Unit Growth and New Technology: Defining Factors for Capital Spending in the HDD Industry

Transcription

1 Unit Growth and New Technology: Defining Factors for Capital Spending in the HDD Industry Thomas Coughlin & Ed Grochowski Coughlin Associates

2 Outline Demand for digital storage drives HDD demand HDD unit volume drives capital demand for drives, heads and media Changing economics of the drive industry supports capital spending Changing trends in capital spending Inherent instability and seasonality in capital equipment demand Major technology changes that will drive capital refreshes in the next few years

3 OVER A ZETABYTE IN SHIPPED HDD CAPACITY BY E E E+10 Bytes Shipped/Year E E E E E E+4 1E+3 HDD Storage Capacity Curve From Multiple Sources CGR = >83% Copyright 2008 Ed Grochowski and Tom Coughlin Production Year Petabytes Exabytes Zetabytes

4 UNIT VOLUME DRIVERS FOR HDD CAPITAL SPENDING The increase in unit volumes of 12-15% average annually over the next few years will drive manufacturing process equipment required to manufacture them. Median estimate is over 1 Billion drives by 2012 Heads and disks per drive seem to have stabilized (positive growth since 2003 in heads per drive) support component demand Close to 2 Billion disks and 3 Billion heads by 2013

5 Drive Shipments (thousands) HIGH/MEDIUM/LOW HDD SHIPMENT PROJECTIONS 1,800,000 1,600,000 1,400,000 1,200,000 1,000, , , ,000 High Estimate Median Estimate Low Estimate 200,

6 GROWTH OF DRIVES, DISKS AND HEADS Units (thousands) 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 MAGNETIC HEADS MAGNETIC DISKS DISK DRIVES Year

7 AVERAGE DRIVE PRICES ARE FAR MORE STABLE THAN IN THE PAST (Data from Q4 98 to Q3 07, Seagate/Maxtor/WD) HDD ASP ($) Q4 98 Q2 99 Q4 99 Q2 00 Q4 00 Q2 01 Q4 01 Q2 02 Q4 02 Q2 03 Q4 03 Q2 04 Q4 04 Q2 05 Q4 05 Q2 06 Q4 06 Q2 07

8 STABLE DRIVE ASP & CONSOLIDATION: A MORE LIQUID MARKET WITH FEWER CUSTOMERS More stable drive prices make capital spending projections easier to finance Note that higher priced drives such as 2.5- inch drives and enterprise high performance drives are still under price pressure with remaining competitors Fewer competitors and greater industry consolidation means fewer customers for capital equipment

9 2007 CAPITAL SPENDING BY COMPANY BREAKDOWN Seagate 30% Komag 2% Fuji Elec 4% Other 4% Toshiba 4% Samsung 6% Fujitsu 7% HGST 11% WD 12% TDK 11% SDK 9%

10 PRELIMINARY HDD INDUSTRY CAPITAL EQUIPMENT MARKET PROJECTIONS Sales ($M).. $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Process Prod. Test Metrology Unit volume increases and new technology introductions look like they will drive about 80% annual capital spending growth between 2007 and 2011 Biggest increases in production as emphasis moves to process control rather than test to control product quality

11 Inherent Stability of the HDD Capital Equipment Market The actual capital spending trend will not be a straight line extrapolation because of intrinsic structural instabilities in production equipment supply and demand Demand for disks and heads is a leading indicator for drives by roughly 1.5 months (about ½ a calendar quarter) Demand for drives can change very quickly, even within a week Capital equipment to make key components can take 9 months from order to delivery Thus a big swing up or down in disk drive demand results in a somewhat off-set swing in demand for equipment to make key components The net result is that there will almost always be either too much or two little capital equipment in place to support demand for product This results in boom and bust years for capital equipment manufacturers as drive companies try to balance their demand vs. their required production equipment Changing technology is also a destabilizing factor since if equipment is bought too soon for an impending technology it can site idle and if not bought soon enough there will be a competitive disadvantage to the drive or component company

12 SEASONAL VARIATION IN DRIVE PRODUCTION There is also a historical seasonal variation in disk drive demand Generally the first half of the year has lower demand than the second half of the year for disk drives As disk drives are used more and more in consumer electronics this trend is exaggerated even further due to the impact of holiday season spending

13 HDD SHIPMENT QUARTERLY SEASONALITY (UNITS IN MILLIONS) Over the last 5 years the last half of the year had seen significantly higher drive volumes than the first half of the year Sometimes but not always Q1 is lower than Q4 of the prior year HDD Shipments Q1 Q2 Q3 Q

14 HDD QUARTERLY SHIPMENTS (2006 HISTORICAL, 2007 ESTIMATE AND PROJECTIONS) Shipped HDDs (M) Seagate Western Digital HGST 0.0 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Seagate Western Digital HGST Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11

15 TECHNOLOGY DRIVERS FOR CAPITAL SPENDING IN THE HDD INDUSTRY The adoption of new disk drive and especially head and medium technologies increases the required number of layers in magnetic disks and will impact disk throughput requiring new sputtering equipment or at least upgrades in older sputtering equipment Longer term changes in technology that will impact capital equipment requirements include: The adoption of heat or thermally assisted magnetic recording will change the media and add to the process complexity of the heads The adoption of discrete track and bit pattern recording will impact disk manufacturing as well as test and metrology tools The adoption of secondary actuators to increase track density will require changes in suspension and head assembly and will also require upgrades in test and measurement equipment Increases in disk drive areal density will also increase disk drive data rates and thus require upgrades in electrical dynamic test equipment The movement from 5 & 6-inch wafers in head manufacturing to 8-inch (200 mm) wafers in order to increase the throughput of head manufacturing plants will require new head tooling Finer dimensions for heads and will force the use of first generation lithography tools by the beginning of the next decade In general heads and media will start to use tools more like those in the semiconductor industry over the next few years New types of measurement and metrology equipment will be required for HAMR or TAR heads and also for discrete track and bit pattern recording media. As the bit size in magnetic recording decreases and as the magnetic heads fly closer to the disk surface contamination control will become more and more important. Environmental monitoring of the production environment (such as particle counting and other process purity measurements and control) will be a key to successful products

16 HDD METROLOGY ROADMAP 1000 HDD Testing/Metrology Roadmap 900 HDD Units, Millions HDD Testing Roadmap Scatterometry Optical Testing with Magnetic Calibration AFM High Resolution AOI AOI 0.5 λ x-y 100 C z High Resolution Optical Testing 0.5 λ x-y 80 C z Ellipsometry Interferometry/Reflectivity Media Defect Detection 0.5 λ x-y 50 C z E 2010 E 2012 E 2014 E Production Year 100% Optical Testing 5% Magnetic Sampling 0.1 λ x-y 10 C z Advanced Vibrometry Beam Deconvolution 0.1 λ x-y 5 C z Ed Grochowski Tom Coughlin

17 HDD PRODUCTION ROADMAP HDD Production Roadmap Technologies Introduction HAMR 800 PBM HDD Units, Millions TFC TMR Heads PMR Heads 8 Inch Head Substrates DTR CPP Head Imprint Tooling 300 AFC Media HDD Production Roadmap E 2010 E 2012 E 2014 E Production Year Ed Grochowski Tom Coughlin

18 CHANGES IN MEDIA PRODUCTION (areas that will be impacted with new technology development are circled) Blank Substrate Clean Plate Polish Sputter Storage Layers Sputter Underlayers and SUL Clean Texture (going away with PMR) Clean DLC Coating Lube Burnish Glide Certify Planarization Pit Fill Sputter Magnetic Layers Dry or Wet Etch Pattern DTR or BPM Process

19 CHANGES IN HEAD PRODUCTION (areas that will be impacted with new technology development are circled) Incoming Inspection Base Coat Deposition First Shield and Gap GMR/TMR & Gap Deposition Second Shield Overcoat Deposition Pole Trim Write Pole Formation Coil Formation Write Gap Deposition Bar Slice & Mount Lapping Bar Level Testing Crown Control Milling and Deposition Assembly in Drive HSA Electrical/ Magnetic Testing Mechanical and Flying Height Testing Final Inspection

20 CHANGES IN DRIVE PRODUCTION (areas that will be impacted with new technology development are circled) Add spindle motor and hardware to baseplate Add Disks Integrate head stack with disks Complete head-disk assembly (HDA) Add PCB Servo Writing (if not media servo write) Drive test and burn-in Packaging Ship drives

21 CONCLUSIONS A doubling of HDD unit volume over 5 years from 2007 to 2012 will be a big factor in capital spending growth Consolidation and the changing economics of the industry make it easily to support these capital investments (on average) Capital spending will trend to focus more and more on process equipment with quality created by process control rather than 100% test There are instabilities in equipment supply and demand and season demand that together create an unstable demand for capital equipment leading to boom and bust cycles New developments and technologies such as larger head wafers, heat assisted recording and discrete track or patterned media will eventually lead to a complete refresh of existing capital equipment for many categories and will lead to whole new types of production and test equipment

22 SOURCES Capital Equipment and Technology Report: Hard Disk Drive Industry. This report is authored by Tom Coughlin and Ed Grochowski and published by Coughlin Associates (

23 Thanks