00:00There are loads of people that are going to watch this program and be like, I've got a WD hard
00:04disk drive, HDD, somewhere in my home.
00:06I understand you have one.
00:07And I have one, right? And it protects some of my most valuable memories in terms of photos and videos.
00:13But the story is data center, and probably it's underappreciated.
00:17So start with that, where HDD fits in the data center story, and then use that to contextualize what is
00:23crazy demand right now.
00:24Sure. I mean, if you look at the AI value chain, a lot of focus has been around the compute
00:29resources.
00:31GPUs, memory, that's a source of compute that's generating data.
00:36But ultimately, data needs to get stored. That data that's generated, it needs to be stored.
00:41And that's where hard drives really come to the fore.
00:4380% of data that is stored in the cloud is stored on hard drives.
00:49And as you look at where things are going with AI, what is happening is actually there's a structural change
00:55in how hyperscalers, the market really looks at the value of AI.
00:59And as a result, that as the value of data increases, by association, storage increases as well, because you need
01:07to store more and more of that data.
01:08And a simple analogy to use is power generation.
01:11Right.
01:11If you think of GPUs and memory as the power generators, data is actually the fuel that powers those power
01:21plants, right?
01:22And so really that is fundamental to enable AI going forward.
01:25So in short, if you don't have HDDs to be able to store that data that's being created.
01:30Can we extrapolate on that analogy a little bit?
01:33So when we think about a data center, we think of it in terms of gigawatts.
01:36A gigawatt equates to hundreds of thousands of GPUs, depending on the stack.
01:41Is there an equivalent that our audience can understand when it comes to storage?
01:46So, you know, a like for like that you can chew on, maybe it's in petabytes, something like that, at
01:53that scale?
01:54There isn't really a rule of thumb that you could use, say, if you have a gigawatt of compute, how
01:58much does that translate into storage?
02:00Because in a way, there's a bifurcation of compute from storage.
02:03If you think about AI, every time you run an AI workload, whether it's training or it's inference,
02:08those compute resources can be recycled every time you run a training model development or an inference workload.
02:14But the data that's getting generated and as a result of that gets stored, it doesn't get deleted.
02:19Right.
02:19So storage is actually growing because of the value of data increasing over time.
02:23How much is your supply growing?
02:25How much can you ramp up to meet the first demand?
02:27So we've projected that exabyte growth, which is the amount of storage that's needed,
02:32is going to go at 25% CAGR over the next five years.
02:36We feel very confident that with the technology enhancements that we're bringing to be able to deliver higher capacity drives
02:42to the market,
02:44we're able to meet that demand going forward.
02:45What's interesting is it's yourself and Seagate many would sort of see as...
02:48Like a geoccalate.
02:49Yeah, the place that people come to.
02:51How are you ensuring with this fierce demand and perhaps anxiety coming from cloud providers and the like that they're
02:57not double ordering,
02:58that they're not ordering from you at the same time as Seagate to make sure that they get the fastest
03:00of the speediest?
03:01Yeah, that's something we pay very close attention to, you know, looking at the inventory levels that our customers have,
03:07working very closely with them to reassure them that we have a technology roadmap that's going to be able to
03:12meet their needs.
03:14And I think what they also appreciated, storage has become a critical piece of the AI data center infrastructure stack.
03:21And as a result, we've really shifted the partnership model with our customers.
03:24They're giving us really good insight into the applications and workloads they're bringing to market over the next few years.
03:30A lot of it's going to be multimodal in nature.
03:33And what I mean by that, a lot of it's going to be video-based because video is going to
03:37be a big driver of storage.
03:39And that's giving us a lot more confidence in terms of the demand that they're signaling to us
03:44and also ensuring that they're not creating an oversupply in the market.
03:47I mean, you talked about your innovation roadmap.
03:50Can we talk a minute about heated-assisted magnetic recording for those who aren't in the lingo?
03:54But basically, this is something that Seagate's been pushing forward on.
03:57And you, too, have been bringing that sort of innovation.
03:59Where are you in terms of neck-and-neck?
04:01And you're already bringing this to customers.
04:03How is it testing out?
04:04What does it do?
04:04Yeah, so we're already qualifying heated-assisted magnetic recording, or HAMMER, affectionately, as we call it, with two customers.
04:11But we've taken a slightly different approach from our peer, where we have a dual-track process, right?
04:16We definitely are committed to HAMMER, and that's required to get us to 100 terabytes per drive and beyond.
04:21But in the interim, we feel that with our current EPMR technology for the next three years,
04:27we can actually get up to 60 terabytes and deliver it with more reliability, more quality, and more scalability to
04:33our customers
04:34than a hard transition to HAMMER.
04:36So I've got to go back to something earlier.
04:38Why don't you just increase capacity?
04:40We don't need to increase unit capacity.
04:43What we're actually doing is to use technology to increase the capacity per drive.
04:47So today, we're shipping, at the top end of our products, a 32 terabyte hard drive.
04:52In the second half of this year, we'll be shipping a 40 terabyte drive.
04:57And between now and 2028, we'll be shipping close to a 60 terabyte hard drive.
05:03So just imagine that the capacity per drive is doubling in the next two years.
05:07So we don't actually have to increase the number of units we're producing.
05:10That's great for our customers because it means better total cost of ownership through higher rack density, lower power consumption.
05:17And that's something that also aids the lower power demands of data centers.
05:21We are going to have to compress this, but WD separated SanDisk, right?
05:26NAND, Flash.
05:28That has been an interesting financial transaction, and hopefully we can get to it with time.
05:32But the basic conviction is that HDD is the way to go, focus.
05:37But, you know, the Flash guys would argue in the context of the data center in the cloud that SSD
05:43is going to have a role.
05:45What is your latest thinking on how that went and the project long term?
05:50So I think that the spin has been a very successful one.
05:53If you look at how both companies have performed since the spin close to a year ago.
05:56Astonishingly well.
05:57Both have done really well.
05:58I think what is given both companies is that singular focus on their specific technology roadmaps, specific segments of the
06:04market that they play in as well.
06:07And specifically to your point, look, we are symbiotic, right?
06:10I mentioned 80% of data that gets stored in the cloud are on hard drives.
06:15SSDs represent the next 15, 20% of it as well.
06:18So it's a symbiotic relationship.
06:21There are some workloads that require lower latency.
06:24They are very much designed for SSDs.
06:26When it comes to long term storage, the vast majority of metadata to support training and AI inference going forward,
06:33that's going to be leveraging HDDs because of the superior economics that we deliver.
06:38We've also launched a month ago at our Innovation Day, some new innovations coming out over the next 12 to
06:4324 months.
06:44It's going to improve the data throughput and performance of hard drives that will also be able to support the
06:50needs of AI workloads coming down the pike as well.
06:53So you're a global company.
06:55We have a pretty global issue on our hands at the moment.
06:57How are you thinking about your supply chain risk?
07:00How are you thinking about ensuring that your customers get what they need and when they want when you have
07:03manufacturing as far flung as Thailand, as China, here in the United States as well?
07:07Yeah, we have a very global supply chain and quite a diversified one as well.
07:12And we constantly model risk scenarios like the conflict that we're unfortunately seeing in the Middle East right now.
07:19And from our current perspective, we're keeping a very close watch on it.
07:23I'm pleased to say as of now, none of our employees in that region are impacted and there's no material
07:29impact to our business as well.
07:30I'm pleased to say as of now.
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