implied in any “forward-looking statement” and from historical trends include, but are not limited to:
- fluctuations in product demand and industry capacity, particularly in the Information & Telecommunication Systems segment, Electronic Devices segment and Digital Media & Consumer Products segment;
- uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technology on a timely and cost-effective basis and to achieve market acceptance for such products;
- rapid technological change, particularly in the Information & Telecommunication Systems segment, Electronic Devices segment and Digital Media & Consumer Products segment;
- increasing commoditization of information technology products, and intensifying price competition in the market for such products, particularly in the Information & Telecommunication Systems segment, Electronic Devices segment and Digital Media & Consumer Products segment;
- fluctuations in rates of exchange for the yen and other currencies in which Hitachi makes significant sales or in which Hitachi’s assets and liabilities are denominated, particularly between the yen and the U.S. dollar;
- uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in product demand and/or exchange rates;- general socio-economic and political conditions and the regulatory and trade environment of Hitachi’s major markets, particularly, the United States, Japan and
elsewhere in Asia, including, without limitation, a return to stagnation or deterioration of the Japanese economy, or direct or indirect restriction by other nations on imports;
- uncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property rights, particularly those related to electronics and data processing technologies;
- uncertainty as to the results of litigation and legal proceedings of which the Company, its subsidiaries or its equity method affiliates have become or may become parties;
- possibility of incurring expenses resulting from any defects in products or services of Hitachi;- uncertainty as to the success of restructuring efforts to improve management efficiency and to strengthen competitiveness;- uncertainty as to the success of alliances upon which Hitachi depends, some of which Hitachi may not control, with other corporations in the design and
development of certain key products;- uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing; and- uncertainty as to general market price levels for equity securities in Japan, declines in which may require Hitachi to write down equity securities it holds.
The factors listed above are not all-inclusive and are in addition to other factors contained in Hitachi’s periodic filings with the U.S. Securities and Exchange Commission and in other materials published by Hitachi.