hitachi global storage technologies · – from perpendicular magnetic recording(pmr) to patterned...
TRANSCRIPT
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved.
The Path to ProfitabilityHitachi Global Storage Technologies
Hiroaki NakanishiChief Executive Officer
March 22, 2007
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 2
1. Objectives and strategies2. HDD market perspective3. 2003-2006 achievements and challenges4. Roadmap for achieving profitability objectives in 2007
- Volume growth- Product strategy- Cost reductions - Restructure Head and Media operations
5. Summary “Collaborative creation and profits”
Agenda
The Path to Profitability
2Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved.
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 3
1. Objectives and strategies2. HDD market perspective3. 2003-2006 achievements and challenges4. Roadmap for achieving profitability objectives in 2007
- Volume growth- Product strategy- Cost reductions - Restructure Head and Media operations
5. Summary “Collaborative creation and profits”
Agenda
The Path to Profitability
3Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved.
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 4
1. Objectives and strategies
• Achieve profitability objectives in 2007 and positive FIV in 2008
• Accelerate delivery of new leadership products
– Expand 2.5” leadership
– Continue strong growth in 3.5” business
– Expand DVR/STB market share position
– Launch of next-generation enterprise products
• Continue to ramp manufacturing capacity and increase productivity
• Establish technology and thought leadership
– From Perpendicular Magnetic Recording(PMR)
to patterned media
• Thorough cost reduction
• Increase efficiency of sales and manufacturing by enhancing Total Supply Chain Management (TSCM)
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 5
1. Objectives and strategies2. HDD market perspective3. 2003-2006 achievements and challenges4. Roadmap for achieving profitability objectives in 2007
- Volume growth- Product strategy- Cost reductions - Restructure Head and Media operations
5. Summary “Collaborative creation and profits”
Agenda
The Path to Profitability
5Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved.
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 6
2. HDD market perspective
Market expansion into new applications adds to the growth of the established HDD segments
0
100
200
300
400
500
600
700
2005 2006 2007 2008 2009 2010
Units (M)
Overall = 12% CAGRCE = 16% CAGR
Enterprise
Desktop
Notebook
Home/PersonalStorage
DVR
AutomotiveCE otherGame machines
MP3/PMP
Source: HitachiCE: Consumer Electronics (includes personal storage)CAGR: Compound Annual Growth Rate
CE
IT
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 7
1. Objectives and strategies2. HDD market perspective3. 2003-2006 achievements and challenges4. Roadmap for achieving profitability objectives in 2007
- Volume growth- Product strategy- Cost reductions - Restructure Head and Media operations
5. Summary “Collaborative creation and profits”
Agenda
The Path to Profitability
7Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved.
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 8
3. 2003-2006 achievements
• Invested in manufacturing capacity growth• Increased yields• Optimized product portfolio• Cemented partnerships with large OEMs and distributors• Improved quality through Total Quality Control
– Average quality rank went from #3 to #1.4• Continuous investment in R&D to close technology gap• Strengthened management team and reinvigorated corporate culture
– Accelerated management changes and adherence to Monozukuri (“Gemba”, “Tokken” and “Ochibo”)
0
2
4
6
2003 2004 2005 2006
Revemue(B$)
0
40
80
2003 2004 2005 2006
Shipment(M units)
Revenue Shipments
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 9
3. 2003-2006 challenges
• Enhancing cost competitiveness
• Timely market rollout
• Establishment of flexible manufacturing structure
-400-320-240
-160-80
02003 2004 2005 2006
Operating Income(M$)
Operating Income / Loss
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 10
1. Objectives and strategies2. HDD market perspective3. 2003-2006 achievements and challenges4. Roadmap for achieving profitability objectives in 2007
- Volume growth- Product strategy- Cost reductions - Restructure Head and Media operations
5. Summary “Collaborative creation and profits”
Agenda
The Path to Profitability
10Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved.
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 11
4. Roadmap for achieving profitability objectives in 2007
New Products
20072006
-8%
Cost Reductions
Profit
Operating Income
Volume Growth
• 100M/Y capacity is ready
• New modular lines provide flexibility for managing demand changes; improve inventory management
New Products
• New product ratio of approx. 75% in 2007
• Focus resources on 2.5”, 3.5” ATA and Enterprise
• Accelerate product time to market
Cost Reductions
• Restructure Head and Media operations
• Yield improvement and scrap reduction
• Approx. 10% cost reduction with new product designs
• Overall company focus on reducing cost
• New technologies (TMR, TFC etc.)
VolumeGrowth
±0
TMR:Tunneling Magneto-ResistanceTFC:Thermal Fly-height Control
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 12
4-1. Volume growth
• Hitachi 2007 target: 93-98M units
• Outgrow the market with 33-40% CAGR
• Increase share by providing high-quality new products
VolumeGrowth
0
5
10
15
20
25
30
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07
Shipment(M Units)
Enterprise 3.5" 2.5" 1.8" Emerging
Shipment by form factor2007 Industry Growth (YTY)
HDD Total: 14%
Enterprise (traditional): 4%
3.5”: 12%
2.5”: 23%
1.8”: 18%
Source: HitachiEnterprise includes Traditional and SATA
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 13
4-2. Product strategy(1)
2.5" Travelstar• Maintain #1 share position with best-of-breed
products
• Travelstar 5K160 (5,400 RPM 160GB)– Leads the industry’s PMR transition– Ramp up production through 1H07
• Travelstar 7,200 RPM 200GB– High quality product with industry-leading capacity,
7,200 RPM and 200GB– Market-leading launch, coming in 1H07
• Travelstar 5,400 RPM 250GB– Industry-leading capacity, 5,400 RPM and quarter TB – Market-leading launch, coming in 2H07
• Upcoming products available with optional hybrid and encryption
New Products
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 14
4-2. Product strategy(2)
3.5” Deskstar• Deskstar 7K160 /T7K500
– Ramp in high volume in Shenzhen, China– Fewer heads and disks than previous generation for cost savings
• Deskstar 7K1000– First-to-market 1.0TB drive
• CinemaStar 7K1000– CinemaStar version 1.0TB drive for DVR/STB
Enterprise• Complete product-line refresh in 2007• Increase customer satisfaction with high quality and reliability• Ultrastar 15K RPM 3.5-inch
– Fewer heads and media for significant cost improvement• Ultrastar 10K RPM SFF
– Our first small form factor product to address 2007 demand surge• Enterprise SATA
– 1.0TB drive to solidify Hitachi’s leadership position in Enterprise SATA
New Products
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 15
4-2. Product strategy(3)
Expand CinemaStar salesAVSM file systemIdentify and create new opportunities with CE Design StudiosBroaden participation in DVR/STB marketPenetrate content delivery market
Sharpen focus on DVR/STB and other 3.5” CE opportunities
CinemaStar
Travelstar C3K80Travelstar C4K60 Slim
Endurastar
Consumer Electronics
Increase segment participation with next-generation products
Continue to improve profitability by optimizing mix
Leverage Enterprise SATA leadership
Increase share in Traditional Enterprise
Maintain #1 position in high-capacity Enterprise SATA
Deskstar E7K500/7K1000
Ultrastar 15K RPM 3.5-inch
Ultrastar 10K RPM SFF
Enterprise
Ramp new 2.5” drives with expanded feature set (hybrid, encryption)Leverage capacity leadership with new 1.0 TB 3.5” driveNew designs and improved yieldsOptimize mix and price
Maintain #1 share position in 2.5”Continue 3.5” growth momentum
Travelstar 5K160Travelstar 7,200 RPM 200GBTravelstar 5,400 RPM 250GB Deskstar 7K160/T7K500Deskstar 7K1000
PC
Product Strategy2007 Market StrategyKey Products
AVSM:Audio-Visual Storage Manager
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 16
4-3. Cost reductions
• 10+% cost reduction by enhancing cost management
• Focusing on cost reduction of Head and Media
1. Yield improvement with higher PMR ratio2. 25% YTY improvement from 2006 to 2007
1. Ramp China factory to full utilization2. Transfer Odawara manufacturing mission to Shenzhen3. Improve yield and reduce scrap cost4. Consolidate development in San Jose
1. Increase Femto slider ratio2. Transfer Mexico manufacturing mission to Philippines
and San Jose development to Odawara3. Yield improvement and scrap reduction
1. Improve throughput by higher yields 2. Shorten HDD test time 3. Improve capital investment efficiency4. Increase parts commonality (2.5” & 3.5”)5. Reduce mechanical component cost (3.5”)6. Reduce platters in 3.5” drives including 15K rpm
Cost Reductions
Scrap
Media
1.00*
0.8713%
9%0.78
Head
HDD
2006 2007 2008
* 2006 scaled to equal 1.00 unit cost
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 17
4-4. Restructure Head and Media operations(1)
Media Slider HGAUS - San Jose
Japan - OdawaraMexico
Philippines
China
Thailand
Philippines
Consolidate Slider MFG to Philippines
Transfer Philippine HDD/HGA MFG to Thailand and Shenzhen
US - San Jose
China - ShenzhenPhilippines
China
Thailand
Consolidate Slider Developmentto Odawara
China - Shenzhen
Transfer Odawara Media MFG to Shenzhen
Consolidate Media Development to San Jose
Development
Manufacturing
• Fujisawa / Odawara, Japan• San Jose, California, USA
Current
Future
HGA: Head Gimbal Assembly
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 18
4-4. Restructure Head and Media operations(2)
Expected to generate approx. $300M of direct cost savings over five years
Slider Manufacturing Consolidation Media Manufacturing Consolidation
Transfer media manufacturing from Odawara to Shenzhen in 2007
- 20% reduction in media unit cost
- Additional cost savings in labor, services, infrastructure and logistics
- Increase operational efficiencies in media manufacturing
Consolidate development in San Jose in 2007
- Enable common development and manufacturing processes
• Transfer slider manufacturing from Mexico to Philippines by end of 2Q08
- Maximize operational efficiencies
- Centralize slider manufacturing closer to suppliers, customers and Hitachi GST’soperations
• Consolidate all slider development in Odawara by 2008
- Increase slider development efficiencies
- Result in a more focused and specialized development mission
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 19
4-4. Restructure Head and Media operations(3)
Head Business 2007 Revenue: $950M
2007 Employees: 15,000
ObjectivesProvide Hitachi GST with most technologically advanced, cost competitive productLeverage relationships with vendors to enhance our competitiveness
2005 2006 2007 2008
Technology Competitiveness LMR PMR PMR+TMR PMR+TMR
Product Cycle Time Index 100 86 74 68
Product Cost Index 100 95 86 70
- Scrap 100 96 74 42
- Depreciation 100 107 100 91
- Materials 100 99 92 84
- Other 100 82 82 70
LMR: Longitudinal Magnetic Recording TMR:Tunneling Magneto-ResistancePMR: Perpendicular Magnetic Recording
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 20
4-4. Restructure Head and Media operations(4)
Media Business 2007 Revenue: $800M
2007 Employees: 2,500
ObjectivesProvide Hitachi GST with most technologically advanced, cost competitive productLeverage relationships with vendors to enhance our competitiveness
2005 2006 2007 2008
Technology Competitiveness LMR PMR + LMR
Leader-ship
Leader-ship
Product Cost Index 100 87 77 73
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 21
1. Objectives and strategies2. HDD market perspective3. 2003-2006 achievements and challenges4. Roadmap for achieving profitability objectives in 2007
- Volume growth- Product strategy- Cost reductions - Restructure Head and Media operations
5. Summary “Collaborative creation and profits”
Agenda
The Path to Profitability
21Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved.
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 22
5. Summary “Collaborative creation and profits”
Achieve profitability Positive FIV
20082007Strategies
• Additional promotion of management reforms• Rigorous cost reduction
– Promote further optimization of operating sites for $100M– Reduce scrap cost by 20% year-over-year, primarily in Head and Media– Pursue strategic partnerships with vendors– Balanced use of internal heads and media with external sourcing for
supply flexibility• Strengthen technological capability
– Improve time to market– Strengthen the head and media development capability
• Intensive utilization of Hitachi group resources (R&D and Monozukuri culture)
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 23
Cautionary Statement
This presentation contains forward-looking statements within the meaning of U.S. federal securities laws, including statements about the following: the future demand for hard disk drives; Hitachi’s future product portfolio; the demand for HDDs in new applications; Hitachi’s ability to achieve cost improvements, yield improvements and structural improvements; and future profitability. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially, including the following: possible fluctuations in the demand for our products; possible delays in developing and marketing new products; possible delays in delivering cost improvements, yield improvements and structural changes; the introduction of new products by competitors or the entry into the market of new competitors; and the possibility of legal disputes.
These factors are not all-inclusive and are in addition to other factors contained in Hitachi Ltd.'s periodic filings with the U.S. Securities and Exchange Commission and other materials published by Hitachi Ltd. or Hitachi Global Storage Technologies. The forward-looking statements contained herein represent the company's judgment as of the date of this presentation and readers are cautioned not to place undue reliance on such statements. Hitachi Ltd. and Hitachi Global Storage Technologies undertake no obligation to update forward looking statements contained in this presentation.
Copyright © 2007, Hitachi Global Storage Technologies, All rights reserved. 24