Western Digital 2009 Annual Report Download - page 13

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performance, higher capacity per square foot and lower power consumption. This trend demonstrates the fragmentation
of the enterprise hard drive market and the need for application-specific enterprise-class hard drives.
Consumer Electronics Market
The use of hard drives in CE products has been a major growth area in recent years. Currently, the three largest
segments of this market are:
• video content in applications such as DVRs;
• audio and video content in applications such as consumer handheld devices, including MP3 players; and
• 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 and cataloging recorded television programs and
quickly forwarding or returning to any section of a recorded television program. Additionally, digital video disk (“DVD”)
recorders increasingly incorporate hard drives to allow for DVR functionality and faster recording of content onto
removable DVDs. The market for these products favors larger capacity hard drives and continues to grow in Japan, North
America and Europe. Additionally, the rest of Asia Pacific shows strong interest in this market. We believe growth in this
market will continue to build demand for higher capacity hard drives.
The proliferation in the CE market of more sophisticated mobile devices including cell phones and MP3 players is
driving the delivery of diverse content from hard drive intensive hosts. We believe this is one of the factors influencing
increased sales of enterprise-class SATA drives. We also believe that multimedia handheld devices such as video cameras
and high-resolution still cameras are enabling consumer production of expansive digital content that requires increasing
amounts of small form-factor hard drive storage, as well as high-capacity desktop-class hard drives for editing,
manipulation and long-term storage of such content.
Hard drives with 1.8-inch or 1.0-inch form factors primarily address the consumer handheld device 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. Currently, we believe the markets for these handheld devices are better served by
flash memory as opposed to rotating magnetic storage.
External Hard Drive Market
Most new PC systems include high-speed external interfaces, such as USB 2.0, external SATA, FireWire
TM
or
Ethernet network connections, that permit users to supplement the storage space of their PC systems or home and small
office networks with the use of external hard drives. Users store additional programs or multimedia content, and back up
internal hard drives with external hard drives, as well as mobile external hard drives for mobility convenience. Although
external hard drives are a small part of the overall hard drive market, we believe that sales of external hard drives will
continue to grow. External storage can often be the easiest, quickest or only way of adding additional storage capacity to
either a desktop or notebook computer. We believe there is an increasing consumer awareness of the need and value of
securely storing personal digital content through backup applications and devices. In addition, there is opportunity for
external storage as a way of expanding storage capacity in CE devices such as DVRs. We also believe there is a growing
need for media players that enable consumers to play digital movies, music and photos, otherwise limited to being viewed
on computer screens, from USB mass storage devices on their television or home theater system.
Solid-State Drive Market
The solid-state drive market consists primarily of solid-state drives constructed with semiconductor, non-volatile
media that retains data even when power is not applied using either single-level cell or multilevel cell NAND media. Our
solid-state drive products are currently used in the embedded systems market which includes network-communications,
industrial, embedded-computing, medical, military, aerospace, media appliance and data streaming applications.
We believe that the demand for solid-state drives in certain markets has grown in part due to:
• the increasing performance, measured by input/output per second, in enterprise applications;
7