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This excerpt taken from the WDC 10-K filed Nov 20, 2006. Market
Overview
For calendar year 2005, we believe that the total market for
hard drives was more than 380 million units, or almost
$28 billion in sales. Over half of these unit shipments
were to the desktop market. Total hard drive unit growth depends
greatly on developments in the PC market. We believe that the
demand for hard drives in the PC market has grown in part due to:
We believe several other factors affect the rate of PC unit
growth, including maturing PC markets in North America and
Western Europe, an increase in first-time buyers of PCs in Asia,
Eastern Europe and Latin America, and the lengthening of PC
replacement cycles.
We entered the mobile market in the first quarter of 2005,
commencing volume production of our WD
Scorpiotm
family of
2.5-inch
hard drives for notebook computers. We expect the mobile market,
which is primarily notebook computers, to continue to grow
faster than the desktop or enterprise markets in the next three
years. We believe that the demand for mobile drives has grown
from approximately 16% of the overall hard drive market in 2003
to 21% of the overall hard drive market in 2005. As the mobile
market evolves to a higher volume market, we believe customers
are placing increased emphasis on attributes such as quality,
reliability, execution, flexibility, and competitive cost
structures on their hard drive suppliers. These are the same
attributes that have mattered for many years to customers in the
high-volume desktop market.
The enterprise market for hard drives focuses on customers that
make workstations, servers, network attached storage devices,
storage area networks, and other computing systems or
subsystems. We serve this market with hard drives using the SATA
interface, which is similar in performance in some applications
to the Small Computer Systems Interface (“SCSI”), but
more cost effective than SCSI. We believe that the enterprise
market has two distinct sectors: a marketplace for
high-performance enterprise hard drives and a marketplace for
high capacity enterprise hard drives. We believe that acceptance
of SATA in both of these enterprise market sectors is growing.
Additionally, we offer high-capacity, high reliability Parallel
Advanced Technology Attachment (“PATA”) enterprise
products to service video surveillance and similar PATA-based
systems. Expansion of our involvement in the enterprise market
may require us to make additional investments.
The use of hard drives in CE products has been a major growth
area in recent years. Today’s three largest segments of
this market are: (1) digital television content in
applications such as DVRs; (2) audio content in
applications such as consumer handheld devices, such as MP3
players; and (3) hard drives in game consoles. Since 1999,
DVRs have been available for use in home entertainment systems
and they offer enhanced capabilities such as pausing live
television, simplifying the process of recording, cataloging
recorded television programs and quickly forwarding or returning
to any section of a recorded television program. The market for
DVR products favors large capacity hard drives and continues to
grow in Japan, North America, and Europe. We believe growth in
this market will continue to build demand for higher capacity
hard drives. Hard drives with
1.8-inch or
1.0-inch
form factors primarily address the consumer handheld device
Table of Contents
and portable external storage markets. The majority of hard
drives used in portable media players that play both digital
audio and video content are
1.8-inch
form factors.
The branded products market for hard drives features storage
products that we sell directly to end customers through retail
store fronts and online stores. Our branded products include
external hard drives, which are internal drives embedded into WD
branded PC peripheral-style enclosures, which have
FireWiretm,
USB 2.0 and Ethernet network connections; and internal hard
drives that are packaged as an installation kit with the WD
brand for retail store sales. We believe the worldwide demand
for external hard drives is growing, spurred by consumers’
and businesses’ expanding use of digital content in the
form of photographs, video and music — all of which
consume large amounts of storage.
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