Data Storage Trends and Directions

Data Storage Trends and Directions Tom Coughlin Coughlin Associates & Peripheral Research Corporation

Outline The difficulty of predictions Drivers for storage growth Technology growth Pricing trends Drive growth areas and drive/component vendors Mobile storage growth Network storage, tape, optical storage Industry Status and Summary

The Aberrant Mirror An aberrant mirror gives a distorted view of the world, we draw an analogy to our always inaccurate view of the future. Correction of this aberration occurs over time as possibilities become certainties Time is nature s way of preventing everything from happening at once. Graffito

US Economy 1998 to 2001 The real Y2K problem (1) and 2001 is worse!!!

US Economy 1998 to 2001 The real Y2K problem (2) In Q2 2001: Investment in computers and peripherals dropped 30.1% (further drop in Q3) Business Investment declined 14.6%, software and equipment investment fell 15.1% (worse in Q3) GDP growth increase was only 0.2% from Q1 2001 (Q3-0.4%, negative growth)

Drive Projections History (1997-2000 PRC) Drive Shipments (M) 300 280 260 240 220 200 180 160 140 120 100 1997 Proj 1998 Proj 1999 Proj 2000 Proj 2001 Proj Actual 1996 1997 1998 1999 2000 2001 2002 2003 2004

Desktop Drive Average Components/Drive Ratios (Source: IDC May 2001) 4 3.5 Heads/Drive Disks/Drive Components/Drive 3 2.5 2 1.5 1 1999 2000 2001 2002 2003 2004 2005

History of PRC Head Volume Forecasts (Source: PRC 1997-2000) Units (M) 2000 1500 1000 500 0 1998 Forecast 1999 Forecast 2000 Forecast Actual 1997 1998 1999 2000 2001

History of PRC Disk Volume Forecasts (Source: PRC 1997-August 2001) Units (M) 900 800 700 600 500 1997 1998 1999 2000 2001E Actual 400 300 200 1996 1997 1998 1999 2000 2001 2002 2003

Drivers for Storage Growth Growth in digital information from faster processors and the digitization of human content (from literature, audio, and video to our genes) Ever lower cost of digital data storage Increasing availability of high data rate access New applications inspired by low cost that generate even more digital information

Hans Moravec, When will computer hardware match the human brain? Vol. 1, March 1998, Journal of Transhumanism

GROWTH OF MOBILE INTERNET DEVICES TO 2004 25 20 Handheld Companions Millions 15 10 Smartphones x 10 Car Clients Digital STBs Video Game Players 5 0 2000 2001 2002 2003 2004 Source: IDC

Residential Broadband Projections $BILLIONS 150 100 50 Terrestrial Wireless Satellite Cable Modem xdsl 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Wireless 0 0.07 0.26 0.85 1.54 2.56 4 5.95 8.34 11.16 Satellite 0.03 0.07 0.2 0.65 1.9 4.58 10.49 18.48 27.64 39.62 Cable Modem 0.57 1.52 4.24 8.54 13.72 19.99 26.86 34.33 41 46.78 xdsl 0.2 0.69 2.2 5.332 9.93 15.57 21.45 27.2 33 38.49 Source: Pioneer Consulting, "Global Broadband Access Markets: xdsl, Cable Modems and the Threat from Broadband Satellite, Wireless and All-Optical Solutions, Executive Summary, October 1998; Centennial Investments

NON-PC REMOVABLE STORAGE DEVICE OPPORTUNITY FORECAST (UNITS MILLIONS) APPLICATION 2000 2001 2002 2003 2004 HANDHELD COMP. 9.6 13.3 18.1 24.3 29.8 DIGITAL STILL CAM. 7.9 12.3 17.9 22.8 27.9 CAMCORDERS 15.7 16.1 16.3 16.6 16.8 DIGITAL AUDIO 4.0 7.8 13.3 19.1 24.2 HAND HELD GPS 3.7 6.3 10.9 13.8 16.7 SET-TOP BOX 24.8 33.3 43.3 52.1 58.9 INDUST. NETWORK 3.0 3.1 3.2 3.3 3.4 SUB-TOTAL 68.7 92.2 123.0 152.0 177.7 DIGITAL CELL 326.1 421.1 532.5 585.0 622.0 TOTALS 394.8 513.3 655.5 737.0 799.7

World Wide Storage Capacity of Disk Memory (In PetaBytes, Source: Disk/Trend plus projection to 2004) 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 1997 1998 1999 2000 2001 2002 2003 2004 Mega: 10 6 Giga: 10 9 Tera: 10 12 Peta: 10 15 Exa: 10 18 Zetta: 10 21 Yotta: 10 24

Technology Growth Areas and Concerns Data coding, compression, and error correction: How to deal with reducing SNR Variations for niche markets--e.g. video storage Implications of perpendicular recording Servo Time for servo writing, self servo writing Higher TPI requirements Areal density growth Capital investments needed, particularly for head development Flight of talent to more lucrative fields may limit creativity available to industry Changes from longitudinal to perpendicular recording

Growth Models for Technology Is there a finite technology pool or limited resources in technology growth? Or could technology growth be ever exponential? Limitations could be economic rather than technical. Market Penetration (%) Population Growth 120 100 80 60 40 20 0 20000 15000 10000 5000 0 1 1 3 3 5 5 7 7 9 11 13 15 17 19 Time 9 11 13 15 17 19 Time

AREAL DENSITY RACE (Source: PRC, August 2001) COMPANY SIZE CAPACITY AREAL ktpi kbpi Time (GB) DENSITY PRODUCT Gb/in 2 MXTR 96147U8 3.5 61.4 11.3 27.3 412 3/00 IBM 40GV 3.5 40.0 14.3 35.0 415 3/00 IBM 1.0 1.0 15.2 35.0 435 6/00 MXTR DM80 3.5 81.0 14.7 34.0 402 7/00 QTM FBAS 3.5 80.0 14.7 35.4 417 7/00 QTM ATLASIII 3.5 73.4 179 40.0 448 10/00 MXTR 531DX 3.5 15.0 22.5 46.0 489 2/01 TOSHIBA MK1002 2.5 10.0 22.4 3/01 IBM 2.5 30.0 25.7 3/01 MXTR 3.5 40.0 28.3 54.0 524 6/01 TOSHIBA MK4018 2.5 40.0 35.1 56.8 625 6/01 DEMONSTRATION SEAGATE 45.0 70.0 640 3/00 R-R/KOMAG 50.0 90.0 552 3/00 FUJITSU 56.0 82.7 678 6/00 R-R/KOMAG/HTCH/GUZIK 63.2 105 600 10/00 FUJITSU 106.5 142 750 8/01

AREAL DENSITY PROGRESSION TECHNOLOGY DEMONSTRATIONS / PRODUCTS (Source: PRC, 2001) 120 100 Areal Density (Gb/in2) 80 60 40 20 0 Q1 2000 Q2 2000 Q3 2000 Q4 2000 Q1 2001 Q2 2001 Q3 2001 TECHNOLOGY PRODUCT

Average Desktop Drive Prices vs. Time (Sources: Disktrend 1999 and 230 PRC 2001) 210 Ave. Desktop Price 3 per. Mov. Avg. (Ave. Desktop Price) 190 170 Price ($) 150 130 110 90 70 50 1H 95 2H 95 1H 96 2H 96 1H 97 2H 97 1H 98 2H 98 1H 99 2H 99 1H 00 2H 00 Q1 01 Q2 01 Q3 01

DISK DRIVE UNITS & AVERAGE SALES PRICES 1999-2001 (Source: PRC 2001) MFG. Q3 99 Q4 99 Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 UNIT/$ UNIT/$ UNIT/$ UNIT/$ UNIT/$ UNIT/$ UNIT/$ UNIT/$ UNIT/$ MAXTOR 5.8/$100 6.8/$102 6.6/$105 6.5/$102 6.5/$95 7.4/$98 6.7/$94 12.1/$85 12.5/$82 QUANTUM 6.9/$111 8.7/$102 8.6/$105 8.2/$105 9.0/$92 6.8/$104 6.6/NA SEAGATE 9.7/$161 10.3/$149 10.5/$140 10.3/$140 11.6/$141 10.6/NA 11.2/NA 10.6/NA 11.2/NA WEST. DIG. 3.4/$121 5.3/$106 5.5/$98 5.2/$91 5.1/$86 5.8/$92 6.0/$88.9 5.3/NA 5.4/$82 UNITS IN MILLIONS

Disk vs. Drive Shipment Projections 500,000 450,000 Total Drives Total Disks 400,000 Units (M) 350,000 300,000 250,000 200,000 150,000 1999 2000 2001 2002 2003 2004

WW Disk Production Capacity Estimates vs. Disk Shipment Projections 640 Disks (M) 590 540 490 440 390 Capacity Shipments 340 1999 2000 2001 2002 2003 2004

Average Disk and Head Prices 12.00 11.00 10.00 Disk Price ($) 9.00 8.00 7.00 6.00 Disks Heads 5.00 1998 1999 2000 2001 2002 2003 2004 Year

Q2 2001 Disk Drive Company Market Share Samsung 5.7% WD 12.6% Others 6.4% Seagate 22.7% Fujitsu 11.0% IBM 14.6% Maxtor 27.0%

DISK DRIVE SHIPMENTS BY SUPPLIER (UNITS MILLIONS) 14 12 10 8 6 4 2 0 Q3-99 Q4-99 Q1-00 Q2-00 Q3-00 Q4-00 Q1-01 Q2-01 SEAGATE QUANTUM MAXTOR W.D. IBM MAX/QTM

Q1 2001 Drive Company Volume vs Market Sector 14 12 10 Volume (M) 8 6 4 2 0 Mobile Desktop Enterprise Maxtor Seagate IBM WD Fujitsu Samsung Toshiba Hitachi

Q2 2001 Head Company Market Share (Source: PRC, 2001) Fujitsu 9% Others 14% TDK/SAE 18% IBM 21% Seagate 25% Read-Rite 13%

Q2 2001 Media Company Market Share Seagate 22% Others 9% Mitsubishi Chemical 6% MaxMedia 6% IBM 21% Komag 14% Fuji 8% SDK 6% Fujitsu 8%

INDUSTRY STATUS NETWORK STORAGE MARKETS TEMPORARILY STAGNANT DUE TO IT RECESSION BUT GROWTH PRESSURE IS INTENSE (OPPORTUNITY FOR LOW COST NETWORK STORAGE) SLOWNESS IN P.C. MARKETS DRIVE AND COMPONENT PRICING PRESSURES HAVE LESSENED, ESPECIALLY FOR HEADS CONSUMER ELECTRONICS AND MOBILE MARKETS GROWING UNIT FORECASTS SHOULD INCREASE AFTER 2001

Disk drive growth will be primarily in mobile storage, network storage and new applications. The traditional PC market seems to be near saturation. 140 120 100 Units (M) 80 60 40 20 0 2000 2001 2002 2003 2004 PC Mobile Network New Apps.

Average Mobile Electronic Product Price Projections Average Price ($) 700 600 500 400 300 200 Digital Cameras MP3 Player MPEG-2 Player Handheld Computer GPS/Map/Phone 100 0 1999 2000 2001E 2002E 2003E 2004E 2005E Source: Projections based on Intelect Market Tracking for Digital Cameras and PDAs, 2000

Microdrive Price Projections at 20% Gross Margin and 2-Sided Capacity 400 16 350 14 300 12 Prices ($) 250 200 150 20% 2-Sided Capacity 10 8 6 2-Sided Capacity (GB) 100 4 50 2 0 0 2000 2001 2002 2003 2004 2005

IBM MICRODRIVE MARKETS SHIPMENT EST. 1999 2000 2001 (UNITS 000) 30.0 188.0 600.0 APPLICATIONS: 40% THINK-PAD, LAPTOP, P.C. APPLICATIONS 60% DIGITAL CAMERA CAMERA MODELS: 19 TOTAL CANON-4 CASIO- 3 KODAK-2 HITACHI- 2 FUJI- 3 SANGYO-2 MINOLTA-3 * OTHER POTENTIAL 1 INCH DRIVE SUPPLIERS: HALO, MARQLIN, QUANTUM, TOSHIBA,SEAGATE, OTHERS

Compact flash memory is expected to show strong unit growth and be a significant source of revenue as mobile data storage applications grow. (IDC, 2000) 140 7 Units (M) 120 100 80 60 40 20 0 Units (M) Revenue ($B) 1999 2000 2001 2002 2003 2004 6 5 4 3 2 1 0 Revenue ($B) Figure 4C-1

Disk drive arrays are expected to show strong revenue growth as are storage network systems such as SAN and NAS. (Source: Peripheral Concepts, Inc. 2001) Revenue ($B) 40 35 30 25 20 15 10 5 0 Arrays SAN NAS 1998 1999 2000 2001 2002 2003

Tape drive areal density growth is around 30% annually, much less than disk drive >100% per year areal density growth. This may make tape systems vulnerable to disk drive based storage. 100000 Tape Capacity (GB) 10000 1000 100 10 AIT (GB) DDS (GB) DLT LTO 30% CAGR 60% CAGR 120% CAGR 1 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

As low cost disk drive storage decreases in price it will offer increasing competition to tape systems for back-up applications. $/GB 1000 100 10 1 0.1 0.01 Tape Drive + 100 Media Tape Media Tape Drives IDE Drives 1996 1998 2000 2002 2004 2006 Tape Drive + 100 Media IDE Drive Ghetto RAID Ghetto RAID

Optical storage technologies show moderate growth over the next few years driven primarily by content distribution and copying of audio and video content. (Source: PRC 2001, units Millions) 2000 2001 2002 2003 CD-ROM 82.9 56.4 30.2 18.6 DVD-ROM 30.1 60.3 92.8 107.3 CD/DVD RW 19.0 25.4 29.8 33.7 R/W < 4 GB 1.9 1.6 1.3 1.0 R/W > 4 GB.2.3.8 TOTALS 133.9 143.9 154.4 161.4

Flash and disk drives show strongest projected sales growth. Tape and floppy units are in decline 300 250 UNITS (MILLIONS) 200 150 100 50 0 2000 2001 2002 2003 2004 RIGID DISK DRIVE OPTICAL DRIVES TAPE DRIVES FLEXIBLE DRIVES FLASH MEMORY

SUMMARY 2001 WILL BE A DOWN YEAR FOR STORAGE AFTER H1 2002, STORAGE DEMANDS WILL CONTINUE TO INCREASE (ESPECIALLY FOR LOW COST NETWORK STORAGE, MOBILE AND NEW APPLICATIONS) SOME ADDITIONAL CONSOLIDATION AND STRATEGIC DIFFERENTIATION (SUCH AS FUJITSU S DECISION TO GET OUT OF THE DESKTOP DRIVE MARKET) AREAL DENSITIES WILL CONTINUE TO INCREASE, MAYBE AT A SLOWER RATE WITHIN 2 YEARS MORE COMPONENT INTEGRATION WILL BE REQUIRED, FEW MERCHANT VENDORS WILL REMAIN DISK DRIVES WILL ENCROACH FURTHER ON TAPE MARKET

Data Storage getting more mature? Things are more like they are now than they ever were before. Dwight Eisenhower