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2003 Hitachi Global Storage Technologies Nex t MADE IN JAPAN. Nex t MADE IN JAPAN.
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Page 1: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

1Copyright 2003 Hitachi Global Storage Technologies

Nex t MADE IN JAPAN.Nex t MADE IN JAPAN.’’

Page 2: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

Jun NaruseChief Executive Officer

Hitachi Global Storage Technologies

June 12, 2003

HDD Business StrategyToward The No.1 HDD Supplier In The World

Page 3: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

ContentsMarket Trends1Technology Trends2Business Strategy3Implementing Structural Reforms4Business Plan5

Page 4: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

ContentsMarket Trends1Technology Trends2Business Strategy3Implementing Structural Reforms4Business Plan5

Page 5: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 6: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 7: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 8: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

ContentsMarket Trends1Technology Trends2Business Strategy3Implementing Structural Reforms4Business Plan5

Page 9: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 10: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

ContentsMarket Trends1Technology Trends2Business Strategy3Implementing Structural Reforms4Business Plan5

Page 11: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 12: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 13: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 14: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 15: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 16: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 17: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 18: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

ContentsMarket Trends1Technology Trends2Business Strategy3Implementing Structural Reforms4Business Plan5

Page 19: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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”

Page 20: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 21: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 22: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 23: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

ContentsMarket Trends1Technology Trends2Business Strategy3Implementing Structural Reforms4Business Plan5

Page 24: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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.

Page 25: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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

Page 26: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events
Page 27: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

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.

Page 28: Next MADE IN JAPAN. - Hitachi · Cautionary Statement This document contains forward-looking statements which reflect management’s current views with respect to certain future events

28Copyright 2003 Hitachi Global Storage Technologies

Nex t MADE IN JAPAN.Nex t MADE IN JAPAN.’’


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