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1Copyright 2003 Hitachi Global Storage Technologies
Nex t MADE IN JAPAN.Nex t MADE IN JAPAN.’’
Jun NaruseChief Executive Officer
Hitachi Global Storage Technologies
June 12, 2003
HDD Business StrategyToward The No.1 HDD Supplier In The World
ContentsMarket Trends1Technology Trends2Business Strategy3Implementing Structural Reforms4Business Plan5
ContentsMarket Trends1Technology Trends2Business Strategy3Implementing Structural Reforms4Business Plan5
5Copyright 2003 Hitachi Global Storage Technologies
Ubiquitous HDD World1-11-1
•Information Access Anywhere•Entertainment Anywhere•Communication Anywhere•Embedded Card PC
•Automotive Applications•Car Navigation•ITS
Digital Mobility
Digital Video
Digital ImagingDigital Audio
Digital Books Digital Entertainment
PersonalComputing
EmbeddedApplications
WinCE Ⓡ
&HPC
Internet communication
K-12 Educational Devices
e- Businesse-Entertainment
Mobile Computing
Emerging TechnologyInformation Technology
Consumer Electronics* ITS: Intelligent Transport Systems
6Copyright 2003 Hitachi Global Storage Technologies
1-21-2 Growth in emerging and non-traditional applications
Notebook PC
PC/Server
PDA, Portable AudioVideo Camera, Car NavigationCar Audio, iVDR*HDD Recorder
0
100
200
300
400
500
2000 2001 2002 2003 2004 2005 2006 2007
M units/Y
Notebook PC Desktop PC, PC Server
Desktop PC
Server
Notebook PC
Source: Hitachi, Ltd. estimates
iVDR: Information Versatile Disk for Removable usage
ConsumerElectronics
I T
Market: ¥ 2,400 billion in 2002 →¥ 3,000 billion in 2006
3.5
1.0
1.8
2.5
3.5
1.8
2.5
7Copyright 2003 Hitachi Global Storage Technologies
HDD Form Factor and Applications1-31-3
Microdrive ATA 1.0 3,600 RPM
ServerSCSIFCSAS
3.52.5
10,000 RPM15,000 RPM
Mobile ATASATA
2.51.8
4,200 RPM5,400 RPM7,200 RPM
DesktopATASATA 3.5
2.5
5,400 RPM7,200 RPM10,000 RPM
Consumer Electronics
Consumer Electronics
IT
IT
ITAutomotiveConsumer Electronics
Interface Size Rotational Speed Applications
ContentsMarket Trends1Technology Trends2Business Strategy3Implementing Structural Reforms4Business Plan5
9Copyright 2003 Hitachi Global Storage Technologies
Technology Trends2-12-1
60 70 80 90 100 110
Production Year
Hitachi/IBM Disk Drive Products
1st MR Head
1st GMR Head
60% CGR
100% CGR
1st AFC Media
PerpendicularRecording
10
10
10
10
10
1
10 -4
10 -5
10 -6
25% CGR
IBM RAMAC (First Hard Disk Drive)
1st Thin Film Head
6 years ahead
2000 2010
ArealD
ensity Megabits/in
2
35 Million ×Increase
Future ArealDensityProgress
10 -3
-2
-1
2
3
Industry Lab Demos
ContentsMarket Trends1Technology Trends2Business Strategy3Implementing Structural Reforms4Business Plan5
11Copyright 2003 Hitachi Global Storage Technologies
Basic Strategy3-13-1
Business Growth Strategy
Capitalize on Depth of R&D Resource & Product Line BreadthRecover Share in Server Business through New ProductsGrow Desktop Business with Low Cost DesignsContinue Leadership in Small Form Factor (1.0”, 1.8”, 2.5”)Drive Growth In Emerging Markets
“Business Process Change Initiatives”*Business Challenges
The No.1 HDD supplier in the world
Revenue Growth Cost Reduction Asset Efficiency
*Name of the structural reforms project of Hitachi GST
12Copyright 2003 Hitachi Global Storage Technologies
Business Unit Concept & Global R&D3-23-2
Existing Technology
Future TechnologyFundamental Research
Storage Technology Research Center, Central Research Lab.,Mechanical Engineering Research Lab., Systems Development Lab., etc.
MobileBU
development&design
DesktopBU
development&design
ServerBU
development&design
EmergingBU
development&design
Head & MediaBU
development&design
San Jose Research Center
Ad Tech
Hitachi Corp.Research
R&D
TechnologyDevelopment
13Copyright 2003 Hitachi Global Storage Technologies
Expand Share in Server Business
・ Leverage strong R&D teams to increase product breadth・ Capitalize on proven technical support capabilities・ Deliver highly reliable products・ Maintain strong relationships in all key server accounts・ Win #1 or #2 qualification position in all key accounts
3-33-3
14Copyright 2003 Hitachi Global Storage Technologies
Competitive Positioning in Small Form Factor
Source:IDC,Hitachi
Form Factor
HitachiGST
02 – 06
Unit CGR
CompanyA
CompanyB
CompanyC
CompanyD
CompanyE
CompanyF
1” 95% # 1
1.8” 95% # 2
2.5” 30% # 1
3.5”
Server-3% # 3
3.5”
Desktop 8% # 4
3-43-4
15Copyright 2003 Hitachi Global Storage Technologies
Factors driving 2.5” growth
Servers
“Desknote”(No battery)
2.5”
● <$1000
●Wireless
1
2
3-53-5Shift to from desktop to notebook
Increase in non-Notebook applications
16Copyright 2003 Hitachi Global Storage Technologies
Recent Hitachi Announcements
New
May 28, 2003● Travelstar 4K80・ Most rugged 2.5” (250G / 2ms op. shock)
May 14, 2003● Travelstar 7K60・ World’s first 7200 RPM mobile drive
●Travelstar 5K80・ Highest capacity 5400 RPM Mobile drive
January 6, 2003●Travelstar C4K40・ Hitachi’s entry to 1.8” ATA
● Travelstar A4K20・ Automotive drive -20C to +85C operating
●Ultrastar 15K73・ 15,000 RPM SCSI & FC
● Preview of next generation Microdrive・4 GB
●iVDR・ Industry consortium participation & promotion4 GB iVDR
2.5” 4200 RPMTravelstar A4K20
1.8” 4200 RPMTravelstar C4K40
3.5” 15000 RPMUltrastar 15K73
2.5” 4200 RPMTravelstar 4K80
2.5” 7200RPMTravelstar 7K60
2.5” 4200 RPMTravelstar 5K80
3-63-6
17Copyright 2003 Hitachi Global Storage Technologies
Business Growth in Emerging Market
HDD are increasingly being used in new applications– MP3 players, personal video recorders (PVRs), digital cameras, set top boxes,
game machines– 89% CGR (source: Institute of Information Technology, Ltd.)
Hitachi is a leading innovator in drives for consumer products– 1” Microdrives (1GB)– 2.5Automotive drives (20GB)– 1.8” drives (20/40GB)– To come: 4GB Microdrives & iVDR drives
Hitachi is best positioned to lead this growth- Widest range of products- High volume manufacturing- Focus on customer satisfaction- Leaders in HDD miniaturization
3-73-7
ContentsMarket Trends1Technology Trends2Business Strategy3Implementing Structural Reforms4Business Plan5
19Copyright 2003 Hitachi Global Storage Technologies
4-14-1
Basic strategy
● Capitalize on Depth of R&D Resource & Product Line Breadth● Continue Leadership in Small Form Factor (1.0”, 1.8”, 2.5”)● Drive Growth In Emerging Markets● Recover Share in Server Business through New Products●Grow Desktop Business with Low Cost Designs
“Business Process Change Initiatives”Business Challenges
The No.1 HDD supplier in the world
Revenue Growth Cost Reduction2
Asset Efficiency
Structural Reforms “ Business Process Change Initiatives”
20Copyright 2003 Hitachi Global Storage Technologies
Revenue Growth
Capitalize on Hitachi’s Reputation of “Easy to Do Business With”
-Combine Strength of Two Companies’ Strong Customer Bases
Deliver “First to Market” Approach to Product R&D Schedules
-Recover Share in Server Business through High-Performance
New Products
-Focus on High-Growth Small Form Factor Segment
-Grow Desktop Business through Low Cost Designs Platforms
Enhance Hitachi Brand Awareness in Distribution Channel
4-24-2
21Copyright 2003 Hitachi Global Storage Technologies
Cost Reduction
Minimize Infrastructure through Site/Equipment Consolidation- Shift Workload from High-Cost to Low-Cost Countries
Drive Increased Procurement Leverage - Focus on multiple sources for key components - “Lowest cost” parts procurement policy - Drive increased parts commonality to produce volume leverageReduce “Lost-Cost” through Supply Chain Management - End of Life Transition Management - “Pull-Based” Demand Planning - Simplify Supply Chain to Minimize Logistics Cost - Limit Vendor Liabilities through Replenishment TermsDesign Test Strategy to Minimize Warranty CostEstablish “Yield Management” Task Force to Limit “Lost-Cost”
4-34-3
22Copyright 2003 Hitachi Global Storage Technologies
Asset Efficiency
Consolidation of HDD Manufacturing Locations
Reduction of High Cost Site Footprints
Restructure/Retire Under-utilized Assets
End-to-end Improvement of Supply Chain Management
- Improved Inventory Turnover through SCM Techniques
- Drive Linear Sales Skew to Reduce Accounts Receivable
- Improve Sales Forecast Accuracy to Smooth End of Life Transition
4-44-4
ContentsMarket Trends1Technology Trends2Business Strategy3Implementing Structural Reforms4Business Plan5
24Copyright 2003 Hitachi Global Storage Technologies
5-15-11) Industry growth in targeted markets 2) Server share growth 3) Dominant share in the Non-IT market
Attainment of revenue goals driven by:
Plan For Revenue Growth
$3.0
$3.5
$4.0
$4.5
$5.0
$5.5
FY2003 FY2004 FY2005 FY2006
4.1
4.7
5.1
(1 billion $)
Average annual growth rate of 10%
Mobile Maintain Share near 60%DesktopMaintain Share at 10%Non-IT ApplicationsGrow with industry(78% CGR)
ServerGrow Share
5.5
Hitachi GST has a December 31 year-end:for example,the fiscal 2003 consolidated forecast for Hitachi,Ltd., the year ending March 31,2004 includes Hitachi GST’s business result for its fiscal year ending December 31,2003.
25Copyright 2003 Hitachi Global Storage Technologies
Plan For Profit Growth
Contribution Margin・ Research delivers lowest cost designs・ Low cost sourcing alternatives
Structural Reforms (Realize site consolidation )
・ Consolidation of pilot lines and lab effort
Profit
FY2004FY2003 FY2005
Achieve at least 6% operating margin
Volume Growth・ Recover Server Share to 33%・ Grow market – Non-I/T / Mobile / Desktop
Contribute to profit margins・ Supply Chain & Productivity Gains・ Combined Procurement Strength
Structural Reforms(Begin manufacturing site consolidation)
・ HDD site consolidation・ Pilot Line consolidation
Turn to profitability
Minimize losses
5-25-2
FY2006
Cautionary StatementThis document contains forward-looking statements which reflect management’s current views with respect to certain future events and financial performance. Words such as “anticipate,” “believe,” “expect,” “estimate,” “intend,” “plan,” “project” and similar expressions which indicate future events and trends identify forward-looking statements. Actual results may differ materially from those projected or implied in the forward-looking statements and from historical trends. Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate.
Factors that could cause actual results to differ materially from those projected or implied in any forward-looking statements include, but are not limited to, rapid technological change, particularly in the Information & Telecommunication Systems segment and Electronic Devices segment; uncertainty as to Hitachi’s ability to continue to develop products and to market products that incorporate new technology on a timely and cost-effective basis and achieve market acceptance; fluctuations in product demand and industry capacity, 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; 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 access to liquidity or long-term financing, particularly in the context of restrictions on availability of credit prevailing in Japan; uncertainty as to Hitachi’s ability to implement measures to reduce the potential negativeimpact of fluctuations in product demand and/or exchange rates; general economic conditions and the regulatory and trade environment of Hitachi’s major markets, particularly, the United States, Japan and elsewhere in Asia, including, without limitation, continued stagnation or deterioration of the Japanese or other East Asian economies, or direct or indirect restriction by other nations of imports; uncertainty as to Hitachi’s access to, or protection for, certain intellectual property rights, particularly those related to electronics and data processing technologies; Hitachi’s dependence on alliances with other corporations in designing or developing certain products; and the market prices of equity securities in Japan, declines in which may result in write-downs of equity securities Hitachi holds.
These factors listed above are not exclusive and are in addition to other factors that are stated or indicated elsewhere in this document, or in other materials published by the Company.
28Copyright 2003 Hitachi Global Storage Technologies
Nex t MADE IN JAPAN.Nex t MADE IN JAPAN.’’