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began shipping a new category of enterprise storage product called active archive, which is a fully enclosed rack sys-
tem utilizing our helium hard drives and object storage software.
Performance and capacity HDDs and SSDs are essential to the operations of an enterprise and require the greatest
capabilities and reliability. These drives are the most highly engineered product line in the storage industry. The
infrastructure to support cloud computing storage is driving the demand for multi-platter high capacity HDDs as
well as enterprise class SSDs in tiered storage architectures. Cloud computing delivers shared resources, software and
information to users on demand on a multitude of devices, such as client PCs, tablets and smart phones. Most cloud
computing models consist of services delivered through large datacenters with enterprise-class servers, also utilizing
tiered architectures to address multiple levels of storage needs. We believe we have established a leading position in
supplying performance HDDs, multi-platter high capacity HDDs and SSDs to address these needs.
We believe petabyte shipments into the enterprise market of the storage industry were up 49% in fiscal 2015
from fiscal 2014. Future growth in the enterprise market is expected to occur based on public and private cloud-
related projects to address the continued growth in data being created and the demand to store much of that data.
Client: Desktop and Notebook PCs
Client storage devices consist of internal HDDs and SSDs for desktop and mobile PCs. Desktop PCs are intended
for regular use at single locations in homes and businesses, as well as in multi-user educational and government networks.
Mobile PCs, primarily notebook computers, are used both in and away from homes and businesses. The demand for hard
drives in desktop and notebook PCs is in decline due to the slow-down in PC sales, the increased use of SSDs as replace-
ments for HDDs in notebook PCs, and the growing shift of storage workloads to the cloud. Other HDD markets, such as
cloud, traditional enterprise, branded products, gaming and other solutions have been expanding. We believe the units
shipped in client hard drives were down 12% in fiscal 2015 from fiscal 2014. We believe that HDD unit shipments into
client computer storage devices will be driven primarily by demand in emerging countries, corporate and consumer
refreshes and the enduring nature of PCs as the most fully functional computing device.
Branded Products
External storage devices supplement the storage space on PC systems for home and small office networks and,
through wireless connections, the fastest growing category in this market, provide remote access to personal content.
These drives, when directly attached to PCs, are ideally suited to back up the data already stored on PC internal drives
because of their portability and security features. The growing availability of wireless connectivity is creating growth
opportunities for external networked attached storage solutions such as our family of WD My CloudTM products. We
believe HDD unit shipments into the external storage market decreased 6% in fiscal 2015 from fiscal 2014.
Consumer Electronics
HDDs for CE products are primarily used in digital video recorders (“DVRs”), game consoles and security video
recording systems. We believe demand for greater storage capacity in these applications will continue to drive growth
for higher capacity HDDs.
DVRs offer greater consumer viewing flexibility and enhanced capabilities such as pausing live television, sim-
plifying the process of recording and cataloging recorded television programs and quickly forwarding or returning to
any section of a recorded television program. Game consoles enable users to save games, movies, music, pictures and
other user generated content. Security surveillance hard drives provide 24/7 reliability and peace of mind for the
installation of home or small to medium sized business (“SMB”) security systems. We believe HDD unit shipments
into the CE market increased 3% in fiscal 2015 from fiscal 2014.
Competition
We compete with manufacturers of HDDs for client compute, client non-compute and enterprise applications
and manufacturers of SSDs. The HDD market consists of five principal brands: HGST, Samsung, Seagate, Toshiba and
WD. In solid-state products, we compete with a wide range of manufacturers, from small startup companies to
multinational corporations, including Intel, Micron, Samsung, SanDisk, Seagate and Toshiba.
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