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March 3, 2006
Technology
Q1 2006 Global Technology
Data Book
Key Additions and Revisions: The majority of 2006
growth estimate revisions made in this edition were
overwhelmingly positive, although expectations for
1Q06 appear more muted than a quarter ago. Notably,
this is the second consecutive quarter in which our
analysts have upwardly revised carrier capex, IT
services, and semiconductor capex estimates.
Meanwhile, we’d highlight two downward revisions,
WLAN revenue and total Interactive Entertainment
(Gaming) revenue, both partly due to a stronger than
previously expected 2005. In addition, we added more
granular storage metrics, including NAS, Networking,
and storage software revenue. These three areas are
expected to grow in the low to mid-teens in 2006.
Themes for 2006: Our analysts’ view of 2006 is being
guided by several new product cycles that are expected
to impact demand and pricing trends, including
Microsoft Vista, and expectations for parts of the
hardware food chain are more back-end loaded (i.e.
NBs). Our analysts are looking for continued positive
revenue growth in many sectors within their industries
in 2006, and another upward tweak to global GDP this
quarter further supports this view.
Premium and Slower Growth Markets: In 2006, our
analysts expect strength in game consoles, iPod units,
integrated digital TVs, LCD monitors, Taiwan notebook
units, SSL VPN Appliances revenue, messaging
security revenue, VoIP revenue, Internet advertising
revenue, and software revenue in India. Weakness is
expected in inkjet printers, Unix servers, DVD player
and digital still camera revenue, and global consulting
billing rates.
Please see page 41 of this report for a complete list
of our global industry views related to technology.
Morgan Stanley does and seeks to do business with
companies covered in its research reports. As a
result, investors should be aware that the firm may
have a conflict of interest that could affect the
objectivity of this report. Investors should consider
this report as only a single factor in making their
investment decision. Customers of Morgan Stanley
in the U.S. can receive independent, third-party
research on the company covered in this report, at
no cost to them, where such research is available.
Customers can access this independent research at
www.morganstanley.com/equityresearch or can call
1-800-624-2063 to request a copy of this research.
Please see analyst certification and other
important disclosures starting on page 44.
Global Technology Team
report compiled by:
Morgan Stanley & Co. Incorporated
Bernie.Mahon@morganstanley.com
(212) 761 6274
Louis.Gerhardy@morganstanley.com
+1 (1)415 576 2391
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
N O R T H A M E R I C A
2
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Morgan Stanley Global Technology Research Team
Hardware
U.S. Enterprise Systems & PC Hardware
Rebecca Runkle (rebecca.runkle@morganstanley.com) (212) 761 6466
Kathryn Huberty (kathryn.huberty@morganstanley.com) 6249
Fei Chen (fei.chen@morganstanley.com) 0227
Alice Hur (alice.hur@morganstanley.com) 3735
U.S. EMS/Components/Distribution
Bernie Mahon (bernie.mahon@morganstanley.com) (212) 761 6274
Aaron Husock (aaron.husock@morganstanley.com) 7678
Tatiana Feldman (tatiana.feldman@morganstanley.com) 7134
Japan Electronic Components
Tomohiro Murata (tomohiro.murata@morganstanley.com) +81 3 5424 5341
Mikiko Kayama (mikiko.kayama@morganstanley.com) 5924
Taiwan Systems and PC Hardware/ODM
Ellen Tseng (ellen.tseng@morganstanley.com) +886 2 2730 2864
Charlie Chan (charlie.chan@morganstanley.com) 2811
Jasmine Lu (jasmine.lu@morganstanley.com) 2870
Asia/Pacific Hardware Components/ODM
Evelyn Ou (evelyn.ou@morganstanley.com) +886 2 2730-2866
Bonnie Chang (bonnie.chang@morganstanley.com) 2861
Jasmine Lu (jasmine.lu@morganstanley.com) 2870
South Korea Hardware Components
Shawn Kim (shawn.kim@morganstanley.com) +822 399 4939
So-Young Ahn (so-young.ahn@morganstanley.com) 4937
Keon Han (keon.han@morganstanley.com) 4933
Jonathan Rhee (jonathan.rhee@morganstanley.com) 4846
Asia/Pacific TFT LCD/DRAM
Frank Wang (Frank.ay.Wang@morganstanley.com) +886 2 2730-2869
China Hardware
Viktor Ma (viktor.ma@morganstanley.com) +852 2848 5903
Danita On (danita.on@morganstanley.com) 5214
Eko Yin (eko.yin@morganstanley.com) 5657
Hong Kong Hardware
Jasmine Lu (jasmine.lu@morganstanley.com) 2870
Communications
U.S. Communications Equipment
Scott Coleman (scott.coleman@morganstanley.com). 6055
John Marchetti (john.marchetti@morganstanley.com) 8940
Oliver Jay (oliver.jay@morganstanley.com) .......... 6962
Rangarajan Sridhar (rj.sridhar@morganstanley.com) 7681
European Telecom Equipment
Adnaan Ahmad (adnaan.ahmad@morganstanley.com) +44 (20) 7425 9227
Peter Dionisio (peter.dionisio@morganstanley.com) 3504
Rupert Lion (rupert.lion@morganstanley.com) 3436
Asia/Pacific Communications Equipment
Shawn Kim (shawn.kim@morganstanley.com) +822 399 4939
China Communications Equipment
Viktor Ma (viktor.ma@morganstanley.com) +852 848 5903
Consumer Electronics Devices
Asia/Pacific Technology
Sunil Gupta (sunil.gupta@morganstanley.com) +65 6834 6732
Praveen Choudhary (praveen.choudhary@morganstanley.com) 6744
Max Lee (max.lee@morganstanley.com) +886 2 2730 2863
Japan Electronics
Masahiro Ono (masahiro.ono@morganstanley.com) +81 3 5424 5362
Shima Nakao (shima.nakao@morganstanley.com) 5378
Kayo Sano (kayo.sano@morganstanley.com) 5332
Kumi Takayama (kumi.takayama@morganstanley.com) 5308
Tomohiro Murata (tomohiro.murata@morganstanley.com) 5341
Mikiko Kayama (mikiko.kayama@morganstanley.com) 5924
Naoki Sato (naoki.sato@morganstanley.com) 5927
Kazuo Yoshikawa (kazoo.yoshikawa@morganstanley.com) 5389
Aya Kurita (aya.kurita@morganstanley.com) ........ 5366
China Technology
Viktor Ma (viktor.ma@morganstanley.com) +852 848 5903
Internet & PC Applications Software
U.S. Internet & PC Applications Software
Mary Meeker (mary.meeker@morganstanley.com) (212) 761 8042
Brian Pitz (brian.pitz@morganstanley.com) 4133
Brian Fitzgerald (brian.fitzgerald@morganstanley.com) 4276
Ramji Srinivasan (ramji.srinivasan@morganstanley.com) 6281
Pierre-Jean Nguyen (pierre-jean.nguyen@morganstanley.com) 4967
Europe Internet & Media
Javier Marin (javier.marin@morganstanley.com) +44 (20) 7425 3503
Edward Steel (edward.steel@morganstanley.com) 4486
China Internet
Richard Ji (richard.ji@morganstanley.com) +852 2848-6926
Jenny Wu (jenny.wu@morganstanley.com) 6708
Japan Internet
Naoshi Nema (naoshi.nema@morganstanley.com) +81 3 5424 5320
South Korea Internet Services
Mitchell Kim (mitchell.kim@morganstanley.com) +82 2 399 4936
Seyon Park (seyon.park@morganstanley.com) 4843
Semiconductors
U.S. Semiconductors
Mark Edelstone (mark.edelstone@morganstanley.com) (415) 576 2381
Louis Gerhardy (louis.gerhardy@morganstanley.com) 2391
Harlan Sur (harlan.sur@morganstanley.com) 2359
Sonia Kimotsuki (sonia.kimotsuki@morganstanley.com) 2388
Jay Iyer (jay.iyer@morganstanley.com) 2607
Sanjay Devgan (sanjay.devgan@morganstanley.com) 2382
Michelle Chen (michelle.chen@morganstanley.com) 2615
U.S. Semiconductor Capital Equipment
Timm Schulze-Melander (timm.schulze-melander@morganstanley.com) (415) 576 2324
Shashin Shah (shashin.shah @morganstanley.com) 2610
Charles Liao (charles.liao@morganstanley.com) 2609
Europe Semiconductors/Semi Cap Equipment
Stuart Adrian (stuart.adrian@morganstanley.com) +44 (20) 7425 3299
Rudolf Dreyer (rudolf.dreyer@morganstanley.com) 9290
Japan Semiconductor Production Equipment
Naoki Sato (naoki.sato@morganstanley.com) 5927
Kazuo Yoshikawa (kazoo.yoshikawa@morganstanley.com) 5389
Asia/Pacific Semiconductors
Keon Han (keon.han@morganstanley.com) +822 399 4933
China Semiconductors
Viktor Ma (viktor.ma@morganstanley.com) +852 2848 5903
Asia/Pacific Semiconductors
Sunil Gupta (sunil.gupta@morganstanley.com) +65 6834 6732
Software & IT Services
U.S. Computer Services & IT Consulting
David Togut (david.togut@morganstanley.com) (212) 761 6388
Charles Murphy (charles.murphy@morganstanley.com) 4990
Dhruv Chopra (dhruv.chopra@morganstanley.com) 3867
Ahmed Alamin (ahmed.alamin@morganstanley.com) 6126
U.S. Specialized IT Services
Julie Santoriello (julie.santoriello@morganstanley.com) (212) 761 8582
Xuying Chang (xuying,chang@morganstanely.com) 4217
Matthew Spiegelman (matthew.spiegelman@morganstanley.com) 4130
U.S. Software
Peter Kuper (peter.kuper@morganstanley.com) (617) 856-7409
Brian Essex (brian.essex@morganstanley.com) 8753
Keith Weiss (keith.weiss@morganstanley.com) (212) 761 4149
Europe Software & IT Services
Gary Rollo (gary.rollo@morganstanley.com) +44 (20) 7425 4619
James Dawson (james.dawson@morganstanley.com) 9646
Jonathan Tseng (jonathan.tseng@morganstanley.com) 6609
Japan Software & IT Services
Masaharu Miyachi (masaharu.miyachi@morganstanley.com) +81 3 5424 5321
Hiroko Ando (hiroko.ando@morganstanley.com) 5324
Shizuka Yahata (shizuka.yahata@morganstanley.com) 5347
India Technology
Anantha Narayan (anantha.narayan@morganstanley.com) +91 22 209 7161
Parag Gupta (parag.gupta@morganstanley.com) 7915
3
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Q1 2006 Global Technology Data Book
Introduction
The Global Technology Data Book is a compilation of the
most relevant data points for the technology sector from
Morgan Stanley’s Global Technology Research Team. The
report incorporates more than 400 sets of data with
thousands of individual data points compiled from seven
technology sub-sectors (Computing Hardware,
Communications Equipment, Consumer Electronic Devices,
Semiconductors, Enterprise Software, Internet & Consumer
Software, and IT services) and non-traditional end markets
such as the automotive industry. This is an effort comprising
more than 30 teams and more than 80 analysts around the
world. Historical and projected data on an annual and
quarterly basis are provided for most of the categories.
Key Themes for 2006; GTDB revisions and additions
Morgan Stanley’s global team of technology analysts are
forecasting several new product cycles to emerge in 2006
that should help drive demand and pricing trends. While
macro economic issues may depress results in the first half
of the year, the new product cycles are likely to emerge in
the second half. Some of these product cycle opportunities
include virtualization for servers, blade servers and storage
aggregation, Microsoft’s Vista, 3G cell phones reaching
mainstream price points, VoIP merging with cellular
technology, 802.11n and 802.16e, new video game
platforms, digital TV, high definition video applications, fiber
to the home/node/premise, NAND flash enabled portable
applications, and RFID. As a result, themes such as the
digital living room appear to be gaining traction in 2006, and
our analysts are expecting significant strength in various
Consumer Electronics products, including game consoles as
next-generation products enter the market, iPod units, and
integrated digital TVs.
Revisions. We highlight that the majority of 2006 growth
estimate revisions made in this edition were overwhelmingly
positive, although expectations for 1Q06 appear more muted
than a quarter ago. Notably, this is the second consecutive
quarter in which our analysts have upwardly revised carrier
capex, IT services, and semiconductor capex estimates.
Meanwhile, we only find two major negative revisions. 1)
WLAN revenue, from double digit growth to single digit
decline, mostly due to a stronger than forecast 2005 and a
slight downward revision to 2006 expectations; 2) Total
Interactive Entertainment (Gaming) revenue, also partly due
to a stronger 2005 than previously expected. Separately,
MPU unit forecasts have gone higher, but our analysts now
have meaningfully more aggressive ASP pressure
expectations that translate into an overall lower revenue
estimate for 2006.
New additions to the GTDB. We have added more
granular storage metrics, including NAS, Networking, and
storage software revenue. These three areas are expected
to grow in the low to mid-teens in 2006, but our analysts
have a positive bias to these estimates and expect numbers
to go higher.
Exhibit 1
Highlighting Some of the Growth Revisions
2006 Growth
Japan GDP ↑ 3.2% from 2.5%
Notebook Revenue ↑ 6% from 1%
San Revenue ↑ 12% from 9%
Wireline Carrier Capex ↑ 4% from 2%
Router Revenue ↑ 27% from 5%
PLD Revenue ↑ 16.7% from 13.9%
Semiconductor Capex ↑ 10.1% from 6.6%
Foundry Capacity Utilization* ↑ 91% from 86%
APAC Internet Users ↑ 27% from 16.5%
Avg. Daily Internet Page Views ↑ 34% from 20%
IT Services Total Revenue ↑ 8% from 6%
US Corporate Capex ↓ 10.5% from 11.1%
WLAN Revenue ↓ -3% from 22%
Total Gaming Revenue ↓ 11% from 17%
*Not growth, but % Utilized
Source: Morgan Stanley Research estimates.
4
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 2
Estimated Year-Over-Year Growth Outlook by Sub-Sector in 2006
Strongest Weakest
Computing Hardware Taiwan NBs 32%, LCD Monitors 20%, Disk
Storage units 20%, Linux servers 20% Inkjet Printer Revenue -5%; Unix Server Revenue -4%
Communications Equipment
EE Handset Replacement Units 52%,
WCDMA products 33%, M.E./Africa Wireless
Subscribers 32%, VoIP Revenue 31%,
Taiwan Handset PCBs 22%
Non-CDMA or GSM Evolution Wireless Infrastructure
Revenue -12%, WLAN Revenue -3%
Consumer Electronics
Integrated Digital TV Revenue 85%, DVD
Recorder Revenue 61%, Gaming Hardware
Revenue 48%, Flash-based MP3 Player units
49%
DVD Player Revenue -15%, Digital Still Camera
Revenue -10%, VCR Revenue -10%, Projection
Television Revenue -10%, Global PC Software Revenue
-10%
Semiconductors PLD Revenue 17% DRAM Revenue 4%
Software
SSL VPN Appliances Revenue 33%,
Messaging Security Revenue 31% IDS/IPS Revenue 3%
Internet
Avg. Daily Page Views 34%, PayPal
Payments 33%, Internet Advertising Revenue
30%, APAC Internet users 27%
NA Internet Users 6%
IT Services
India Software Revenue 30%, Offshore
headcount 30% Blended Global Consulting Billing Rate -7%
GDP Asia ex-Japan 6.3% Europe 2.2%
E= Morgan Stanley Estimates
Source: Morgan Stanley Research
Exhibit 3
Overview of Stock Market Performance by Sub-Sector
Sector
Cable & Satellite
Communications Equipment
Computer Services & IT Consulting
Disti / EMS / VAR
Internet
Security Software
Semiconductor Capital Equipment
Semiconductors
Software
Systems & PC Hardware
Telecom Services 0.4% 6.3% 7.9% 12.1% 10.0%
0.8%
-1.4% -0.8% 4.9% 5.1% 6.5%
-0.4% -2.2% 1.5% 20.3%
20.6%
-1.7% 2.9% 16.2% 34.7% 15.8%
-2.5% 3.8% 15.0% 23.4%
-7.7%
1.3% 1.9% -3.6% -7.2% 3.2%
0.0% -7.5% -12.4% 25.8%
4.3%
-1.4% 0.3% 5.0% 3.7% 2.6%
-0.4% 4.1% 5.7% 21.8%
2.4%
0.5% 5.7% 7.8% 25.1% 10.2%
0.5% 3.0% 4.8% -1.8%
Stock Performance
1 Week Performance 1 Month 3 Month 1 Year Performance Year-to-Date
Source: Morgan Stanley Research, ModelWare
Results as of February 24, 2006
Note: Industry performance is an average of stocks covered by Morgan Stanley within each category.
5
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
PC Supply Chain Update
Morgan Stanley’s PC unit forecast for 2006 remains
unchanged from the 4Q05 edition, but estimates for the
remainder of the foodchain have all ticked up (except for
Tawain NBs on a standalone basis). Taiwan desktop and
notebook units went up roughly 400 bps combined, and
Microprocessor units were up roughly 5 percentage points.
The team continues to expect strong growth in the notebook
market, or 18% for the overall market and 32% for Taiwan
units, with significant outperformance over desktops in both
markets. We note that the Taiwan estimates are looking for
stronger growth than the rest of the estimates for the PC
supply chain, and that the MPU revision is due to better than
expected AMD results in 2005 and a subsequently
meaningful upward revision to the 2006 forecast, while
numbers for Intel remain unchanged. In addition, our
analysts have raised their expectations for hard disk drive
unit growth to 13%, although this is still below their original
forecast of 14% (see the 3Q05 edition).
Exhibit 4
PC Supply Chain Update
New Prior
PCs 9.0% 9.0%
Desktop 5.0% 5.0%
Notebook 18.0% 18.0%
Taiwan DT & NB Units 25.4% 21.4%
Taiwan Desktop 23.0% 17.0%
Taiwan Notebook 32.0% 35.0%
Hard Disk Drives 13.0% 12.0%
Microprocessor 15.6% 10.6%
Intel 10.1% 10.1%
AMD 37.6% 13.2%
2006E Unit Growth, Global
E = Morgan Stanley Research Estimates as of February 28, 2006
Source: Morgan Stanley Research
Wireless Handset Supply Chain Analysis
Our analysts continue to expect total handset unit sales
growth to decelerate in 2006 for the second consecutive
year, posting unit growth of about 11% versus unit growth of
about 19% in 2005 and 34% in 2004. New subscribers in
developed markets are expected to only drive about 5% of
total handset sales, while handset sales from new
subscribers in emerging markets are expected to drive about
30% of total handset sales in 2006. Our team projects the
overall replacement rate for 2006 will be around 29% of the
subscriber base. Overall, our team’s analysis suggests it is
likely the increased mix of business from developing markets
that will help to more than offset the growth of the higher
ASP handsets (e.g. 3G), but they now expect a slightly
milder decline of 6% (from $153 to $144) in the ASP of the
total handset market (compared to a prior estimate for a 7%
decline from $150 to $139 in the 4Q05 edition).
Exhibit 5
Wireless Handset Supply Chain
2005E 2006E Y/Y Change
Wireless Subscribers 2,067 2,396 16%
Developed Regions 731 771 6%
Developing Regions 1,336 1,625 22%
Wireless Handsets 810 896 11%
New subscribers 3 18 305 -4%
Replacement units 492 590 20%
Replacement rate 29% 29% 0%
ASPs $153 $144 -6%
Taiwan Handset PCBs 341 420 23%
Wireless Carrier Capex $92,175 $97,435 6%
2005E & 2006E Growth, Global
(figures in millions)
Source: Morgan Stanley Research as of February 28, 2006
E= Morgan Stanley Estimates
Feedback Is Welcomed
We would like to receive your feedback on how the Global
Technology Data Book can be optimized for your needs.
Please direct your comments to your Morgan Stanley
salesperson or contact:
louis.gerhardy@morganstanley.com
bernie.mahon@morganstanley.com
6
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Data Book Trends by Sub-Sector
• Communications Equipment
Our analysts have raised the global carrier capex estimates
and now model 5% growth in 2006, slightly higher than 3%
indicated in their previous model. Most of this positive
revision comes from higher wireline capex, where our
analysts now expect 4% growth y/y compared to the prior
estimate of 2% growth, as several of the carriers included in
the model are either reiterating or raising guidance in light of
FTTx and IPTV-related network upgrades. AT&T, for
example, significantly raised capex guidance for Project
Lightspeed. On the wireless front, capex estimates have
also been adjusted upwards. Our analysts now expect 6%
growth in 2006, up from 3% previously expected due to
increased coverage and capacity spending in the Asia
Pacific region, as well as 3G spending in EMEA and Asia
Pacific.
From a product perspective, our analysts expect the router
market to grow 27% in 2006, up from 5% in the prior model,
driven by strong demand for high-end carrier routers.
Wireless LAN, on the contrary, is expected to decline 3% in
2006, down from 22% growth previously estimated, off of a
much stronger than expected 2H05.
Overweight Idea: Motorola (MOT, $22, Overweight-V,
$26 Price Target, covered by Scott Coleman and John
Marchetti)
Our analysts’ thesis on Motorola is based on increasing
handset market share and improving handset operating
margins. Longer term, Motorola’s experience across
wireless, broadband, and video positions it well for how
networks evolve, services converge, and consumers’
demand “any content, anywhere.” Our analysts also
estimate that a robust mix of high- and low-end handsets will
minimize the price erosion during the year, and assume
other market participants will not initiate significant price
discounting to win back market share.
Overweight Idea: Cisco Systems (CSCO, $21,
Overweight-V, $23 Price Target, covered by Scott
Coleman and John Marchetti)
Our analysts’ view Cisco as the company best positioned to
benefit from transitions across wireline, wireless, enterprise
and home networks over the next several years due to its
commanding market share in core routing and switching and
growing presence in key technology growth areas like VoIP,
security, storage, WLAN and the digital living room.
Underweight Idea: Nokia (NOK1V.HE, €16, Underweight,
€11 Price Target, covered by Adnaan Ahmad and Peter
Dionisio)
Our analysts' thesis on Nokia is based on their view that the
company's average selling price (ASP), margins, and market
share will decline going forward as Nokia faces increased
pressure from the low-end to the mid-to-high-end product
segments. They believe that Nokia's leading position is
under threat from the big Asian vendors and a reinvigorated
Motorola. Assuming their thesis is correct, our analysts
believe that management's current operational decisions
(while to be applauded) will not alter the course of the
handset industry's structural dynamics - i.e., increasing
competition at the low-end and a move to consumer
electronics at the mid-to-high-end. Our analysts believe that
the main impact of relatively new competition at the low-end
(including the sub-$50 segment), primarily from Motorola,
will likely appear in the form of price pressure. On the other
hand, the impact of consumer electronics traits, such as
market fragmentation, short product cycles, and lack of
pricing power, would, in our analysts' view, be damaging to
Nokia's revenue and margin structure.
• Computing Hardware
Our analysts’ view new technology cycles in 2H06 (MSFT
Vista, Intel Viiv, dual-core server and PC processors) as
potential positive drivers for unit growth. New systems will
require higher configurations and could provide ASP relief
after 12 months of aggressive pricing. As a result, our
analysts have a positive bias on the group in 2006 and look
to be opportunistic with any 1H06 seasonal weakness.
4Q05 PC shipments were slightly lower than their forecast,
due to weaker than expected Desktop demand (4% YoY
growth vs. their forecast of 6%), but Notebook demand
continued to be strong and came in line with their forecast of
22% unit growth. Hard Disk Drives demand was better than
they had expected (revenues grew 10% vs. a 7% forecast)
due to strength in notebook and consumer electronics
applications.
For 2006, our analysts are sticking with their 9% PC unit
growth estimate, which accounts for tough compares and
technology transitions this year. However, they are raising
their HDD unit growth forecast from 12% to 13% post
tweaking the model to account for 4Q results and 1Q
guidance. In storage, our analysts increased their estimates
for SAN revenue growth (from 9% to 12% y/y in 2006) to
better account for strong 4Q results and new product cycles
(namely EMC Symmetrix), and their total 2006 y/y Storage
hardware revenue growth estimate shifts from 4% to 5%.
7
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Our analysts continue to believe that AAPL and EMC are the
strongest secular growth stories in the group.
Overweight Idea: Apple (AAPL, $70, Overweight, $90
Price Target, covered by Rebecca Runkle)
AAPL is evolving into a growth-driven portfolio franchise.
With the healthiest business in five years and an impressive
product pipeline, our analysts think estimates will continue to
trend up through 2006. They believe management is doing
the right thing by keeping expectations in check during the
Intel transition and they are buyers on any near-term
weakness. As the portfolio strategy expands, margins have
the potential to increase similarly to other secular growth
stories. As a result, upside exists to current expectations
and AAPL shares continue to look attractive over the next
12-18 months.
Overweight Idea: EMC Corp. (EMC, $15, Overweight-V,
$16 Price Target, covered by Rebecca Runkle)
Our analysts’ operating leverage/new product thesis on EMC
continues to hold in 2006, as Storage remains one of the top
five IT priorities and EMC continues to be the leader and
innovator in the market. With its product cycles gaining
momentum (DMX-3, Clariion), expanded Dell/CSCO
distribution, SMB initiatives, and software and services
traction, EMC is well positioned to grow faster than the
market. Net-net, our analysts expect shares to outperform
the group in 2006.
Overweight Idea: Dell (DELL, $30, Overweight, $42 Price
Target, covered by Rebecca Runkle)
DELL remains a top pick in the group. While not yet back to
typical Dell levels, execution improved in the January quarter
and our analysts expect further movements in the right
direction over the next twelve months. Conservative April
quarter guidance sets expectations up for another possible
quarter of upside (if the demand environment and execution
don’t deteriorate) and limits the risk of a major blow-up as
management continues to rebalance the business.
Meaningful industry/technology drivers should help
accelerate revenue growth in 2H06 and our analysts are
buyers of the stock.
Overweight Idea: Flextronics (FLEX, $11, Overweight,
$13 Price Target, covered by Bernie Mahon)
Our analysts are Overweight FLEX as they see a clear path
to revenue growth and margin expansion in C2H06, and
believe the company is well-positioned to take market share.
Flextronics trades at 14x C06 EPS, the low end of the 10-
20x range our analysts believe the EMS stocks are likely to
trade in. They expect shares to trade up to an average peer
multiple of 18x C06, or ~$13.
Underweight Idea: Lexmark International (LXK,
Underweight, $47.76, covered by Rebecca Runkle)
Printer industry fundamentals could worsen before
noticeable stabilization, in our analysts’ opinion. They think
channel inventory drawdowns and aggressive pricing are
systemic problems that will continue to impact the printer
industry in the next 2-4 quarters. With 100% exposure to
this industry, a less competitive mix of business and the
need to restructure over the next 6-12 months, our analysts
think upside is limited. The largest risk of remaining
Underweight LXK is a major balance sheet restructuring
and/or sale of assets. However, our analysts believe
management is committed to addressing near-term business
and market issues internally before turning to larger strategic
decisions.
• Consumer Electronics
In 2006, our analysts are expecting significant strength in
various Consumer Electronics products, including game
console units as next-generation products enter the market,
iPod units, and integrated digital TV units. Our analysts
remain bearish on the prospects for Digital Still Cameras
(DSC) and DVD players. For DSCs, they see 4~5 mega
pixel (MP) cameras as being in the “volume zone”, as our
analysts believe (1) the rise of low-priced SLRs and limited
resolution of the PC screen has shrunk the market for
greater than 5MP compact cameras; (2) the diffusion rate
has hit a considerably high level, and demand is likely to
level off. Our analysts expect growth to turn negative in the
Japanese market in 2005 as this trend is evident in Japan.
Our analysts also believe that a faster than expected decline
in LCD and PDP TV prices has stimulated price elasticity
and they have adjusted their numbers accordingly. LCD TV
unit growth for 2006 is at 62%, as LCDs hit an attractive
price point at US$2,000 for 32 inch TVs. For PDP TVs, our
analysts expect unit growth of 58% in 2006.
• Software
Our analysts estimate moderate software growth this year,
and they expect consolidation, convergence and
commoditization to continue to be prominent factors shaping
the industry in 2006. On a more granular level, overall
industry growth should be supported by strong low teen
security software growth. While security software is
experiencing some of the same overall trends as software in
general, several significant emerging segments within the
industry could see growth in the high teen to low twenty
percent levels. Specifically, authentication, authorization,
web filtering, messaging security, encryption, embedded
technology, suites and appliances (and suites on
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appliances/UTM), and endpoint security are expected to be
industry growth drivers for 2006.
Throughout the software industry, maturing technology, suite
expansion and a desire from enterprises to reduce the
number of vendor relationships are driving consolidation.
The need to provide security, capacity and reliability
embedded as part of a product or a service is driving change
in the industry. These trends are leading to convergence
across several segments including storage, security and
hardware. Larger vendors are expected to continue using
their scale to solidify positions as vendors of choice but
some of the faster growing and emerging segments still
support smaller, more innovative, often private best-of breed
vendors.
Overweight Idea: VeriSign (VRSN, $24, Overweight-V,
$26 Price Target, covered by Peter Kuper):
Our analysts think that the sell off last year represented
panic over option conversion by management with the stock
price also reflecting the impact of negative sentiment over a
decline in Jamba! performance. VeriSign has demonstrated
control over costs associated with the volatile content
business and appears to be well positioned to take
advantage of several key trends they are anticipating. This
is driven by a suite of products that include exposure to
increasing secure online commerce, technology offering
embedded security, an infrastructure to facilitate the
movement of information over disparate platforms
seamlessly and securely.
Underweight Idea: Check Point (CHKP, $21,
Underweight, $19 Price Target, covered by Peter Kuper):
Our analysts continue to believe that Check Point belongs
below $20. With weak growth from the core business,
declining growth this year is expected. Any meaningful
growth would likely be reliant on contribution from the
pending SourceFire acquisition. The acquisition is in its own
state of uncertainty given the probability of approval from
CFIUS in light of a recent increase in public scrutiny over
foreign investment in US companies affecting National
Security. The Company guided to revenue growth of
approximately 14% for 2006 but this number includes
SourceFire. Considering our analysts’ SourceFire
estimates, guidance numbers imply a paltry 7% midrange
organic growth for the year. Considering the wide range the
company offered for guidance (+/- 5%), growth could even
be as low as 2% this year. Check Point struggled in the
market with disappointing numbers last year and our
analysts expect the struggle to continue for core product in
‘06.
• IT Services
For 2006, our analysts have raised their forecast of global IT
services revenue growth to 8% from 6% driven primarily by
three factors. First, the U.S. consulting and discretionary IT
services spending environment has improved. Second, their
European growth expectations remain healthy, given modest
volume and price improvements stemming from an
improving consulting market and limited supply of qualified
IT services professionals. Finally, Indian IT service
providers continue to experience strong unit volume growth
and our analysts have increased their revenue growth
expectations for the offshore providers to 30% from 27%.
During 1H/CY06, our analysts forecast robust IT consulting
demand will continue, but remain cautious about the back
half of 2006. A potential slowdown of the U.S. economy
near the end of the year (due to higher interest rates, a
slowing housing market, and potentially high oil prices) may
constrain discretionary IT spending. IT outsourcing should
grow in the low single-digits and will likely remain a
challenging business given its high capital intensity and
persistent pricing pressures. Our analysts believe the
continued rapid growth offshore of software application
development and maintenance should limit pricing power at
the multinational IT service companies.
For 2006, IT services earnings growth should improve for
top-tier players such as Accenture. Our analysts prefer toptier
US and European consulting companies, selective
offshore leaders, and government IT providers focused on
homeland security.
Overweight Ideas:
Accenture (ACN, $33, Overweight, $36 price target,
covered by David Togut)
Cogent (COGT, $20, Overweight-V, $32 price target,
covered by Julie Santoriello)
Patni Computer Systems (PTNI.BO, RS 467, Overweight,
Rs 575 price target, covered by Anantha Narayan)
Capgemini (CAPP.PA, €42, Overweight-V, €45 price
target, covered by James Dawson and Gary Rollo)
Tata Consultancy Services (TCS, Rs 1,742, Overweight,
Rs 1,950 price target, covered by Anantha Narayan)
Cognizant Tech Solutions (CTSH.O, $58, Overweight-V,
$65 price target, covered by Julie Santoriello).
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Within the U.S., our analysts prefer top-tier
consultants/system integrators and companies exposed to
the homeland security market. Given improving demand
and pricing for discretionary projects, our analysts prefer
Accenture. Additionally, our analysts recommend Cogent,
which remains the leader in providing Fingerprint
Identification System and other biometric solutions to
governments, law enforcement agencies, and other
organizations worldwide.
Within Europe, our analysts prefer companies with exposure
to the Continent and the improving Consulting and System
integration market. They recommend Capgemini.
Within the offshore IT market, our analysts prefer Tata
Consulting, Cognizant, and Patni. They believe that offshore
momentum remains robust given strong order flow and solid
client and employee additions.
Underweight Ideas: Computer Sciences Corp. (CSC,
$55, Underweight, covered by David Togut)
Our analysts believe that IT outsourcing should remain a
difficult business due to its high capital intensity and
persistent pricing pressures. They maintain an Underweight
rating on Computer Sciences Corporation and believe
companies within this space will likely face pricing pressure
from contract renewals. As the industry continues to mature,
our analysts expect the IT outsourcing companies to face
long-term challenges in growing their earnings and free cash
flows.
• Internet
Overview…
• CQ4 financial results for the Internet leaders
were very good, but not great.
• C2006 revenue growth rates will likely continue
to slow and margins may compress as
investments related to the likes of growth in
infrastructure, content and mobile rise.
• Are there things one can worry about? Sure.
• Are there things one can get excited about? You
bet.
• Net / net, our analysts remain upbeat but their
view is more loaded to CH2:06 and 2007 than
they had expected as recently as a month ago.
The good news is that their discounted cash flow
valuations (assuming their assumptions are
sound) look compelling.
Drilldown…
CQ4 financial results for the Internet leaders were
very good, but not great. Revenue growth rates, while
still high for mere mortals, slowed and upside could not
be found. While currency had an average -2% Y/Y
impact, revenue growth rates slowed – Google grew by
97% vs.108% in CQ3; Yahoo! grew 36% vs. 42% and
Amazon.com grew 17% vs. 27%. eBay, the outlier,
supported 42% growth vs. 37% Q/Q. EBITDA margins
fell – Google came in at 63% vs. 64% Q/Q; eBay was
39% vs. 41% and Amazon.com was 7.4% vs. 7.5%.
Yahoo!, the outlier, came in at 43% vs. 41% Q/Q.
C2006 revenue growth rates will likely continue to
slow and margins may compress as investments
related to the likes of growth in infrastructure,
content and mobile rise. For Google, our analysts
estimate 64% revenue growth vs. 105% in C2005 and
EBITDA margin of 63% vs. 65% Y/Y. For Yahoo!, 31%
vs. 43% and margin of 42%, flat Y/Y. For eBay, 29% vs.
39% and margin of 35% vs. 38%. For Amazon.com,
20% vs. 23% and margin of 7% vs. 8%. That said, if the
Internet leaders gain traction in emerging trends, 2007
could be a year of strong revenue growth and margin
leverage.
Are there things one can worry about? Sure. 1)
Plethora of emerging opportunities can create near-term
costs; 2) Increasingly competitive landscape (intramural
and other) can drive uncertainty; 3) Infrastructure builds
can increase costs; 4) Rapid growth of mobile Internet
can create transitions; 5) Rapid growth of emerging
markets can create challenges; 6) Rising competition for
talent can increase costs; 7) Regulatory intervention can
slow momentum; 8) Impact of high oil prices and ongoing
threats of terrorism on economies can create
uncertainty.
Are there things one can get excited about? You bet.
1) Broadband penetration remains low; 2) Online
advertising spending relative to usage remains low; 3)
Online commerce vs. offline commerce penetration
remains low; 4) Usage growth of digital content
(broadband and mobile) remains robust; 5) Monetization
of broadband and wireless content / usage remains
relatively low; 6) Global Internet usage growth (including
mobile) remains healthy; 7) Internet leaders have gained
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significant audience and competitive advantage over the
years; 8) 2007 could be a year of leverage.
Net / net, our analysts remain upbeat but their view is
more loaded to CH2:06 and 2007 than they had
expected as recently as a month ago. The good
news is that their discounted cash flow valuations
(assuming their assumptions are sound) look
compelling. Google’s at $413 (vs. 02/13 closing price of
$346); Yahoo!s at $43 (vs. $32); eBay’s at $52 (vs. $40)
and Amazon.com’s at $45 (vs. $38). Our analysts add
that their Microsoft DCF is $36 (vs. $26). They continue
to maintain that a portfolio approach to investing is key.
Our analysts maintain their 3-5 year thesis that global
broadband / mobile Internet user growth may rise 10-
15%; usage growth may rise 20-30% and monetization
growth may rise 30%+.
For further details please see the Feb 14 Note Internet
Trends – From Great to Very Good
(https://secure.ms.com/ER/ebs/2006/ny/mm/mmee021406.pdf)
Overweight Idea: eBay (EBAY, $40, Overweight-V,
covered by Mary Meeker): Our analysts remain bullish on
eBay’s position within global e-commerce and believe its
prospects for longer-term growth opportunities in emerging
markets (including China) and payments continue to be
substantial.
Overweight Idea: Google (GOOG, $376, Overweight-V,
covered by Mary Meeker): Google remains a top pick in the
group. If Google continues to execute in online advertising
as well as Web products/services innovation, it should be
well positioned to benefit from (and help drive) ongoing,
secular Internet user, usage and monetization growth.
Overweight Idea: Yahoo! (YHOO, $32, Overweight-V,
covered by Mary Meeker): Our analysts remain bullish on
Yahoo! and believe that the company should continue to be
a beneficiary of the share shift to online advertising, both in
branded advertising and sponsored search. In their view,
Yahoo! should be primed to capture share of both offline and
online ad dollars.
• Semiconductors
Semiconductor industry revenue grew 7% in 2005 versus
our analysts’ revised estimate of 5%-8% (and their original
estimate for growth in the 0%-5% range). The team expects
industry growth in the 8%-12% range in 2006, with some
revenue catalysts beginning to emerge at the end of the year
and into 2007. Semiconductor industry revenue in the
month of January was down 5% (led by a 4% decline in
average selling prices) from October 2005, virtually in-line
with our team’s estimate. Microprocessors and NOR flash
appeared to be the weakest areas, down 20% and 16%
(January 2006 versus October 2005) quarter-to-date,
respectively. These results suggest a slow start to Intel’s
Q1, as the company is heavily exposed to these two
markets.
Through the first two months of Q1, the team’s checks
suggest semiconductor sales are tracking at least to the midpoint
of the range of guidance provided by most
management teams, although a strong month of March is
usually required in the back-end loaded quarter. While
inventory levels appear to remain at relatively normal levels,
our analysts note semiconductor company bookings and
backlog growth in Q4 and so far into Q1 appears to be
significantly outperforming end market consumption rates,
suggesting cyclical forces may be exaggerating the order
patterns. Given their view the cyclical forces were triggered
by constraints in back-end (packaging substrates, assembly
and test) manufacturing operations, and with a view that
these constraints can be relatively quickly resolved, our
analysts are cautious about the sustainability of the
unusually strong bookings and backlog growth at our
companies.
Our analysts are beginning to see a number of new product
cycles on the horizon and expect these new product cycles
to begin to emerge in the second half of 2006. Some of
these product cycle opportunities include virtualization for
servers, blade servers and storage aggregation, Microsoft’s
Vista, 3G cell phones reaching mainstream price points,
VoIP merging with cellular technology, 802.11n and
802.16e, new video game platforms, digital TV, high
definition video applications, fiber to the home/node/premise,
NAND flash enabled portable applications, and RFID. With
semiconductor stocks outperforming all other technology
industry groups year-to-date (with the exception of
semiconductor capital equipment companies), our analysts
believe the probability for a weak Q2 for semiconductor
stocks is rising.
Overweight Idea: Advanced Micro Devices (AMD, $41,
Overweight-V, $50 Price Target, covered by Mark
Edelstone) Our analysts believe that AMD is benefiting from
a strong product cycle leading to market share gains. They
believe that the potential for AMD to continue to
meaningfully upside earnings expectations with a
combination of higher revenues and margins remains solid.
Following a 27% sequential unit growth in each of the last
two quarters, AMD gained about 550 basis points of MPU
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market share from Intel, according to our analysts. While in
the past, the vast majority of AMD’s MPU business was
driven by desktop PCs for the consumer oriented PC
markets, our analysts believe that an increasing percentage
of servers, notebook PCs, and enterprise-oriented systems
will drive a richer and more favorable product mix going
forward.
Overweight Idea: Analog Devices (ADI, $39, Overweight,
$52 Price Target, covered by Louis Gerhardy)
Our analysts’ F2006 EPS estimates are 4% above
consensus and their F2007 EPS estimates are 15% above
consensus. They expect ADI to advance and potentially
exceed their $52 target as investors become more
comfortable with their two-phase investment thesis. Phase
one of their thesis is about operating margins expanding
from 22.9% in F2005 to 31.6% at the end of F2006, and the
company demonstrated stronger than expected progress on
this front by delivering operating margins of 25.7% for Q1
F2006 (January 2006), 80 basis points above our analysts’
street-high estimate. Phase two of their investment thesis
involves revenue catalysts (MEMS, power management, TDSCDMA
in China, and advanced consumer) that will begin to
drive the company’s top line at the end of F2006 and into
F2007. The price target is based on a 10-year DCF and 21x
our analysts’ C2007 proforma EPS estimate. The primary
risks to the team’s earnings estimate and investment thesis
are predicated on the smooth execution of management’s
product pruning and other restructuring initiatives.
Memory
Short-term optimism should continue a little longer as the
supply side adjusts to the creation of new demand segments
and DDR2 transition keeps ASP more firm. However,
slower PC demand will not be able to absorb the new
capacity growth resulting from investments made in 2005.
3Q06 may experience PC consumption declines as the
consumers wait for Windows Vista to hit the shelves by
August or September. Upside risk to the DRAM industry is
more likely in 2007, not 2006. Near-term industry
improvement is driven by inventory replenishment, supply
side adjustment to satisfy rapid surge in Graphics DRAM
and concerted marketing effort by PC OEMs on DDR2
embedded PCs. As the supply side becomes more
productive and the lagging producers complete the 90 nano
transition, our analysts see little chance of 9% PC growth
being able to absorb the forecasted supply growth. Current
rally in the global DRAM stocks may come to an end soon.
Our analysts would not chase the DRAM stocks up much
further.
Equal-weight Idea: Samsung Electronics (005930.KS, Sk
686, Equal-weight, covered by Keon Han and Sunil
Gupta)
The handset business will remain stalled. Despite the best
efforts, our analysts see only 6% revenue growth but profits
should decline due to margin contraction. The silver-lining is
that as handset capabilities evolve, Samsung’s NAND flash
business will benefit. Rise in both embedded and cell phone
cards should ensure NAND revenue growth of 42% and OP
growth of 17% YoY in 2006. Of the company’s handset
market sub-segmentation strategy, only music-centric
phones will generate value in 2006 by indirectly driving the
global NAND demand. TV-centric phones should be a post
2006 story and camera-centric phones parade technological
prowess, but are reserved for a niche market.
Foundry Industry
Our analysts expect the foundry industry to outgrow the
global semi industry in 2006, with the annual growth rate of
28%, compared with 8-12% for global semi. Our analysts
attribute this to 1) more capacity discipline in the industry,
which is positive for pricing environment, 2)
increasing/resuming outsourcing from IDMs after excess
inventory digestion in 2005, and 3) better capex efficiency,
which leads to a lighter depreciation burden. As a result, our
analysts have modestly revised up their 2006 estimates by
5%.
On the other hand, our analysts believe the semiconductor
manufacturing food chain has started to accumulate
inventory over the last few months. Furthermore, they
expect this inventory to grow further in 1Q06. As a result, our
analysts expect the suppliers in the food chain (i.e.
Foundries and IC A&T) to experience worse than normal
seasonal demand in 2Q06 or 3Q06.
Overweight Idea: TSMC (2330.TW, 62.70, Overweight-V,
79.00 TWD Price Target, covered by Sunil Gupta)
After about a 10% decline in the stock price over the past
month, TSMC is now once again trading at our analysts’
mid-cycle valuation. They upgraded the stock rating to
Overweight-V with price target of NT$79.0 for the local share
and US$12.6 for the ADR.
In our analysts’ view, five factors have changed for the
better. 1) Over the past few weeks, expectations of above
normal demand in 1Q06 have corrected, particularly in the
PC market. 2) TSMC and other foundries have successfully
achieved capacity growth targets with lower capex. 3) The
foundry industry is showing restraint in capacity addition,
which should be positive for the pricing environment. 4)
TSMC has been able to secure 0.18u capacity at Vanguard.
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5) Most of the NT$ appreciation is now behind, and recent
weakness in NT$ should be beneficial for TSMC.
Semiconductor Capital Equipment
Our analysts’ 2006 global semiconductor capital spending
estimate of $50.7 bn is up 10.1% over 2005. This level of
capital investment by the semi industry implies a 50-60%
growth in order activity from 4Q05 through 3Q06. Given our
analysts’ expectation for meaningful new product cycles
towards year-end, this suggests a pattern of steady and
sustained order growth.
Overweight Idea: Applied Materials (AMAT, $19,
Overweight, $25 Price Target, covered by Timm Schulze-
Melander)
Our analysts foresee strength across all business segments
for AMAT in FY06 – semiconductor systems, FPD systems
and services. With top quartile revenue and earnings
growth, our analysts expect AMAT to outperform the group
as investors focus on better than expected earnings
leverage and a more shareholder friendly cash management
policy. AMAT's 1Q06 results have shown improving margin
leverage that our analysts expect to continue through this
current up-cycle into 2007.
Overweight Idea: Teradyne (TER, $17, Overweight, $20
Price Target, covered by Timm Schulze-Melander)
Teradyne is the leader in the non-memory semiconductor
ATE market with a 35% share. With disposal of its TCS
business, Teradyne’s financial performance will be driven by
improvement in its semi-test business. Our analysts are
confident that Teradyne will deliver improvements in
operating performance, which will drive profitability during
the current cyclical upswing. This should result in further
upward revisions to earnings estimates and relative outperformance
of the share price.
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Contents
The Data Book………………………………………………………………………………………….……………….......14
Macroeconomics.…………………………………………………………………………………………………………..14
Computing Hardware..…………………………………………………………………………………………………….16
Communications Equipment...……………………………………………………………………………………..........22
Consumer Electronics.………………………………………………………………………………………………........25
Semiconductors...……………………………………………………………………………………………………........28
Software……..………………………………………………………………………………………………………..........32
Internet………………………………………………………………………………………………………………..........34
IT Services…..………………………… …………………………………………………………………………..........38
Non-Traditional End Markets: Autos ……………………………………………………………………………..........40
Industry Views…………………………………………………………………………………………………………........41
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Exhibit 6
Macroeconomics - Annual Key Metrics
1998 1999 2000 2001 2002 2003 2004 2005E 2006E 2007E
Macroeconomics
Global Economy
GDP Growth 2.9% 3.8% 4.8% 2.5% 3.0% 3.7% 4.9% 4.3% 4.2% 3.8%
CPI Inflation 3.4% 2.1% 2.5% 2.4% 2.4% 2.3% 2.8% 2.8% 2.8% 2.4%
Industrial World
GDP Growth 3.0% 3.3% 3.6% 1.1% 1.2% 1.9% 3.1% 2.6% 2.9% 2.5%
CPI Inflation 1.3% 1.5% 2.2% 2.1% 1.5% 1.8% 2.0% 2.4% 2.1% 1.8%
Europe
GDP Growth 3.0% 2.9% 3.6% 1.7% 1.0% 1.0% 2.1% 1.6% 2.2% 1.8%
CPI Inflation 1.4% 1.3% 1.9% 2.2% 2.1% 1.9% 1.9% 2.1% 2.0% 1.9%
Emerging Europe
GDP Growth -0.7% 3.1% 7.1% 1.9% 4.1% 5.2% 6.2% 5.2% 5.3% 5.0%
CPI Inflation 28.5% 48.3% 19.9% 19.4% 15.9% 11.0% 7.5% 7.8% 6.3% 5.3%
Japan
GDP Growth -1.2% 0.2% 2.8% 0.4% -0.3% 1.8% 2.3% 2.8% 3.2% 2.3%
CPI Inflation 0.6% -0.3% -0.9% -0.8% -0.8% -0.3% -0.1% -0.1% 0.2% 0.2%
Asia Ex-Japan
GDP Growth 1.9% 6.7% 7.4% 4.2% 6.2% 7.0% 7.9% 7.4% 6.3% 6.1%
CPI Inflation 6.1% 1.7% 1.5% 2.2% 1.4% 2.1% 3.5% 3.0% 3.5% 2.6%
Latin America
GDP Growth 2.0% 0.3% 4.1% 0.3% -0.2% 2.1% 5.7% 4.2% 4.2% 3.8%
CPI Inflation 8.9% 8.2% 6.9% 5.6% 13.4% 6.9% 6.6% 5.9% 6.0% 6.3%
Total US
GDP ($BB) $8,747 $9,268 $9,817 $10,128 $10,470 $10,971 $11,734 $12,479 $13,250 $14,025
Y/Y Growth 4.2% 4.5% 3.7% 0.8% 1.6% 2.7% 4.2% 3.5% 3.6% 3.3%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Corporate Capex ($BB) $777 $852 $919 $854 $787 $806 $901 $994 -- --
Y/Y Growth 13.2% 12.7% 9.4% -4.9% -6.2% 3.2% 11.9% 10.8% 10.5% 7.5%
Q/Q Growth -- -- -- -- -- -- -- --
US Corporate IT Spending
Total Corporate IT Spending ($BB) $363 $411 $468 $437 $399 $406 $447 $489 -- --
Y/Y Growth 21.9% 21.2% 17.4% -1.8% -4.7% 5.1% 13.6% 13.1% -- --
Q/Q Growth -- -- -- -- -- -- -- -- -- --
% of GDP 4.2% 4.4% 4.8% 4.3% 3.8% 3.7% 3.8% 3.9% -- --
% of Corporate Capex 46.7% 48.3% 50.9% 51.2% 50.7% 50.4% 49.6% 49.2% -- --
Note: Regional GDP aggregate growth is PPP weighted except for Asia ex. Japan which is weighted with nominal GDP; Global CPI excludes EMEA; US data refers to nominal GDP figures and
real GDP year-over-year and q/q growth; Corporate capex comprises all private, non residential fixed investment excluding structures; Corporate IT spending is nominal IT capex and real IT
capex growth
E = Morgan Stanley Research Estimates
Source: US Bureau of Economic Research, Morgan Stanley Research
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Exhibit 7
Macroeconomics - Quarterly Key Metrics
1Q05 2Q05 3Q05 4Q05E 1Q06E 2Q06E 3Q06E 4Q06E 1Q07E 2Q07E 3Q07E 4Q07E Comments
Macroeconomics
Global Economy
GDP Growth 3.3% 3.7% 4.7% 4.3% 4.5% 4.2% 4.3% 4.2% 3.2% 4.0% 3.9% 4.3%
CPI Inflation -- -- -- -- -- -- -- -- -- -- -- --
Industrial World
GDP Growth 2.3% 2.2% 3.0% 1.8% 3.8% 2.8% 3.1% 3.2% 2.0% 2.5% 2.3% 2.4%
CPI Inflation -- -- -- -- -- -- -- -- -- -- -- --
Europe
GDP Growth -- -- -- -- -- -- -- -- -- -- -- --
CPI Inflation -- -- -- -- -- -- -- -- -- -- -- --
Emerging Europe
GDP Growth 4.3% 5.2% 5.5% 6.0% 5.8% 5.5% 5.0% 4.8% 4.8% 4.9% 5.3% 5.3%
CPI Inflation -- -- -- -- -- -- -- -- -- -- -- --
Japan
GDP Growth 0.6% 1.1% 1.4% 5.5% 2.6% 3.5% 2.0% 2.4% 2.8% 1.7% 2.0% 2.5%
CPI Inflation -- -- -- -- -- -- -- -- -- -- -- --
Asia Ex-Japan
GDP Growth 5.3% 5.9% 8.1% 7.9% 5.5% 6.4% 6.4% 6.0% 4.9% 6.3% 6.6% 7.5%
CPI Inflation -- -- -- -- -- -- -- -- -- -- -- --
Latin America
GDP Growth 2.0% 4.0% 2.0% 5.7% 4.2% 4.3% 4.3% 3.8% 3.2% 4.6% 3.7% 4.4%
CPI Inflation -- -- -- -- -- -- -- -- -- -- -- --
Total US
GDP ($BB) $12,199 $12,378 $12,606 $12,735 $12,959 $13,138 $13,343 $13,560 $13,747 $13,938 $14,121 $14,293
Y/Y Growth 3.6% 3.6% 3.6% 3.1% 3.5% 3.5% 3.4% 4.0% 3.5% 3.4% 3.3% 3.0%
Q/Q Growth 0.9% 0.8% 1.0% 0.3% 1.3% 0.8% 0.9% 0.9% 0.8% 0.7% 0.8% 0.7%
Corporate Capex ($BB) $964 $988 $1,009 $1,014 -- -- -- -- -- -- -- --
Y/Y Growth 12.8% 11.7% 10.5% 8.3% 10.1% 10.0% 10.1% 11.8% 9.8% 8.4% 6.8% 5.3%
Q/Q Growth 2.0% 2.6% 2.6% 0.9% 3.7% 2.5% 2.7% 2.5% 1.8% 1.3% 1.2% 1.0%
US Corporate IT Spending
Total Corporate IT Spending ($BB) $475 $487 $495 $501 -- -- -- -- -- -- -- --
Y/Y Growth 11.9% 13.0% 13.7% 13.7% -- -- -- -- -- -- -- --
Q/Q Growth 4.7% 3.5% 2.7% 2.2% -- -- -- -- -- -- -- --
% of GDP 3.9% 3.9% 3.9% 3.9% -- -- -- -- -- -- -- --
% of Corporate Capex 49.2% 49.2% 49.0% 49.4% -- -- -- -- -- -- -- --
% QoQ
annualized
% QoQ
annualized
% QoQ
annualized
% QoQ
annualized
% QoQ
annualized
% QoQ
annualized
Note: Regional GDP aggregate growth is PPP weighted except for Asia ex. Japan which is weighted with nominal GDP; Global CPI excludes EMEA; US data refers to nominal GDP figures and
real GDP year-over-year and q/q growth; Corporate capex comprises all private, non residential fixed investment excluding structures; Corporate IT spending is nominal IT capex and real IT
capex growth
E = Morgan Stanley Research Estimates
Source: US Bureau of Economic Research, Morgan Stanley Research
16
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 8
Computing Hardware - Annual Key Metrics
Rebecca Runkle, Ellen Tseng, Frank Wang, Tomohiro Murata, Kathryn Huberty
1997E 1998E 1999E 2000E 2001E 2002E 2003E 2004E 2005E 2006E Comments
Personal Computers
Total
Revenues ($MM) $160,820 $166,866 $186,883 $215,060 $179,373 $161,508 $168,857 $193,837 $199,644 $198,319
Y/Y Growth -1% 4% 12% 15% -17% -10% 5% 15% 3% -1%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units 84,198,950 97,145,160 1 20,300,818 139,954,004 1 33,633,460 1 36,373,068 1 51,553,645 1 74,301,169 1 96,786,380 213,523,764
Y/Y Growth 16% 15% 24% 16% -5% 2% 11% 15% 13% 9%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $1,910 $1,718 $1,553 $1,537 $1,342 $1,184 $1,114 $1,112 $1,015 $929
Y/Y Growth -15% -10% -10% -1% -13% -12% -6% 0% -9% -8%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Desktops
Revenues ($MM) $112,460 $116,321 $124,718 $137,599 $112,465 $96,606 $92,445 $102,333 $101,079 $98,021
Y/Y Growth -5% 3% 7% 10% -18% -14% -4% 11% -1% -3%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units 68,532,392 79,468,150 97,642,927 110,954,134 1 04,141,640 1 03,741,220 1 11,054,282 1 23,907,619 1 33,645,691 139,832,390
Y/Y Growth 16% 16% 23% 14% -6% 0% 7% 12% 8% 5%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $1,641 $1,464 $1,277 $1,240 $1,080 $931 $832 $826 $756 $701
Y/Y Growth -17% -11% -13% -3% -13% -14% -11% -1% -8% -7%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
LCD Monitors (MM units) -- -- 4.6 6.7 15.9 32.2 49.2 67.6 102.0 123.4
Y/Y Growth -- -- -- 48% 137% 102% 53% 37% 51% 21%
Penetration -- -- 5% 6% 15% 31% 44% 55% 76% 88%
Taiwan Motherboards (K units) 43560 53731 64,378 84,372 80,565 86,554 98,796 88,486 105,501 129,391
Y/Y Growth 34% 23% 20% 31% -5% 7% 14% -10% 19% 23%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Notebooks
Revenues ($MM) $35,099 $34,946 $43,368 $54,049 $47,896 $47,184 $55,236 $67,944 $74,130 $78,712
Y/Y Growth -1% 0% 24% 25% -11% -1% 17% 23% 9% 6%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units 14,066,397 15,429,520 19,813,696 26,376,989 27,991,451 30,820,012 39,382,632 49,079,648 62,550,761 73,717,302
Y/Y Growth 19% 10% 28% 33% 6% 10% 28% 25% 27% 18%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $2,495 $2,265 $2,189 $2,049 $1,711 $1,531 $1,403 $1,384 $1,185 $1,068
Y/Y Growth -17% -9% -3% -6% -16% -11% -8% -1% -14% -10%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
LCD Screens (MM units) -- -- 19.9 26.1 27 30 39 48 62 7 3
Y/Y Growth -- -- -- 31% 5% 10% 28% 24% 28% 19%
Penetration -- -- 101% 99% 98% 98% 98% 98% 98% 99%
Taiwan NB Units (K units) -- -- 9,701 12,708 14,161 15,467 21,422 28,782 42,014 55,659
Y/Y Growth -- -- -- 31% 11% 9% 39% 34% 46% 32%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Monitor Mkt Installed base (K) -- -- -- -- -- -- -- -- 1,564,915 1,723,341
LCD Mtr Installed base (K) -- -- -- -- -- -- -- -- 767,952 1,063,617
CRT Mtr Installed base (K) -- -- -- -- -- -- -- -- 796,964 659,724
LCD Mtr Installed base/Mtr Installed base % -- -- -- -- -- -- -- -- 49% 62%
LCD Monitor Screen Size Market Breakdown:
20" + wide -- -- -- -- -- -- -- -- 6% 7%
19" -- -- -- -- -- -- -- -- 20% 32%
17" - 18" -- -- -- -- -- -- -- -- 51% 44%
15" -- -- -- -- -- -- -- -- 23% 17%
PC unit growth
acceleration in
2H06 with dualcore,
Vista and EVDO
technology
drivers.
Lower ASPs
combined with an
aging installed base
drove recent
notebook
acceleration in
2005.
E = Morgan Stanley Research Estimates
Source: Morgan Stanley Research
17
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 9
Computing Hardware - Annual Key Metrics
Rebecca Runkle, Ellen Tseng, Frank Wang, Tomohiro Murata, Kathryn Huberty
1997E 1998E 1999E 2000E 2001E 2002E 2003E 2004E 2005E 2006E Comments
Printers
Inkjet
Revenues ($MM) $10,893,173 $10,554,317 $10,710,434 $11,203,042 $11,281,103 $11,094,177 $10,520,027
Y/Y Growth -- -- -- -- -3% 1% 5% 1% -2% -5%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units 68,491,493 67,529,305 70,673,853 80,510,307 84,892,569 88,341,935 90,263,163
Y/Y Growth -- -- -- -- -1% 5% 14% 5% 4% 2%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $159 $156 $152 $139 $133 $126 $117
Y/Y Growth -- -- -- -- -2% -3% -8% -5% -5% -7%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Laser
Revenues ($MM) $29,140,043 $29,224,893 $29,639,370 $35,255,851 $39,045,786 $41,728,166
Y/Y Growth -- -- -- -- -- 0% 1% 19% 11% 7%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units 14,733,454 15,727,909 19,045,699 23,798,096 29,010,085 34,403,664
Y/Y Growth -- -- -- -- -- 7% 21% 25% 22% 19%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $1,978 $1,858 $1,556 $1,481 $1,346 $1,213
Y/Y Growth -- -- -- -- -- -6% -16% -5% -9% -10%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Servers
Total
Revenues ($MM) $60,796 $59,557 $57,733 $61,680 $50,500 $44,654 $46,149 $49,083 $51,176 $52,412
Y/Y Growth 6% -2% -3% 7% -18% -12% 3% 6% 4% 2%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units 2,358,604 2,999,420 3,767,309 4,372,313 4,277,148 4,442,348 5,278,384 6,304,311 7,176,491 8,112,916
Y/Y Growth 29% 27% 26% 16% -2% 4% 19% 19% 14% 13%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $25,786 $19,860 $15,325 $14,107 $11,808 $10,047 $8,735 $7,638 $6,880 $6,242
Y/Y Growth -18% -23% -23% -8% -16% -15% -13% -13% -10% -9%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Unix Servers
Revenues ($MM) $23,893 $24,579 $25,392 $29,058 $22,112 $18,683 $17,770 $17,634 $17,393 $16,665
Y/Y Growth 17% 3% 3% 14% -24% -16% -5% -1% -1% -4%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units 508,456 611,245 692,318 786,177 658,363 628,743 661,562 725,575 736,885 776,585
Y/Y Growth 17% 20% 13% 14% -16% -4% 5% 10% 2% 5%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $46,991 $40,211 $36,677 $36,961 $33,586 $29,715 $26,860 $24,304 $23,603 $21,459
Y/Y Growth 0% -14% -9% 1% -9% -12% -10% -10% -3% -9%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Windows Servers
Revenues ($MM) $6,237 $7,749 $10,584 $13,873 $12,250 $12,274 $13,831 $15,864 $17,528 $18,428
Y/Y Growth 63% 24% 37% 31% -12% 0% 13% 15% 10% 5%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units 725,342 1,204,881 1,795,794 2,380,532 2,542,739 2,762,091 3,342,668 4,076,469 4,660,717 5,275,903
Y/Y Growth 85% 66% 49% 33% 7% 9% 21% 22% 14% 13%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $8,599 $6,431 $5,894 $5,828 $4,818 $4,444 $4,138 $3,891 $3,761 $3,493
Y/Y Growth -11% -25% -8% -1% -17% -8% -7% -6% -3% -7%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Linux Servers
Revenues ($MM) -- $251 $749 $1,750 $1,721 $1,967 $2,948 $4,257 $5,314 $6,161
Y/Y Growth -- -- 199% 134% -2% 14% 50% 44% 25% 16%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units -- 66,204 173,153 436,956 487,408 566,735 826,388 1,120,748 1,409,846 1,685,750
Y/Y Growth -- -- 162% 152% 12% 16% 46% 36% 26% 20%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs -- $3,789 $4,327 $4,004 $3,531 $3,471 $3,568 $3,798 $3,769 $3,655
Y/Y Growth -- -- 14% -7% -12% -2% 3% 6% -1% -3%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Aggressive
hardware pricing,
channel inventory
drawdown of
supplies, and
softness in end
user demand likely
to continue into
2006.
Dual-core and
virtualization are
key server market
drivers in 2006
(esp. 2H06).
E = Morgan Stanley Research Estimates
Source: Morgan Stanley Research
18
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 10
Computing Hardware - Annual Key Metrics
Rebecca Runkle, Ellen Tseng, Frank Wang, Tomohiro Murata, Kathryn Huberty
1997E 1998E 1999E 2000E 2001E 2002E 2003E 2004E 2005E 2006E Comments
Storage and Networking
Disk Storage Systems
Revenues ($MM) -- -- $26,245 $29,499 $23,360 $20,991 $21,525 $22,617 $24,415 $25,738
Y/Y Growth -- -- -- 12% (21%) (10%) 3% 5% 8% 5%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units -- -- 1,883,571 2,300,411 2,004,506 2,057,557 2,066,910 2,292,372 2,775,727 3,324,292
Y/Y Growth -- -- -- 22% (13%) 3% 0% 11% 21% 20%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs -- -- $13,934 $12,823 $11,654 $10,202 $10,414 $9,866 $8,796 $7,742
Y/Y Growth -- -- -- (8%) (9%) (12%) 2% (5%) (11%) (12%)
Q/Q Growth -- -- -- -- -- -- -- -- -- --
SAN
Revenues ($MM) -- -- $3,533 $5,740 $6,106 $6,235 $7,017 $8,183 $9,642 $10,814
Y/Y Growth -- -- -- 62% 6% 2% 13% 17% 18% 12%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
NAS
Revenues ($MM) -- -- $835 $1,559 $1,736 $1,543 $1,559 $1,831 $2,086 $2,368
Y/Y Growth -- -- -- 87% 11% -11% 1% 17% 14% 14%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Networking
Revenues ($MM) -- -- $437 $1,319 $2,177 $2,309 $2,628 $3,048 $3,585 $4,085
Y/Y Growth -- -- -- 202% 65% 6% 14% 16% 18% 14%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Tape Automation
Revenues ($MM) -- -- $2,976 $3,202 $3,029 $2,859 $2,553 $2,519 $2,554 $2,672
Y/Y Growth -- -- -- 8% -5% -6% -11% -1% 1% 5%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Storage Services
Revenues ($MM) -- -- $17,250 $19,501 $20,552 $21,171 $23,360 $24,929 $26,639 $28,224
Y/Y Growth -- -- -- 13% 5% 3% 10% 7% 7% 6%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Storage Software
Revenues ($MM) -- -- $4,503 $5,466 $6,169 $5,869 $6,621 $7,140 $7,886 $8,785
Y/Y Growth -- -- -- 21% 13% -5% 13% 8% 10% 11%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Hard Disk Drives
Hard Disk Drives
Revenues ($MM) -- -- -- -- $18,867 $19,582 $20,393 $20,484 $23,418 $24,925
Y/Y Growth -- -- -- -- -- 4% 4% 0% 14% 6%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units -- -- -- -- 193,644 219,365 255,581 299,367 361,123 406,541
Y/Y Growth -- -- -- -- -- 13% 17% 17% 21% 13%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs -- -- -- -- $97 $89 $80 $68 $65 $61
Y/Y Growth -- -- -- -- -- -8% -11% -14% -5% -5%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Recording Heads
Units -- -- 2 48 272 168 242 328 329 459 5 26
Y/Y Growth -- -- -- 10% -38% 44% 36% 0% 40% 15%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Spindle Motors
Units -- -- 1 27 154 163 188 225 259 316 3 80
Y/Y Growth -- -- -- 21% 6% 15% 19% 15% 22% 20%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Near-term
fundamentals are
stable. Industry
dynamics peaked
and 1H06 is at risk
of typical
seasonality.
E = Morgan Stanley Research Estimates
Source: Morgan Stanley Research
19
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 11
Computing Hardware - Quarterly Key Metrics
Rebecca Runkle, Ellen Tseng, Frank Wang, Tomohiro Murata, Kathryn Huberty
1Q04E 2Q04E 3Q04E 4Q04E 1Q05E 2Q05E 3Q05E 4Q05E 1Q06E 2Q06E 3Q06E 4Q06E
Personal Computers
Total
Revenues ($MM) $46,277 $44,258 $48,216 $55,086 $50,083 $46,840 $49,032 $53,689 $49,406 $45,050 $48,006 $55,857
Y/Y Growth 15% 16% 14% 14% 8% 6% 2% -3% -1% -4% -2% 4%
Q/Q Growth -4% -4% 9% 14% -9% -6% 5% 9% -8% -9% 7% 16%
Units 40,717,158 38,926,817 43,836,940 50,820,254 46,206,996 46,223,005 49,195,998 55,160,381 49,382,389 48,873,254 52,894,658 62,373,463
Y/Y Growth 17% 16% 13% 14% 13% 19% 12% 9% 7% 6% 8% 13%
Q/Q Growth -8% -4% 13% 16% -9% 0% 6% 12% -10% -1% 8% 18%
ASPs $1,137 $1,137 $1,100 $1,084 $1,084 $1,013 $997 $973 $999 $928 $913 $901
Y/Y Growth -2% 1% 0% 0% -5% -11% -9% -10% -8% -8% -8% -7%
Q/Q Growth 5% 0% -3% -1% 0% -7% -2% -2% 3% -7% -2% -1%
Desktops
Revenues ($MM) $24,904 $23,509 $24,812 $29,108 $25,582 $24,250 $23,812 $27,435 $24,830 $23,312 $22,719 $27,160
Y/Y Growth 10% 12% 9% 12% 3% 3% -4% -6% -3% -4% -5% -1%
Q/Q Growth -4% -6% 6% 17% -12% -5% -2% 15% -9% -6% -3% 20%
Units 29,424,074 27,805,300 30,898,296 35,779,949 31,936,937 31,499,032 32,886,082 37,323,640 33,294,565 32,710,866 34,101,790 39,725,169
Y/Y Growth 14% 12% 10% 11% 9% 13% 6% 4% 4% 4% 4% 6%
Q/Q Growth -9% -6% 11% 16% -11% -1% 4% 13% -11% -2% 4% 16%
ASPs $846 $845 $803 $814 $801 $770 $724 $735 $745 $714 $668 $685
Y/Y Growth -3% 0% -1% 1% -5% -9% -10% -10% -7% -7% -8% -7%
Q/Q Growth 5% 0% -5% 1% -2% -4% -6% 2% 1% -4% -7% 3%
LCD Monitors (MM units) 15.8 15.0 16.9 19.9 22.7 23.6 26.1 29.6 29.7 27.9 30.4 35.4
Y/Y Growth 49% 40% 31% 33% 43% 57% 55% 49% 31% 18% 16% 20%
Penetration 54% 54% 55% 56% 71% 75% 79% 79% 89% 85% 89% 89%
Taiwan Motherboards (K units) 21,560 18,758 22,201 25,968 22,830 23,810 26,830 32,031 28,916 29,903 33,253 37,319
Y/Y Growth -8% -16% -12% -7% 6% 27% 21% 23% 27% 26% 24% 17%
Q/Q Growth -22% -13% 18% 17% -12% 4% 13% 17% -13% 3% 12% 12%
Notebooks
Revenues ($MM) $15,824 $15,158 $17,567 $19,395 $18,552 $16,997 $19,095 $19,485 $18,508 $17,262 $20,068 $22,874
Y/Y Growth 26% 24% 24% 19% 17% 12% 9% 0% 0% 2% 5% 17%
Q/Q Growth -3% -4% 16% 10% -4% -8% 12% 2% -5% -7% 16% 14%
Units 11,027,817 10,782,162 12,653,434 14,616,235 13,949,782 14,383,035 16,372,354 17,845,590 16,085,262 16,148,671 18,859,295 22,624,074
Y/Y Growth 29% 24% 22% 24% 26% 33% 29% 22% 15% 12% 15% 27%
Q/Q Growth -7% -2% 17% 16% -5% 3% 14% 9% -10% 0% 17% 20%
ASPs $1,435 $1,406 $1,388 $1,327 $1,330 $1,182 $1,166 $1,092 $1,151 $1,069 $1,064 $1,011
Y/Y Growth -2% 0% 2% -4% -7% -16% -16% -18% -13% -10% -9% -7%
Q/Q Growth 4% -2% -1% -4% 0% -11% -1% -6% 5% -7% 0% -5%
LCD Screens (MM units) 10.9 10.8 12.6 13.7 13.9 14.2 16.0 17.5 16.2 16.2 18.6 22.2
Y/Y Growth 29% 25% 26% 19% 28% 31% 27% 28% 17% 14% 16% 27%
Penetration 99% 100% 100% 94% 100% 99% 98% 98% 101% 100% 99% 98%
Taiwan NB Units (K units) 5,594 6,271 7,680 9,237 8,175 9,640 11,238 12,961 11,246 12,697 14,773 16,943
Y/Y Growth 29% 36% 32% 39% 46% 54% 46% 40% 38% 32% 31% 31%
Q/Q Growth -16% 12% 22% 20% -11% 18% 17% 15% -13% 13% 16% 15%
Monitor Mkt Installed base (K) -- -- -- -- 377,048 386,890 395,593 405,384 415,839 425,991 434,785 446,725
LCD Mtr Installed base (K) -- -- -- -- 165,584 181,904 200,377 220,087 239,151 256,364 273,847 294,255
CRT Mtr Installed base (K) -- -- -- -- 211,464 204,986 195,216 185,298 176,688 169,627 160,938 152,470
LCD Mtr Installed base/Mtr Installed base % -- -- -- -- 44% 47% 51% 54% 58% 60% 63% 66%
LCD Monitor Screen Size Market Breakdown:
20" + wide -- -- -- -- 5% 6% 6% 6% 7% 7% 7% 8%
19" -- -- -- -- 16% 18% 21% 26% 28% 30% 33% 36%
17" - 18" -- -- -- -- 55% 52% 51% 48% 46% 45% 43% 41%
15" -- -- -- -- 24% 25% 22% 20% 19% 18% 17% 15%
E = Morgan Stanley Research Estimates
Source: Morgan Stanley Research
20
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 12
Computing Hardware - Quarterly Key Metrics
Rebecca Runkle, Ellen Tseng, Frank Wang, Tomohiro Murata, Kathryn Huberty
1Q04E 2Q04E 3Q04E 4Q04E 1Q05E 2Q05E 3Q05E 4Q05E 1Q06E 2Q06E 3Q06E 4Q06E
Printers
Inkjet
Revenues ($MM) $2,614,188 $2,370,975 $2,516,582 $3,779,358 $2,854,251 $2,447,067 $2,310,080 $3,482,779 $2,713,136 $2,314,272 $2,194,591 $3,298,029
Y/Y Growth -4% 4% -6% 7% 9% 3% -8% -8% -5% -5% -5% -5%
Q/Q Growth -26% -9% 6% 50% -24% -14% -6% 51% -22% -15% -5% 50%
Units 19,739,305 17,793,461 19,941,847 27,417,956 21,140,481 18,985,193 20,126,366 28,089,895 21,638,886 19,356,367 20,564,479 28,703,431
Y/Y Growth 7% 10% 0% 5% 7% 7% 1% 2% 2% 2% 2% 2%
Q/Q Growth -24% -10% 12% 37% -23% -10% 6% 40% -23% -11% 6% 40%
ASPs $132 $133 $126 $138 $135 $129 $115 $124 $125 $120 $107 $115
Y/Y Growth -10% -5% -7% 2% 2% -3% -9% -10% -7% -7% -7% -7%
Q/Q Growth -2% 1% -5% 9% -2% -5% -11% 8% 1% -5% -11% 8%
Laser
Revenues ($MM) $8,334,119 $8,428,823 $8,625,212 $9,867,697 $9,641,397 $9,270,008 $9,419,677 $10,714,703 $10,237,489 $9,862,127 $10,113,703 $11,514,847
Y/Y Growth 17% 20% 19% 20% 16% 10% 9% 9% 6% 6% 7% 7%
Q/Q Growth 1% 1% 2% 14% -2% -4% 2% 14% -4% -4% 3% 14%
Units 5,590,956 5,576,999 5,855,889 6,774,252 6,846,572 6,655,212 7,138,371 8,369,930 8,052,126 7,855,243 8,408,511 10,087,784
Y/Y Growth 28% 29% 21% 23% 22% 19% 22% 24% 18% 18% 18% 21%
Q/Q Growth 2% 0% 5% 16% 1% -3% 7% 17% -4% -2% 7% 20%
ASPs $1,491 $1,511 $1,473 $1,457 $1,408 $1,393 $1,320 $1,280 $1,271 $1,255 $1,203 $1,141
Y/Y Growth -9% -7% -1% -3% -6% -8% -10% -12% -10% -10% -9% -11%
Q/Q Growth 0% 1% -3% -1% -3% -1% -5% -3% -1% -1% -4% -5%
Servers 1Q04E 2Q04E 3Q04E 4Q04E 1Q05E 2Q05E 3Q05E 4Q05E 1Q06E 2Q06E 3Q06E 4Q06E
Total
Revenues ($MM) $11,500 $11,544 $11,555 $14,484 $12,080 $12,193 $11,962 $14,942 $12,265 $12,467 $12,291 $15,389
Y/Y Growth 7% 7% 5% 6% 5% 6% 4% 3% 2% 2% 3% 3%
Q/Q Growth -16% 0% 0% 25% -17% 1% -2% 25% -18% 2% -1% 25%
Units 1,445,405 1,510,511 1,563,919 1,784,476 1,641,126 1,675,085 1,802,759 2,057,521 1,852,489 1,896,217 2,037,557 2,326,653
Y/Y Growth 23% 23% 17% 16% 14% 11% 15% 15% 13% 13% 13% 13%
Q/Q Growth -6% 5% 4% 14% -8% 2% 8% 14% -10% 2% 7% 14%
ASPs $7,972 $7,628 $7,395 $7,590 $7,181 $6,871 $6,639 $6,856 $6,484 $6,231 $6,014 $6,257
Y/Y Growth -12% -13% -10% -15% -10% -10% -10% -10% -10% -9% -9% -9%
Q/Q Growth -10% -4% -3% 3% -5% -4% -3% 3% -5% -4% -3% 4%
Unix Servers
Revenues ($MM) $4,134 $4,242 $3,978 $5,281 $4,249 $4,349 $3,776 $5,019 $4,051 $4,182 $3,623 $4,809
Y/Y Growth -3% -2% -2% 3% 3% 3% -5% -5% -5% -4% -4% -4%
Q/Q Growth -19% 3% -6% 33% -20% 2% -13% 33% -19% 3% -13% 33%
Units 163,268 185,681 173,487 203,140 171,505 169,522 181,734 214,124 180,309 178,350 191,564 226,362
Y/Y Growth 7% 23% 9% 2% 5% -9% 5% 5% 5% 5% 5% 6%
Q/Q Growth -18% 14% -7% 17% -16% -1% 7% 18% -16% -1% 7% 18%
ASPs $25,319 $22,845 $22,929 $25,996 $24,776 $25,652 $20,778 $23,440 $22,467 $23,449 $18,912 $21,244
Y/Y Growth -9% -21% -10% 2% -2% 12% -9% -10% -9% -9% -9% -9%
Q/Q Growth -1% -10% 0% 13% -5% 4% -19% 13% -4% 4% -19% 12%
Windows Servers
Revenues ($MM) $3,766 $3,570 $3,917 $4,611 $4,148 $4,083 $4,264 $5,032 $4,358 $4,286 $4,477 $5,308
Y/Y Growth 16% 13% 13% 16% 10% 14% 9% 9% 5% 5% 5% 5%
Q/Q Growth -6% -5% 10% 18% -10% -2% 4% 18% -13% -2% 4% 19%
Units 946,973 969,292 1,013,765 1,146,439 1,065,876 1,074,572 1,182,563 1,337,705 1,205,786 1,216,790 1,338,409 1,514,919
Y/Y Growth 27% 25% 19% 18% 13% 11% 17% 17% 13% 13% 13% 13%
Q/Q Growth -3% 2% 5% 13% -7% 1% 10% 13% -10% 1% 10% 13%
ASPs $3,977 $3,683 $3,864 $4,022 $3,892 $3,800 $3,606 $3,762 $3,614 $3,522 $3,345 $3,504
Y/Y Growth -8% -10% -5% -2% -2% 3% -7% -6% -7% -7% -7% -7%
Q/Q Growth -3% -7% 5% 4% -3% -2% -5% 4% -4% -3% -5% 5%
Linux Servers
Revenues ($MM) $923 $963 $1,067 $1,303 $1,241 $1,398 $1,217 $1,457 $1,417 $1,578 $1,431 $1,734
Y/Y Growth 56% 47% 42% 38% 34% 45% 14% 12% 14% 13% 18% 19%
Q/Q Growth -2% 4% 11% 22% -5% 13% -13% 20% -3% 11% -9% 21%
Units 244,452 264,312 283,901 328,082 319,233 349,034 344,128 397,451 380,625 417,855 411,633 475,637
Y/Y Growth 47% 38% 32% 30% 31% 32% 21% 21% 19% 20% 20% 20%
Q/Q Growth -3% 8% 7% 16% -3% 9% -1% 15% -4% 10% -1% 16%
ASPs $3,776 $3,645 $3,759 $3,972 $3,888 $4,005 $3,537 $3,667 $3,724 $3,777 $3,477 $3,646
Y/Y Growth 6% 7% 8% 6% 3% 10% -6% -8% -4% -6% -2% -1%
Q/Q Growth 1% -3% 3% 6% -2% 3% -12% 4% 2% 1% -8% 5%
E = Morgan Stanley Research Estimates
Source: Morgan Stanley Research
21
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 13
Computing Hardware - Quarterly Key Metrics
Rebecca Runkle, Ellen Tseng, Frank Wang, Tomohiro Murata, Kathryn Huberty
1Q04E 2Q04E 3Q04E 4Q04E 1Q05E 2Q05E 3Q05E 4Q05E 1Q06E 2Q06E 3Q06E 4Q06E
Storage and Networking
Disk Storage Systems
Revenues ($MM) $5,485 $5,412 $5,384 $6,336 $5,483 $5,596 $5,739 -- -- -- -- --
Y/Y Growth 5.3% 7.0% 4.2% 4.0% (0.0%) 3.4% 6.6% -- -- -- -- --
Q/Q Growth (10.0%) (1.3%) (0.5%) 17.7% (13.5%) 2.1% 2.6% -- -- -- -- --
Units 529,951 543,285 538,078 681,057 588,777 603,437 628,038 -- -- -- -- --
Y/Y Growth 3.0% 12.9% 8.0% 18.8% 11.1% 11.1% 16.7% -- -- -- -- --
Q/Q Growth (7.5%) 2.5% (1.0%) 26.6% (13.5%) 2.5% 4.1% -- -- -- -- --
ASPs $10,350 $9,961 $10,006 $9,303 $9,312 $9,274 $9,138 -- -- -- -- --
Y/Y Growth 2.2% (5.3%) (3.5%) (12.5%) (10.0%) (6.9%) (8.7%) -- -- -- -- --
Q/Q Growth (2.6%) (3.8%) 0.5% (7.0%) 0.1% (0.4%) (1.5%) -- -- -- -- --
SAN
Revenues ($MM) $1,888 $2,006 $1,955 $2,334 $1,835 $1,960 $1,940 -- -- -- -- --
Y/Y Growth 18% 19% 17% 13% -3% -2% -1% -- -- -- -- --
Q/Q Growth (8.9%) 6.3% (2.5%) 19.4% (21.4%) 6.8% (1.0%) -- -- -- -- --
NAS
Revenues ($MM) $433 $454 $468 $476 $482 $475 $481 -- -- -- -- --
Y/Y Growth 20% 20% 19% 11% 11% 5% 3% -- -- -- -- --
Q/Q Growth 1.1% 5.0% 3.1% 1.8% 1.1% (1.4%) 1.2% -- -- -- -- --
Hard Disk Drives
Hard Disk Drives
Revenues ($MM) $4,944 $4,788 $5,125 $5,628 $5,832 $5,780 $5,638 $6,168 $6,229 $6,088 $6,106 $6,503
Y/Y Growth -4% -1% 7% -1% 18% 21% 10% 10% 7% 5% 8% 5%
Q/Q Growth -13% -3% 7% 10% 4% -1% -2% 9% 1% -2% 0% 7%
Units 66,310 67,800 79,000 86,257 83,121 85,463 92,540 100,000 95,005 95,280 106,259 109,997
Y/Y Growth 15% 23% 17% 15% 25% 26% 17% 16% 14% 11% 15% 10%
Q/Q Growth -12% 2% 17% 9% -4% 3% 8% 8% -5% 0% 12% 4%
ASPs $75 $71 $65 $65 $70 $68 $61 $62 $66 $64 $57 $59
Y/Y Growth -16% -19% -9% -13% -6% -4% -6% -5% -7% -6% -6% -4%
Q/Q Growth -1% -5% -8% 1% 8% -4% -10% 1% 6% -3% -10% 3%
Recording Heads
Units 8 3 7 1 7 8 9 7 1 05 1 07 1 18 129 1 26 1 28 1 34 138
Y/Y Growth 7% -5% -4% 2% 28% 51% 51% 32% 20% 20% 14% 7%
Q/Q Growth -13% -14% 10% 25% 8% 2% 10% 9% -2% 2% 4% 3%
Spindle Motors
Units 6 4 5 5 6 4 7 6 7 2 7 6 8 2 85 9 0 8 9 9 6 105
Y/Y Growth 25% 12% 11% 13% 13% 40% 28% 12% 24% 17% 17% 23%
Q/Q Growth -4% -15% 18% 18% -4% 6% 8% 3% 5% 0% 8% 9%
E = Morgan Stanley Research Estimates
Source: Morgan Stanley Research
22
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 14
Communications Equipment - Annual Key Metrics
Scott Coleman, John Marchetti
1999 2000 2001 2002 2003 2004 2005E 2006E
Global Carrier Capex (Constant Currency)
Total
Capex ($MM) $169,519 $229,657 $239,279 $173,228 $156,834 $169,256 $187,086 $195,757
Y/Y Growth -- 35% 4% -28% -9% 8% 11% 5%
North America ($MM) $60,954 $94,421 $88,991 $56,927 $45,842 $47,654 $52,341 $55,071
APAC ($MM) $24,611 $36,863 $47,664 $39,376 $40,825 $41,002 $44,376 $46,716
EMEA ($MM) $44,703 $58,085 $63,961 $49,748 $43,373 $49,445 $54,745 $57,665
Japan ($MM) $33,613 $31,376 $25,893 $21,097 $20,644 $22,371 $24,556 $24,917
Latin America ($MM) $5,638 $8,913 $12,770 $6,081 $6,151 $8,784 $11,067 $11,389
Wireline Carrier Capex
Capex ($MM) $120,701 $164,330 $154,396 $99,668 $87,426 $87,782 $94,910 $98,323
Y/Y Growth -- 36% -6% -35% -12% 0% 8% 4%
North America ($MM) $53,874 $82,260 $66,038 $34,605 $27,424 $26,179 $27,593 $29,496
APAC ($MM) $13,424 $20,727 $26,211 $22,382 $23,444 $22,220 $23,672 $23,803
EMEA ($MM) $28,689 $37,537 $39,939 $28,261 $22,213 $23,242 $24,888 $26,305
Japan ($MM) $21,324 $18,516 $13,924 $11,143 $11,657 $12,690 $14,247 $14,232
Latin America ($MM) $3,389 $5,290 $8,285 $3,277 $2,688 $3,450 $4,510 $4,486
Wireless Carrier Capex
Capex ($MM) $48,818 $65,328 $84,883 $73,560 $69,408 $81,474 $92,175 $97,435
Y/Y Growth -- 34% 30% -13% -6% 17% 13% 6%
North America ($MM) $7,079 $12,161 $22,953 $22,321 $18,417 $21,475 $24,748 $25,576
APAC ($MM) $11,187 $16,136 $21,453 $16,994 $17,380 $18,782 $20,704 $22,913
EMEA ($MM) $16,015 $20,548 $24,022 $21,487 $21,160 $26,202 $29,857 $31,359
Japan ($MM) $12,288 $12,860 $11,969 $9,954 $8,987 $9,681 $10,310 $10,685
Latin America ($MM) $2,249 $3,623 $4,485 $2,804 $3,463 $5,334 $6,557 $6,902
Breakdown by Product
Voice-over-IP (VoIP) *
Manufacturing Revenues ($MM) -- -- -- $1,521 $2,423 $4,100 $5,791 $7,588
Y/Y Growth -- -- -- -- 59% 69% 41% 31%
Carrier -- -- -- $601 $697 $1,031 $1,693 $2,294
Enterprise -- -- -- $920 $1,726 $3,069 $4,098 $5,294
Routers *
Manufacturing Revenues ($MM) -- -- -- $6,544 $6,028 $6,957 $7,886 $10,029
Y/Y Growth -- -- -- -- -8% 15% 13% 27%
High-end -- -- -- $3,498 $3,298 $4,055 $4,996 $6,794
Carrier -- -- -- $2,794 $2,865 $3,744 $4,580 $6,254
Enterprise -- -- -- $703 $433 $311 $416 $540
Midrange -- -- -- $1,505 $1,312 $1,324 $1,168 $1,274
Low-end -- -- -- $1,542 $1,418 $1,578 $1,722 $1,961
Ethernet Switches *
Manufacturing revenues ($MM) -- -- -- $13,886 $12,887 $16,645 $16,753 $17,379
Y/Y Growth -- -- -- -- -7% 29% 1% 4%
Layer 2 (fixed & modular) -- -- -- $5,318 $4,050 $4,039 $3,541 $3,224
Layer 3 (fixed & modular) -- -- -- $5,591 $6,310 $9,756 $10,443 $11,630
Layer 4-7 -- -- -- $608 $582 $623 $709 $808
Multiservice WAN Switch -- -- -- $2,369 $1,946 $2,227 $2,060 $1,717
WLAN *
Revenues ($MM) -- -- -- $1,696 $2,194 $2,802 $3,881 $3,783
Y/Y Growth -- -- -- -- 29% 28% 39% -3%
SO/HO/Home -- -- -- $898 $1,310 $1,591 $1,887 $2,211
Enterprise -- -- -- $798 $884 $1,211 $1,994 $1,572
E = Morgan Stanley Research Estimates; Source: Morgan Stanley Research; * Source: Synergy Research data
23
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 15
Wireless Infrastructure - Annual Key Metrics
Adnaan Ahmad, Peter Dionisio
2000 2001 2002 2003 2004 2005e 2006e 2007e 2008e 2009e 2010e
Wireless Infrastructure Revenues
Revenues ($MM) $62,746 $59,115 $46,219 $46,064 $56,435 $66,489 $71,851 $76,794 $80,295 $83,097 $85,463
Y/Y Growth -6% -22% 0% 23% 18% 8% 7% 5% 3% 3%
Regional Breakdown
Asia Pacific $17,532 $19,141 $13,456 $14,576 $16,916 $19,345 $21,388 $23,283 $25,050 $26,517 $27,816
(% of total market) 9% -30% 8% 16% 14% 11% 9% 8% 6% 5%
Japan $5,230 $5,772 $3,703 $4,267 $4,305 $4,379 $4,773 $4,821 $4,821 $4,724 $4,771
China $5,492 $7,871 $4,725 $4,418 $5,403 $6,213 $6,959 $8,072 $9,122 $9,760 $10,151
Korea $2,092 $1,574 $1,305 $1,391 $1,331 $1,400 $1,456 $1,442 $1,413 $1,399 $1,413
Rest of Asia Pacific $4,718 $3,924 $3,723 $4,500 $5,877 $7,353 $8,199 $8,948 $9,694 $10,634 $11,481
Emerging: Asia Pacific $3,526 $4,552 $5,214 $5,818 $6,536 $7,410 $8,218
Developed: Asia Pacific $1,469 $1,810 $1,920 $2,026 $2,082 $2,208 $2,313
Mature: Asia Pacific $882 $991 $1,066 $1,104 $1,076 $1,015 $950
EMEA $25,005 $20,433 $17,835 $17,767 $22,949 $27,073 $29,171 $30,690 $31,079 $31,502 $31,703
(% of total market) -18% -13% 0% 29% 18% 8% 5% 1% 1% 1%
Western Europe $20,747 $16,183 $12,784 $10,995 $12,314 $13,840 $14,892 $15,418 $15,030 $14,180 $13,267
E. EU, M. East, & Africa $4,258 $4,250 $5,050 $6,772 $10,635 $13,234 $14,279 $15,272 $16,049 $17,322 $18,436
Eastern Europe & the Middle East $4,132 $4,093 $4,713 $5,869 $8,396 $10,343 $10,969 $11,578 $11,899 $12,617 $13,218
Africa $126 $157 $337 $903 $2,239 $2,890 $3,310 $3,694 $4,150 $4,705 $5,218
Latin America $7,261 $6,773 $3,485 $2,732 $4,331 $5,336 $5,658 $5,972 $6,138 $6,509 $6,819
(% of total market) -7% -49% -22% 59% 23% 6% 6% 3% 6% 5%
North America $12,948 $12,768 $11,443 $10,990 $12,239 $14,734 $15,634 $16,849 $18,028 $18,569 $19,126
(% of total market) -1% -10% -4% 11% 20% 6% 8% 7% 3% 3%
Product Breakdown
GSM $31,151 $29,816 $26,995 $28,018 $33,209 $40,436 $41,686 $38,967 $38,111 $36,764 $36,028
Y/Y Growth -4% -9% 4% 19% 22% 3% -7% -2% -4% -2%
WCDMA $667 $1,700 $3,034 $5,188 $8,588 $11,633 $15,463 $21,435 $25,313 $29,161 $32,619
Y/Y Growth 155% 78% 71% 66% 35% 33% 39% 18% 15% 12%
Total GSM Evolution $31,818 $31,516 $30,028 $33,207 $41,797 $52,070 $57,150 $60,402 $63,424 $65,925 $68,647
CDMA Evolution $17,995 $16,745 $10,795 $9,105 $11,048 $12,488 $13,007 $14,855 $15,488 $15,917 $15,943
Y/Y Growth -7% -36% -16% 21% 13% 4% 14% 4% 3% 0%
Other (PDC, TDMA, iDEN etc) $12,933 $10,854 $5,395 $3,752 $3,590 $1,931 $1,695 $1,536 $1,383 $1,255 $873
Y/Y Growth -16% -50% -30% -4% -46% -12% -9% -10% -9% -30%
Total Equipment revenues $62,746 $59,115 $46,219 $46,064 $56,436 $66,489 $71,851 $76,794 $80,295 $83,097 $85,463
Y/Y Growth -6% -22% 0% 23% 18% 8% 7% 5% 3% 3%
E = Morgan Stanley Research Estimates
Source: Morgan Stanley Research
Editors’ Commentary: We note that in examining exhibits 14 and 15, one will find a difference between wireless capex figures
and wireless infrastructure revenues, and our analysts emphasize that infrastructure forecasts pertain to wireless equipment
revenues, and hence, should not necessarily correspond to telco capex trends. Our analysts have examined the relationship
between telco capex and wireless equipment revenues and concluded that relying solely on operator spend numbers is not an
effective way of forecasting revenues. Instead, our analysts believe telco capex data gives the market a sense of how loose or
tight the purse strings are on the part of operators, but it should only be used as an accompanying tool in forecasting wireless
equipment revenues.
24
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 16
Handsets - Annual Key Metrics
Adnaan Ahmad, Peter Dionisio, Bonnie Chang*, Jasmine Lu*
1997 1998 1999 2000 2001 2002 2003 2004 2005E 2006E
Wireless Handsets
Revenues ($MM) -- -- -- -- -- -- -- $112,304 $123,773 $128,790
Y/Y Growth -- -- -- -- -- -- -- 10% 4%
ASPs ($) -- -- -- -- -- -- -- $164 $153 $144
Y/Y Growth -- -- -- -- -- -- -- -7% -6%
Units (MM) -- -- -- 425 432 427 508 683 810 896
Y/Y Growth -- -- -- -- 2% -1% 19% 34% 19% 11%
By Technology
GSM/GPRS -- -- -- 246 255 256 315 451 583 624
WCDMA -- -- -- 0 0 0 3 20 42 79
CDMA Evolution -- -- -- 85 86 85 112 143 162 175
Others -- -- -- 93 91 85 79 68 22 18
Total Net Adds (Units)
North America 12 16 18 25 21 13 20 23 23 20
Western Europe 20 38 66 82 44 20 23 29 21 14
Asia Pacific 24 36 46 70 88 91 109 119 118 130
Latin America 6 8 20 21 20 14 23 47 54 41
Eastern Europe 2 4 6 12 18 25 30 59 56 48
Middle East and Africa 3 5 10 19 17 15 19 33 46 53
Total Replacements (Units)
North America 14 18 34 52 57 75 84 106 118 136
Western Europe 13 22 34 62 80 77 92 108 129 149
Asia Pacific 20 40 60 59 56 54 67 99 152 172
Latin America 1 2 4 9 11 15 17 25 32 45
Eastern Europe 1 2 3 6 10 12 11 18 35 54
Middle East and Africa 1 2 4 7 10 14 15 18 26 36
Wireless Subscribers
Total Subscribers (MM) 206 315 486 724 947 1,141 1,384 1,725 2,067 2,396
Y/Y Growth 53% 54% 49% 31% 21% 21% 25% 20% 16%
North America 59 75 93 118 139 153 172 195 218 238
Western Europe 56 94 161 243 288 309 334 366 390 405
Asia Pacific 66 104 153 229 328 429 550 685 814 957
Latin America 13 22 43 65 86 101 125 174 231 274
Eastern Europe 4 8 14 27 47 75 109 175 237 289
Middle East and Africa 7 13 22 41 59 74 94 128 176 232
Handset Printed Circuit Boards (from Taiwan)
Units (MM) -- -- -- -- 60.6 148.1 185.9 263.2 341.2 419.7
Y/Y Growth 144% 26% 42% 30% 23%
E = Morgan Stanley Research Estimate
Source: Morgan Stanley Research
Notes: Industry figures for 2005 are estimates, Handsets ASPs are sell-through ASPs, and ASPs are based on weighted average of actuals and not estimates
* Handset Printed Circuit Board forecasts
Exhibit 17
Handset PCBs - Quarterly Key Metrics
Bonnie Chang, Jasmine Lu
1Q04E 2Q04E 3Q04E 4Q04E 1Q05E 2Q05E 3Q05E 4Q05E 1Q06E 2Q06E 3Q06E 4Q06E
Handset Printed Circuit Boards (from Taiwan)
Units (MM) 59.0 62.1 63.3 78.8 66.6 70.2 94.7 109.7 104.8 95.5 109.7 109.7
Y/Y Growth 70% 72% 33% 17% 13% 13% 50% 39% 57% 36% 16% 0%
Q/Q Growth -13% 5% 2% 24% -15% 5% 35% 16% -4% -9% 15% 0%
E = Morgan Stanley Research Estimate
Source: Morgan Stanley Research
Note: Data and forecasts based on Handset Printed Circuit Board from Taiwan
25
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 18
Consumer Electronics - Annual Key Metrics
Masahiro Ono
1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005E 2006E
Televisions (Ono)
Total
Revenues ($MM) $26,493 $27,622 $29,325 $30,857 $30,625 $40,760 $47,572 $52,637 $59,543 $65,373
Y/Y Growth -1% 4% 6% 5% -1% 33% 17% 11% 13% 10%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units (000) 120,841 126,705 136,393 147,561 149,698 162,038 172,290 183,817 202,035 222,669
Y/Y Growth -- 5% 8% 8% 1% 8% 6% 7% 10% 10%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $219 $218 $215 $209 $205 $1,720 $1,371 $1,004 $751 $597
Y/Y Growth -5% 0% -1% -3% -2% 737% -20% -27% -25% -21%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
LCD Television (Ono)
Revenues ($MM) -- -- -- -- -- $2,211 $7,078 $9,606 $15,762 $20,469
Y/Y Growth 220% 36% 64% 30%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units -- -- -- 2 00 600 1,400 4,760 8,797 19,246 31,250
Y/Y Growth 200% 133% 240% 85% 119% 62%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs -- -- -- -- -- $1,579 $1,487 $1,092 $819 $655
Y/Y Growth -6% -27% -25% -20%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
PDP Television (Ono)
Revenues ($MM) -- -- -- -- -- $3,200 $3,220 $5,294 $6,339 $7,531
Y/Y Growth 1% 64% 20% 19%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units -- -- -- -- -- 800 1,150 2,816 4,817 7,630
Y/Y Growth 44% 145% 71% 58%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs -- -- -- -- -- $4,000 $2,800 $1,880 $1,316 $987
Y/Y Growth -30% -33% -30% -25%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Projection Television (Ono)
Revenues ($MM) -- -- -- -- -- $4,114 $5,600 $5,610 $5,032 $4,520
Y/Y Growth 36% 0% -10% -10%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units -- -- -- -- -- 3,740 5,600 6,600 7,400 8,100
Y/Y Growth 50% 18% 12% 9%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs -- -- -- -- -- $1,100 $1,000 $850 $680 $558
Y/Y Growth -9% -15% -20% -18%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
CRT Television (Ono)
Revenues ($MM) $26,493 $27,622 $29,325 $30,857 $30,625 $31,235 $31,674 $32,127 $32,409 $32,854
Y/Y Growth -1% 4% 6% 5% -1% 2% 1% 1% 1% 1%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units 1 20,841 126,705 1 36,393 147,361 149,098 156,098 160,780 1 65,604 170,572 175,689
Y/Y Growth 4% 5% 8% 8% 1% 5% 3% 3% 3% 3%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $219 $218 $215 $209 $205 $200 $197 $194 $190 $187
Y/Y Growth -5% 0% -1% -3% -2% -3% -2% -2% -2% -2%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Integrated Digital TV (Ono) *
Revenues ($MM) -- -- -- $1,088 $2,065 $2,602 $3,200 $3,000 $3,900 $7,200
Y/Y Growth 90% 26% 23% -6% 30% 85%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units -- -- -- 7 87 1,595 1,865 3,561 7,747 15,525 28,780
Y/Y Growth 103% 17% 91% 118% 100% 85%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs -- -- -- $1,383 $1,295 $1,129 $1,000 $930 $800 $650
Y/Y Growth -6% -13% -11% -7% -14% -19%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
E = Morgan Stanley Research Estimate
Source: Morgan Stanley Research
* Not included in total TVs; DTV can be any type of display.
26
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 19
Consumer Electronics - Annual Key Metrics
Masahiro Ono
1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005E 2006E
DVD Hardware (Ono)
Total
Revenues ($MM) $320 $1,001 $2,455 $4,169 $6,221 $5,065 $8,080 $11,630 $10,740 $11,110
Y/Y Growth 870% 213% 145% 70% 49% -19% 60% 44% -8% 3%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units (000) 7 05 2,951 9 ,704 20,846 35,335 21,951 39,000 85,600 102,000 123,000
Y/Y Growth 985% 319% 229% 115% 70% -38% 78% 119% 19% 21%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $454 $339 $253 $200 $593 $506 $359 $233 $155 $120
Y/Y Growth -16% -25% -25% -21% 197% -15% -29% -35% -33% -23%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
DVD Player (Ono)
Revenues ($MM) $320 $1,001 $2,455 $4,169 $5,880 $4,169 $5,880 $8,970 $8,100 $6,860
Y/Y Growth 870% 213% 145% 70% 41% -29% 41% 53% -10% -15%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units (000) 7 05 2,951 9 ,704 20,846 35,000 20,846 35,000 78,000 90,000 98,000
Y/Y Growth 985% 319% 229% 115% 68% -40% 68% 123% 15% 9%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $454 $339 $253 $200 $168 $200 $168 $115 $90 $70
Y/Y Growth -16% -25% -25% -21% -16% 19% -16% -32% -22% -22%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
DVD Recorder (Ono)
Revenues ($MM) -- -- -- -- $341 $896 $2,200 $2,660 $2,640 $4,250
Y/Y Growth 163% 145% 21% -1% 61%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units (000) -- -- -- -- 3 35 1,105 4,000 7,600 12,000 25,000
Y/Y Growth 230% 262% 90% 58% 108%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs -- -- -- -- $1,018 $811 $550 $350 $220 $170
Y/Y Growth -20% -32% -36% -37% -23%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
VCR (Ono)
Total
Revenues ($MM) $9,986 $9,342 $8,755 $7,681 $5,436 $3,925 $3,262 $2,640 $2,491 $2,244
Y/Y Growth -2% -6% -6% -12% -29% -28% -17% -19% -6% -10%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units (000) 6 2,022 62,283 6 0,801 56,065 54,361 56,065 54,361 48,000 47,000 44,000
Y/Y Growth 4% 0% -2% -8% -3% 3% -3% -12% -2% -6%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $161 $150 $144 $137 $100 $70 $60 $55 $53 $51
Y/Y Growth -6% -7% -4% -5% -27% -30% -14% -8% -4% -4%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Digital Camcorder (Ono)
Total
Revenues ($MM) $1,083 $1,958 $2,890 $4,675 $5,198 $5,166 $5,346 $4,410 $4,725 $5,400
Y/Y Growth -26% 81% 48% 62% 11% -1% 3% -18% 7% 14%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units (000) 8 00 1,750 3 ,440 6,875 9,450 12,300 14,850 15,750 21,000 27,000
Y/Y Growth -17% 119% 97% 100% 37% 30% 21% 6% 33% 29%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $1,354 $1,119 $840 $680 $550 $420 $360 $280 $225 $200
Y/Y Growth -11% -17% -25% -19% -19% -24% -14% -22% -20% -11%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Digital Still Cameras (Ono)
Total
Revenues ($MM) $576 $1,026 $1,491 $5,193 $6,240 $7,131 $10,329 $12,169 $10,395 $9,315
Y/Y Growth 88% 78% 45% 248% 20% 14% 45% 18% -15% -10%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units (000) 2,311 4,416 6,257 14,098 19,500 27,426 49,185 71,585 77,000 81,000
Y/Y Growth 110% 91% 42% 125% 38% 41% 79% 46% 8% 5%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $249 $232 $238 $368 $320 $260 $210 $170 $135 $115
Y/Y Growth -11% -7% 3% 55% -13% -19% -19% -19% -21% -15%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
E = Morgan Stanley Research Estimate
Source: Morgan Stanley Research; PDA estimates are from Gartner
27
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 20
Consumer Electronics - Annual Key Metrics
Masahiro Ono
1997A 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005E 2006E
CD Players (Ono)
Total
Revenues ($MM) -- -- -- $9,984 $9,249 $9,371 $9,500 $9,700 $9,600 $9,600
Y/Y Growth -- -- -- -- -7% 1% 1% 2% -1% 0%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units (000) -- -- -- 104,000 102,765 106,491 111,000 117,000 122,000 124,000
Y/Y Growth -- -- -- -- -1% 4% 4% 5% 4% 2%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs -- -- -- $96 $90 $88 $85 $83 $80 $78
Y/Y Growth -- -- -- -- -6% -2% -3% -2% -4% -3%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Mini Disc Players (Ono)
Total
Revenues ($MM) $1,056 $1,557 $2,080 $1,442 $1,458 $1,525 $1,600 $1,650 $1,700 $1,750
Y/Y Growth 96% 47% 34% -31% 1% 5% 5% 3% 3% 3%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Units (000) 5 ,698 8,650 13,000 13,000 14,500 16,400 18,000 19,400 20,700 22,300
Y/Y Growth 130% 52% 50% 0% 12% 13% 10% 8% 7% 8%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
ASPs $185 $180 $160 $111 $101 $93 $90 $85 $80 $77
Y/Y Growth -15% -3% -11% -31% -9% -8% -3% -6% -6% -4%
Q/Q Growth -- -- -- -- -- -- -- -- -- --
Portable MP3 Devices (Runkle)
Total Units (000) -- -- -- -- -- 15,130 38,870 75,900 105,570
Y/Y Growth -- -- -- -- -- -- 157% 95% 39%
Flash Units -- -- -- -- -- 12,460 26,360 55,410 82,460
Y/Y Growth -- -- -- -- -- -- 112% 110% 49%
HDD Units -- -- -- -- -- 2,670 12,510 20,490 23,110
Y/Y Growth -- -- -- -- -- -- 369% 64% 13%
AAPL Units (Flash & HDD) -- -- -- -- -- 1,451 8,263 31,961 47,476
Y/Y Growth -- -- -- -- -- -- 469% 287% 49%
% Market Share -- -- -- -- -- 10% 21% 42% 45%
Set-top Boxes (Swinburne)
Global Total STB Units (000) -- -- -- 21,722 24,563 26,816 30,205 39,283 46,211 51,399
Y/Y Growth -- -- -- -- 13% 9% 13% 30% 18% 11%
US Total STB Units -- -- -- 9 ,961 11,286 12,436 13,385 18,443 19,731 19,159
Y/Y Growth -- -- -- -- 13% 10% 8% 38% 7% -3%
ROW Total STB Units -- -- -- 11,762 13,277 14,380 16,820 20,840 26,480 32,240
Y/Y Growth -- -- -- -- 13% 8% 17% 24% 27% 22%
Global Cable STB Units -- -- -- 4,751 5,590 7,418 7,604 10,250 12,398 13,760
Y/Y Growth -- -- -- -- 18% 33% 3% 35% 21% 11%
Global Satellite STB Units -- -- -- 16,971 18,973 19,249 22,101 28,082 31,213 33,838
Y/Y Growth -- -- -- -- 12% 1% 15% 27% 11% 8%
Game Consoles (Pitz)
Total Revenue (US$ in Millions) -- -- $22,730 $22,563 $26,535 $29,567 $29,897 $26,199 $27,415 $30,357
Y/Y Growth -- -- -- -- 18% 11% 1% -12% 5% 11%
Global Console & Handheld Hardware Revenue ($ Millions) -- -- $5,031 $4,782 $8,452 $9,003 $7,517 $5,178 $5,270 $7,799
Y/Y Growth -- -- -- -- 77% 7% -17% -31% 2% 48%
Global Console Units (000) 7,717 8,709 22,859 31,230 28,233 26,143 25,560 23,865
Y/Y Growth -- -- -- -- 162% 37% -10% -7% -2% -7%
Xbox 3602 1,500 8,800
Y/Y Growth -- -- -- -- -- -- -- -- -- 487%
PlayStation 3 4,700
Y/Y Growth -- -- -- -- -- -- -- -- -- --
Nintendo Revolution 1,500
Y/Y Growth -- -- -- -- -- -- -- -- -- --
Global Handheld Units (000) 13,952 14,132 15,436 19,670 29,548 21,300
Y/Y Growth -- -- -- -- -- 1% 9% 27% 50% -28%
Global Console & Handheld Software Revenue ($ Millions) -- -- $11,238 $11,101 $11,140 $12,957 $13,977 $11,277 $11,000 $10,435
Y/Y Growth -- -- -- -- 0% 16% 8% -19% -2% -5%
Global PC Software Revenue ($ Millions) -- -- $5,138 $5,256 $5,198 $4,761 $4,379 $4,314 $4,347 $3,911
Y/Y Growth -- -- -- -- -1% -8% -8% -1% 1% -10%
Global Online Subscriptions, Ads & Fees ($ Millions)4 -- -- -- $135 $393 $884 $1,498 $2,146 $2,771 $3,395
Y/Y Growth -- -- -- -- 191% 125% 69% 43% 29% 23%
Global Mobile Subscriptions & Fees ($ Millions)5 -- -- -- -- $8 $357 $733 $1,312 $1,858 $2,323
Y/Y Growth -- -- -- -- -- 4363% 105% 79% 42% 25%
PDA (Gartner)
Units (000) -- -- -- 10,979 13,121 12,055 13,363 15,658 -- --
Y/Y Growth -- -- -- -- 20% -8% 11% 17% -- --
E = Morgan Stanley Research Estimate
Source: Morgan Stanley Research; PDA estimates are from Gartner
1 Based on PricewaterhouseCoopers estimates for C2000-2003E and Morgan Stanley Research estimates thereafter.
2 Based on PricewaterhouseCoopers estimates for C2001-2003E and Morgan Stanley Research estimates thereafter.
3 Based on PricewaterhouseCoopers and Morgan Stanley Research estimates.
28
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 21
Semiconductors - Annual Key Metrics
Mark Edelstone, Louis Gerhardy, Harlan Sur, Sunil Gupta, Keon Han, Timm Schulze-Melander
1997 1998 1999 2000 2001 2002 2003 2004 2005E 2006E Comments
Semiconductors
Total
x Revenues ($000) $137,203,120 $125,611,999 $149,378,551 $204,393,623 $138,962,610 $140,713,320 $166,425,522 $213,026,836 $227,938,715 $250,732,586
x Y/Y Growth 4.0% -8.4% 18.9% 36.8% -32.0% 1.3% 18.3% 28.0% 7.0% 10.0%*
x Units (000) 255,293,458 257,557,240 299,815,913 373,356,791 293,833,480 335,632,108 366,730,834 433,466,163 4 55,509,052 --
x Y/Y Growth 18.6% 0.9% 16.4% 24.5% -21.3% 14.2% 9.3% 18.2% 5.1% --
x ASPs ($) $0.54 $0.49 $0.50 $0.55 $0.47 $0.42 $0.45 $0.49 $0.50 --
Integrated Circuits
x Revenues ($000) $119,532,273 $109,071,451 $130,217,860 $176,945,444 $118,491,940 $120,072,732 $139,964,713 $ 178,772,092 $192,798,203 --
x Y/Y Growth 4.0% -8.8% 19.4% 35.9% -33.0% 1.3% 16.6% 27.7% 7.8% --
x Units (000) 58,333,158 58,716,106 68,119,064 86,514,632 68,546,045 78,597,897 90,290,041 105,187,213 116,348,536 --
x Y/Y Growth 21.8% 0.7% 16.0% 27.0% -20.8% 14.7% 14.9% 16.5% 10.6% --
x ASPs ($) $1.86 $1.86 $1.91 $2.05 $1.73 $1.53 $1.55 1.70 1.66 --
MPUs
x Revenues ($000) $19,985,070 $21,796,632 $23,098,680 $26,098,784 $21,039,498 $20,404,572 $23,875,229 $27,002,147 $31,283,933 $34,118,395
x Y/Y Growth 9.1% 6.0% 13.0% -19.4% -3.0% 17.0% 13.1% 15.9% 9.1%
x Units (000) 88,150 112,397 135,363 159,281 149,480 150,310 170,710 186,586 221,540 256,000
x Y/Y Growth 27.5% 20.4% 17.7% -6.2% 0.6% 13.6% 9.3% 18.7% 15.6%
x ASPs ($) $226.72 $193.93 $170.64 $163.85 $140.75 $135.75 $139.86 $144.72 $141.21 $133.27
Intel
x Revenues ($000) $19,303,000 $20,538,875 $21,709,400 $23,760,200 $18,620,250 $18,658,050 $21,921,230 $24,463,730 $27,490,810 $28,561,520
x Units (000) 79,750 98,820 116,603 132,681 118,955 124,860 142,750 155,540 177,940 196,000
Advanced Micro Devices
x Revenues ($000) $682,070 $1,257,757 $1,389,280 $2,338,584 $2,419,248 $1,746,522 $1,953,999 $2,538,417 $3,793,123 $5,556,875
x Units (000) 8,400 13,577 18,760 26,600 30,525 25,450 27,960 31,046 43,600 60,000
Analog
x Revenues ($000) $19,788,937 $19,072,955 $22,081,701 $30,516,279 $23,180,165 $23,912,887 $26,793,903 $31,367,086 $31,921,999 $35,150,000
x Y/Y Growth -3.6% 15.8% 38.2% -24.0% 3.2% 12.0% 17.1% 1.8% 10.1%
x Units (000) 25,865,873 26,777,975 31,940,911 41,262,842 33,165,587 40,512,164 46,735,510 52,305,425 57,922,173 --
x Y/Y Growth 3.5% 19.3% 29.2% -19.6% 22.2% 15.4% 11.9% 10.7% --
x ASPs ($) $0.77 $0.71 $0.69 $0.74 $0.70 $0.59 $0.57 $0.60 $0.55 --
PLDs combine ALTR,
x Revenues (from wksh, in $MM) $1,649 $1,716 $2,216 $3,783 $2,462 $2,232 $2,529 $3,038 $3,207 $3,743 LSCC, XLNX,
x Y/Y Growth 25.9% 4.1% 29.1% 70.7% -34.9% -9.3% 13.3% 20.1% 5.6% 16.7% QUIK, ACTL
DRAM
Revenues ($Mn) -- -- $20,722 $29,000 $10,769 $16,012 $17,873 $26,069 $26,054 $26,972
x Y/Y Growth -- -- -- 40.0% -62.9% 48.7% 11.6% 45.9% -0.1% 3.5%
x Supply (Mn, 512Mb Equiv.) -- -- 290 500 852 1,153 1,730 2,467 3,954 5,986
x Demand (Mn, 512 Mb Equiv.) -- -- 292 480 776 1,142 1,724 2,583 3,886 5,695
x ASPs ($) -- -- $71.00 $60.47 $13.88 $14.03 $10.33 $10.57 $6.59 $4.51
Total Memory
J Bits (billions) -- -- 148,621,511 256,000,188 436,352,319 590,428,598 885,659,956 1,263,138,065 2,024,396,961 3,065,073,987
J Gigabytes -- -- 18,577,689 32,000,024 54,544,040 73,803,575 110,707,495 157,892,258 253,049,620 383,134,248
J Terabytes -- -- 18,578 32,000 54,544 73,804 110,707 157,892 253,050 383,134
Pricing
J Average Price / Bit ($) -- -- $0.000 $0.000 $0.000 $0.000 $0.000 $0.000 $0.000 $0.000
J Average Price / MB ($) -- -- $4.438 $3.780 $0.867 $0.877 $0.161 $0.165 $0.103 $0.070
* = Range 8-12%
E = Morgan Stanley Research Estimate
Source: Morgan Stanley Research
29
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 22
Semiconductors - Annual Key Metrics
Mark Edelstone, Louis Gerhardy, Harlan Sur, Sunil Gupta, Keon Han, Timm Schulze-Melander
1997 1998 1999 2000 2001 2002 2003 2004 2005E 2006E
Semiconductors
NAND Flash
Revenues ($000) -- -- -- -- -- $2,172 $3,752 $5,251 $5,895 --
Y/Y Growth -- -- -- -- -- -- 72.7% 40.0% 12.3% --
Supply (MM) -- -- -- -- -- -- 738 1,788 4,058 --
Demand (MM) -- -- -- -- -- 256 748 1,795 3,617 --
ASPs ($) -- -- -- -- -- -- $5.01 $2.93 $1.63 --
Demand Sources (MM):
DSC -- -- -- -- -- 198 399 684 1,027 --
Handsets -- -- -- -- -- 5 64 335 726 --
MP3 Players -- -- -- -- -- 5 9 193 610 --
USB Drives -- -- -- -- -- 30 102 322 850 --
PDA's -- -- -- -- -- 12 5 18 -- --
Game Consoles -- -- -- -- -- 6 10 16 25 --
Digital Camcorders -- -- -- -- -- 14 18 39 82 --
Other -- -- -- -- -- 60 139 187 256 --
Inventory
Channel/OEM Inventory (Days) 46 38 43 51 41 33 30 32 -- --
Semi Company Inventory (Days) 60 56 54 68 67 66 67 71 -- --
Semiconductor Capex
WW Cap Spending ($million) 4 0,505 3 0,199 3 4,603 64,289 3 8,195 2 7,699 3 1,500 46,962 46,004 50,668
Y/Y Growth -9.9% -25.4% 14.6% 85.8% -40.6% -27.5% 13.7% 49.1% -2.0% 10.1%
Semiconductor Capital Equipment Booking
Total Equip't Bookings ($million) * 1 6,361 1 0,921 1 7,580 32,274 1 0,797 1 0,899 9 ,673 17,058 -- --
Y/Y Growth 17.1% -33.2% 61.0% 83.6% -66.5% 0.9% -11.2% 76.3% -- --
Foundry Utilization Model **
Capacity (k wafers) -- 2 ,856 3 ,461 6,779 8 ,363 7 ,930 8 ,504 10,200 13,573 15,829
Capacity Utilization -- 80% 97% 100% 49% 64% 81% 94% 82% 91%
Wafer shipment (k wafers) -- 2 ,295 3 ,363 6,779 4 ,094 5 ,099 6 ,928 9,580 11,100 14,386
E = Morgan Stanley Research Estimate
Source: Morgan Stanley Research
* NA-based SCE companies
** TOP-4 Foundries
30
M O R G A N S T A N L E Y E Q U I T Y R E S E A R C H
March 3, 2006
Electronic Mfg Services/Distribution/Components
Exhibit 23
Semiconductors - Quarterly Key Metrics
Mark Edelstone, Louis Gerhardy, Harlan Sur, Sunil Gupta, Keon Han, Timm Schulze-Melander
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06E 2Q06E 3Q06E 4Q06E
Semiconductors
Total
Revenues ($000) $48,860,808 $53,509,081 $55,553,880 $55,103,067 $55,078,179 $53,