Storage Market Perspective

October 4, 2006

Market Perspective

The recent coup in Thailand has had little immediate impact on the storage market. However, with Thailand being the second largest producer of hard disk drives (HDD) in the world, the situation warrants close attention to the political situation as it unwinds. Concern surrounds export fees and taxes, specifically the tax exemption granted to HDD manufacturers by the deposed government.

Overall, the storage market is healthy. However, Marvel Semiconductor’s recent earnings shortfall due to inventory build up is a concern as their products are widely used in storage products. Is this an indication that fourth quarter projections may not meet expectations?

Desktop

The desktop market is strong with 40GB and 80GB capacities showing signs of allocation due to Samsung no longer supporting these capacities. Horizon is seeing shortages in PATA 250GB, 300GB, and the new 750GB capacities with little refurbished or new product available in the market.

Mobile

While 2.5” demand remains strong by benefiting from an overall transition towards mobile applications, the inventory buildup at Marvel (detailed above) should be paid attention to as it may be a precursor of a weakening market.

Horizon has seen a demand for 30GB and 60GB 1.8" form factors. This increase in demand is likely a result of 1.8” product making inroads into other product lines and applications other than Apples, which had owned 80% of the 1.8” capacity. As the users of 1.8” product diversifies, Horizon is seeing a competitive situation develop as consumers of 1.8” form factors compete for capacity, allowing pricing and availability to positively reflect supply and demand conditions.

Enterprise

The combination of Maxtor being purchased by Seagate (leaving the enterprise market to Seagate, Fuji and Hitachi), combined with manufactures transitioning production capacity to SATA/PATA and mobile applications is expected to increase SCSI pricing over the next quarter.

Horizon is seeing spot shortages in some of the new SAS SCSI products; with the 36GB 15k RPM creating the biggest headache for end users.

For availability and pricing contact: 949.595.8244 or visit www.horizontechnology.com

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Storage Market Perspective