Western Digital Corporation 2012 Annual Report Page 12

Enterprise

We believe shipments into the enterprise market of the storage industry increased 17% in calendar 2011 from

calendar 2010. Enterprise storage devices consist of performance and capacity hard drives, as well as performance
solid-state drives. All of these devices are used in multiple types of enterprise datacenters that provide storage for a
range of cloud and corporate applications. Within datacenters, these drives are typically used in workstations, com-
puter servers and storage systems.

Performance applications are essential to the operations of an enterprise and require the greatest capabilities and

reliability in hard drives and solid-state drives. This class of drives is the most highly engineered product line in the
storage industry. Cloud computing is the trend towards centralization of information storage and delivery of Internet-
based services. Cloud computing delivers shared resources, software and information to users on demand on a multi-
tude of devices, such as client PCs, tablets and smart phones. Most cloud computing models consist of services
delivered through large data centers with enterprise-class servers. The infrastructure to support cloud computing stor-
age needs is driving the demand for enterprise capacity hard drives and solid-state drives.

The enterprise market also consists of solid-state drives for use in embedded applications, such as network

communications and industrial, medical, military and aerospace applications, all of which require high durability and
long life cycles.

We believe that industry unit shipments of performance and capacity hard drives represented 53% and 44%,

respectively, of enterprise hard drives shipped in calendar 2011. Increasingly, solid state drives are also being deployed
in the performance drives of the enterprise market, representing 3% of the enterprise units shipped in calendar 2011.

Client: Desktop and Notebook PCs

Client storage devices consist of internal hard drives and solid-state drives for desktop and mobile PCs. We

believe industry unit shipments of mobile hard drives into the client space declined 3% in calendar 2011 from calen-
dar 2010, while volumes of desktop hard drives declined 13% in calendar 2011 from calendar 2010.

Desktop PCs are intended for regular use at single locations in homes and businesses, as well as in multi-user

educational and government networks. Mobile PCs, primarily notebook computers, are used both in and away from
homes and businesses. We believe that the demand for client computer hard drives and solid-state drives will grow
primarily due to increasing demand in emerging countries, continued corporate refreshes, the proliferation of digital
content and changing requirements for increasing performance, small size and low power consumption.

Mobile hard drives for notebook PCs, the industry's highest volume market, have traditionally been in a 2.5-inch

form factor with a 9.5mm height. There is a trend toward thinner, lighter devices with extended battery life and low
power consumption. To support this trend, the storage industry is developing smaller form factors, such as slimmer
2.5-inch hard drives and hybrid drives. A hybrid drive is a form of a hard drive that incorporates NAND flash
technology in the caching function. Hybrid drives specifically designed for mobile computing will combine the power
and performance of solid state drives with the capacity, affordability and availability attributes of hard drives.

Consumer Electronics

Hard drives for CE products are primarily used in digital video recorders ("DVRs"), game consoles and security

video recording systems. We believe hard drive unit shipments into the CE market decreased 5% in calendar 2011
from calendar 2010.

DVRs offer greater consumer viewing flexibility and enhanced capabilities such as pausing live television, sim-

plifying the process of recording and cataloging recorded television programs and quickly forwarding or returning to
any section of a recorded television program. Game consoles enable users to save games, movies, music, pictures and
other user generated content. We believe growth in the CE market will continue to create demand for higher capacity
hard drives.