MARKET ANALYSIS Worldwide PC Interface And

MARKET ANALYSIS

Worldwide PC Interface and Technologies 2005-2010 ww.idc.com ww.idc.com F o r e c a s t

Bob O'Donnell Shane Rau Richard Shim

IDC OPINION

For a technology provider or OEM, the time when its right to end support for one interface or technology and begin support for another is a matter of timing, listening to customers and observing market dynamics. Remove an interface too early and customers--whether OEMs or end users--will complain, such as was the case recently with 1394 ports in notebooks. Remove an interface too late and customers will bear needless cost and restricted design flexibility, something crucial particularly in tiny desktops and ultraportable notebooks. Still the benefits of greater cost efficiencies

01701 USA P.508.872.8200 F.508.935.4015 w F.508.935.4015 P.508.872.8200 USA 01701 and improving performance of systems will continue to be powerful motivations to drive OEMs.

In some cases, legacy interfaces, such as parallel and serial ports, will be removed from systems without replacement. in other cases, such as on the notebook side, interfaces are getting smaller and faster, such as ExpressCard as compared to PC Card/CardBus. The following are some highlights of attach rates of several interfaces and technologies forecasted for desktop and portable PCs:

The popularity of WLAN (Wi-Fi) has made PC users accustomed to the idea of being constantly connected. This user behavior will extend to cellular wide area networking, which will grow initially in the commercial PC segment. As service costs decline, cellular WAN will increase in the consumer segment as well in the later part of the forecast period.

The PC's role as the hub for consumer devices such as digital audio players and

Global Headquarters: 5 Speen Street Framingham, MA Framingham, Street Speen 5 Headquarters: Global digital cameras sustain adoption and use of high-speed interfaces, including USB 2.0, Ethernet (for broadband modems), and PCI Express.

The arrival of Windows Vista will boost market demand for discrete graphics controllers (on add-in cards) but the economic advantages of integrated solutions, and their improving performance, mean that integrated solutions will remain dominant.

The emergence of DisplayPort will cloud the video interface landscape as it challenges the entrenched HDMI interface. Support from PC manufacturers gives DisplayPort serious influence but with backing from the consumer electronics market, HDMI will be hard to ignore.

Filing Information: February 2006, IDC #, Volume: 1, Tab: Markets Personal Computing: Market Analysis

TABLE OF CONTENTS

In This Study 1 Methodology ...... 1

Situation Overview 1

Future Outlook 2 Forecast and Assumptions ...... 2 Wired Device Connectivity Interfaces ...... 2 USB 1.1 and USB 2.0...... 2 Key Assumption(s) ...... 3 IEEE 1394a and 1394b ...... 4 Key Assumption(s) ...... 5 PCI and PCI-Express/Mini-PCI and Mini PCI-Express ...... 6 Key Assumption(s) ...... 8 Serial Port...... 8 Key Assumption(s) ...... 10 Parallel Port...... 10 Key Assumption(s) ...... 11 Wireless Device Connectivity Interfaces...... 12 Bluetooth and Ultra-Wideband ...... 12 Key Assumption(s) ...... 14 Wireless Networking Interfaces ...... 14 Wireless Networking – 802.11abg...... 14 Key Assumption(s) ...... 16 Wireless Networking – 802.11n...... 16 Key Assumption(s) ...... 18 Cellular Wide Area Networking...... 18 Key Assumption(s) ...... 21 WiMax ...... 21 Key Assumption(s) ...... 23 Wired Networking Interfaces...... 23 v.90/92 Analog Modems...... 23 Key Assumption(s) ...... 25 Fast Ethernet and Gigabit Ethernet ...... 25 Storage Interfaces ...... 27 Parallel ATA and Serial ATA ...... 27 Key Assumption(s) ...... 29 Graphics Interface and Technologies...... 29 Integrated and Discrete Graphics...... 29 Key Assumption(s) ...... 31 AGP and PCI-Express Graphics ...... 32 Key Assumption(s) ...... 33 Security ...... 33 Trusted Platform Modules ...... 33 Key Assumption(s) ...... 35 Bus interfaces...... 36

P PC Card/CardBus...... 36 Key Assumption(s) ...... 37 ExpressCard...... 38 Key Assumption(s) ...... 40 External storage interfaces...... 40 Floppy disk drives...... 40 Key Assumption(s) ...... 41 Video interfaces...... 41 VGA...... 41 Key Assumption(s) ...... 43 DVI ...... 43 Key Assumption(s) ...... 45 HDMI ...... 45 Key Assumption(s) ...... 48 DisplayPort...... 48 Key Assumption(s) ...... 50

Essential Guidance 58

Learn More 59 Related Research...... 59

LIST OF TABLES

P 1 Worldwide USB Port Penetration in PCs 2005–2010...... 2 2 Worldwide 1394 Port Penetration in PCs 2005–2010 ...... 4 3 Worldwide PCI/PCI Express Penetration in PCs 2005–2010...... 7 4 Worldwide Serial Port Penetration in PCs 2005–2010...... 9 5 Worldwide Parallel Port Penetration in Desktops 2005–2010 ...... 11 6 Worldwide Ultrawideband and Bluetooth Penetration in PCs 2005–2010...... 12 7 Worldwide Wi-Fi 802.11abg Penetration in Notebooks 2005–2010 ...... 14 8 Worldwide 802.11n Penetration in Notebooks 2005–2010 ...... 17 9 Worldwide Cellular Penetration in Notebooks 2005–2010 ...... 19 10 Worldwide WiMax 802.16e Penetration in Notebooks 2005–2010...... 21 11 Worldwide Modem Penetration in PCs 2005–2010...... 24 12 Worldwide Fast Ethernet and Gigabit Ethernet Penetration in PCs 2005–2010 ...... 26 13 Worldwide PATA and SATA Penetration in PCs 2005–2010 ...... 28 14 Worldwide Integrated and Discrete Graphics Penetration in PCs 2005–2010 ...... 30 15 Worldwide AGP and PCI Express Graphics Penetration in PCs 2005–2010 ...... 32 16 Worldwide TPM Penetration in PCs 2005–2010 ...... 34 17 Worldwide PC Card/CardBus Penetration in Notebooks 2005–2010...... 36 18 Worldwide ExpressCard Penetration in Notebooks 2005–2010...... 38 19 Worldwide Floppy Disk Drive Penetration in Notebooks 2005–2010 ...... 40 20 Worldwide VGA Penetration in PCs 2005–2010 ...... 42 21 Worldwide DVI Penetration in PCs 2005–2010...... 44 22 Worldwide HDMI Penetration in PCs 2005–2010...... 47 23 Worldwide DisplayPort Penetration in PCs 2005–2010 ...... 49 24 Key Forecast Assumptions for the Worldwide PC Interface Forecast, 2005-2010...... 51

LIST OF FIGURES

P 1 Worldwide USB Penetration in PCs Forecast ...... 3 2 Worldwide 1394 Penetration in PCs Forecast...... 5 3 Worldwide PCI/PCI Express Penetration in PCs Forecast...... 7 4 Worldwide Serial Port Penetration in PCs Forecast...... 9 5 Worldwide Serial Port Penetration in PCs Forecast by Segment...... 10 6 Worldwide Parallel Port Penetration in Desktops Forecast ...... 11 7 Worldwide Ultrawideband and Bluetooth Penetration in PCs Forecast...... 13 8 Worldwide Wi-Fi 802.11abg Penetration in Notebooks Forecast ...... 15 9 Worldwide Wi-Fi 802.11abg Penetration in Notebooks Forecast by Segment ...... 15 10 Worldwide 802.11n Penetration in Notebooks Forecast ...... 17 11 Worldwide 802.11n Penetration in Notebooks Forecast by Segment ...... 18 12 Worldwide Cellular Penetration in Notebooks Forecast ...... 19 13 Worldwide Cellular Penetration in Notebooks Forecast by Segment ...... 20 14 Worldwide WiMax 802.16e Penetration in Notebooks Forecast...... 22 15 Worldwide WiMax 802.16e Penetration in Notebooks Forecast by Segment ...... 22 16 Worldwide Modem Penetration in PCs Forecast...... 24 17 Worldwide Fast Ethernet and Gigabit Ethernet Penetration in PCs Forecast ...... 27 18 Worldwide PATA and SATA Penetration in PCs Forecast ...... 28 19 Worldwide Integrated and Discrete Graphics Penetration in PCs Forecast ...... 31 20 Worldwide AGP and PCI Express Graphics Penetration in PCs Forecast ...... 33 21 Worldwide TPM Penetration in PCs Forecast ...... 34 22 Worldwide TPM Penetration in PCs Forecast by Segment ...... 35 23 Worldwide PC Card/CardBus Penetration in Notebooks Forecast...... 36 24 Worldwide PC Card/CardBus Penetration in Notebooks Forecast by Segment...... 37 25 Worldwide ExpressCard Penetration in Notebooks Forecast...... 38 26 Worldwide ExpressCard Penetration in Notebooks Forecast by Segment...... 39 27 Worldwide Floppy Disk Drive Penetration in Commercial Notebooks Forecast ...... 41 28 Worldwide VGA Penetration in PCs Forecast ...... 42 29 Worldwide VGA Penetration in PCs Forecast by Segment ...... 43 30 Worldwide DVI Penetration in PCs Forecast...... 44 31 Worldwide DVI Penetration in PCs Forecast by Segment...... 45 32 Worldwide HDMI Penetration in PCs Forecast...... 47 33 Worldwide HDMI Penetration in PCs Forecast by Segment ...... 48 34 Worldwide DisplayPort Penetration in PCs Forecast ...... 49 35 Worldwide DisplayPort Penetration in PCs Forecast by Segment ...... 50

This IDC study tracks and forecasts the worldwide market attach rate (a.k.a. penetration rate) for interfaces and technologies in shipping desktop PCs and mobile PCs from 2005 through 2010. Thirty one interfaces for the desktop and portable PC categories are tracked and their growth rates and shipment numbers are estimated. Technologies and interfaces supported through add-in cards and other aftermarket devices that are added to a PC after the PC's sale to the end user are not covered in this study.

Methodology

This worldwide study is the result of a joint effort between IDC's personal computing and semiconductor research groups. The findings in this report are based on IDC's worldwide PC shipment figures and forecast released on December 4, 2006 and PC semiconductor shipment figures and forecast released in on November 22, 2006. Primary research was gathered through surveys of end-users and chip suppliers. Secondary research was done via input gathered from interviews with PC vendors, chip suppliers and various industry organizations. The current and projected information in this study incorporates the data collected, historical shipment data and a level of modeling to fill in information gaps.

The document includes estimates of actual worldwide shipment figures. Forecasts are generated for 2005-2010 with compound annual growth rates (CAGR) calculated for the same years. IDC reserves the right to adjust historical data if better and more granular information is later provided by vendors.

Note: All numbers in this document may not be exact due to rounding.

SITUATION OVERVIEW

Market adoption of a new PC interface or technology depends on demand trends and requirements passed up the supply chain from the end-user. Since late 2002, PC end-user demand has centered around major trends including mobility, connectivity, consumer alignment (the PC as a hub for consumer devices or as a consumer device itself) and, in corporate markets, security. These trends lie on top of perennial basic end user requirements, including cost, simplicity, reliability, usability, compatibility, and interoperability.

The supply chain, from OEMs to technology providers, including semiconductor vendors, software vendors, and other component providers are pursuing a platform approach, which emphasizes the arrangement of standardized technologies— proprietary technologies have little place—and according to how the end-user uses the PC, which is to say a particular usage model, such as a high-end consumer desktop PC enthusiast or an executive mobile PC user. The platform approach has become a way to address the end-user trends while meeting the basic requirements. Intel's Centrino, for example, was the first attempt to meet the mobility and connectivity needs of mobile PC users. In doing so, Intel was quick to drive cost out of

Throughout the forecast period, IDC expects that the PC supply chain will accelerate use of the platform approach, which means that it will get better at standardizing new technologies, arranging them into solutions, driving out cost, and getting them into volume or more quickly rejecting technologies that resist.

FUTURE OUTLOOK

Forecast and Assumptions

Wired Device Connectivity Interfaces

USB 1.1 and USB 2.0

PC host ports compliant with the Universal Serial Bus (USB) standard are ubiquitous on desktop and mobile PCs today. In 2001, USB 2.0, the successor to the USB 1.1, increased the speed of the connection from PC to device from 1.1's 12 megabits per second (Mbps) to 480Mbps; USB 2.0 is backwards-compatible with USB 1.1. The quick penetration of USB 2.0 on the host side enabled a quick transition from USB 1.1 to USB 2.0 on the peripheral side, driven by optical drives, hard drives, scanners, and USB flash drives (UFD). New USB 1.1 PCs and peripherals survive only in the most price-sensitive consumer and emerging-market segments.

T A B L E 1

Worldwide USB Port Penetration in PCs 2005–2010

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall Notebook Shipment 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Forecast Market Share USB 1.1 6.0% 2.0% 1.0% 0.5% 0.0% 0.0% Units Shipments USB 1.1 3,916,331 1,643,410 1,004,570 595,226 - - -100.0 Market Share USB 2.0 94.0% 98.0% 99.0% 99.5% 100.0% 100.0% Units Shipments USB 2.0 61,355,852 80,527,067 99,452,469 118,449,985 136,784,047 155,233,187 20.4 Overall Desktop Shipment 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Forecast Market Share USB 1.1 3.0% 1.5% 1.0% 0.5% 0.0% 0.0% Units Shipments USB 1.1 4,083,131 2,102,240 1,470,838 776,643 - - -100.0 Market Share USB 2.0 97.0% 98.5% 99.0% 99.5% 100.0% 100.0% Units Shipments USB 2.0 132,021,245 138,047,101 145,612,936 154,551,893 161,952,134 168,935,575 5.1

Source: IDC, December 2006

Worldwide USB Penetration in PCs Forecast

180,000,000 160,000,000 140,000,000 120,000,000 100,000,000 80,000,000 (Units) 60,000,000 40,000,000 20,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks USB 1.1 Desktops USB 1.1 Notebooks USB 2.0 Desktops USB 2.0

Source: IDC, December 2006

The prevalence of USB ports in PCs is due to the standard integration of the USB host controller into southbridge of every PC core logic chipset from vendors like Intel, AMD, VIA, and Nvidia and support inside mainstream operating systems like Microsoft's Windows XP. This standard support means that the cost to the PC OEM to implement the technology is negligible relative to cost to implementing a discrete host controller on a motherboard or add-in card. The typical PC includes 6 ports but we expect the typical number to grow to 8 or even 10 ports as new chipsets supporting the higher numbers ship in new PCs in the second half of 2006. Desktop PCs tend to have 2-4 USB ports on the front panel and the remaining ports coming out the back. Mobile PCs tend to have 2-4 ports on the mobile PC itself and remaining port on the docking station.

In the long term, there will not be a USB 3.0. Instead, USB 2.0 will be succeeded by Wireless USB, which runs the standard USB protocol (the language of communication among USB hosts and peripherals) over the Ultrawideband (UWB) wireless infrastructure. Wireless USB will be able to support 127 attached devices at, initially, the same 480 Mbps throughput of USB 2.0. See the section on Ultrawideband for more insight on the attach rate of USB and 1394 technologies.

Key Assumption(s)

Wired USB will remain ubiquitous in client PCs due to integrated support in the southbridge of all major PC core logic chipset vendors products and support in all major operating systems.

IEEE 1394a and 1394b

IEEE-1394, also known by the Apple trademark of FireWire and the Sony trademark of i.LINK, is a hot-pluggable serial interface for the connection of external devices, principally consumer digital devices such as digital video cameras (DVCs), audio players, and external storage devices. 1394a supports speeds of 100Mbps, 200Mbps, 400Mbps and 1394b adds support up to 800Mbps. Due to the strong consumer leaning of the technology, 1394 has a stronger presence on consumer client PCs than commercial client PCs.

T A B L E 2

Worldwide 1394 Port Penetration in PCs 2005–2010

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall Notebook 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Shipment Forecast Market Share 1394a 23.6% 10.0% 0.0% 0.0% 0.0% 0.0% Units Shipments 1394a 15,427,081 8,217,048 - - - - -100.0 Market Share 1394b 22.9% 31.2% 33.0% 29.2% 29.1% 28.0% Units Shipments 1394b 14,944,066 25,650,989 33,183,845 34,701,679 39,735,766 43,465,292 23.8 Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share 1394a 8.0% 0.0% 0.0% 0.0% 0.0% 0.0% Units Shipments 1394a 10,826,210 ------100.0 Market Share 1394b 17.3% 19.3% 17.6% 16.0% 15.7% 12.0% Units Shipments 1394b 23,591,061 27,053,596 25,894,098 24,875,865 25,437,822 20,272,269 -3.0

Source: IDC, December 2006

Worldwide 1394 Penetration in PCs Forecast

50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000

(Units) 20,000,000 15,000,000 10,000,000 5,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks 1394a Desktops 1394a Notebooks 1394b Desktops 1394b

Source: IDC, December 2006

Invented by Apple in 1986 and adopted as a standard by IEEE in 1995, 1394 was long integrated into Apple PCs, but support among x86 PC OEMs has been inconsistent. Since the connectivity needs of most external devices can be served by the standard USB 2.0 host controller inside all PC core logic chipsets, most OEMs only implement a discrete 1394 host controller on PC SKUs or optional add-in boards targeted towards consumers willing to pay for the extra performance that 1394 offers over USB 2.0. In addition to the higher cost to implement, IEEE-1394's attach rate has been limited by inconsistent support in operating systems. While the Mac OS and Linux have full 1394a and 1394b support, Microsoft's Windows XP has limited support for 1394 to the 100 Mbps speed. Microsoft's Windows Vista operating system will initially support 1394a only; 1394b support will be provided in a service pack.

In the long term, IDC forecasts that 1394b will supplant 1394a but achieve a peak attach rate in desktop PCs of less than 20% and a peak attach rate in mobile PCs of 33% in the middle of the forecast period before beginning a slow decline.

Key Assumption(s)

IEEE-1394 will not gain sufficient support from core logic chipset vendors sufficient to lowerthe cost to implement IEEE-1394 to the point where it is an easy decision for a PC OEM to implement it as a standard feature.

To the extent that 1394/Firewire/i.Link technology remains in PCs will be determined by the success of Wireless 1394, which will begin replacing wired

PCI and PCI-Express/Mini-PCI and Mini PCI-Express

PCI-Express (PCI-E), a chip-interconnect and device I/O technology invented by Intel and now under the control and development of the PCI Special Interest Group began to appear in desktop PCs in 2004 and mobile PCs in 2005. While PCI is a single parallel bus shared by the multiple peripherals connected to it, PCI-E is a point-to- point serial link which devotes all of its bandwidth to the connected device. In contrast to a parallel link which carries several streams of data along multiple channels, this serial link carries a single stream of data (Universal Serial Bus, IEEE-1394, Serial ATA and Gigabit Ethernet are other examples of serial technology).

PCI-E links can be implemented in one or more lanes, scaling the technology according to the needs of the connected device. A single 'x1' PCI-E link supports a maximum net bandwidth of 5 gigabits per second (5Gpbs). In addition to x1, the PCI- E specification allows for x4 (20Gbps), x8 (40Gbps), x16 (80Gbps), and x32 (160Gbps) lanes to form the entire link.

Client PCs utilize the basic x1 link for add-in cards and the x16 link for graphics cards. PCI-E is backwards compatible with PCI, so PCI add-in cards can be plugged into x1 PCI-E slots, if necessary. Core logic chipsets that support PCI-E on motherboards typically implement two PCI add-in card slots and two PCI-E add-in card slots. As a result, attach rates for PCI and PCI-E are not exclusive of each other and can total to more than 100 percent.

Transactional (buying 1, 2, or some small number of systems) markets, like consumers, are driving the adoption of PCI-E faster than are commercial markets and those with a large installed base of PC's to change over. While consumers value performance features, like a fast graphics card in the x16 slot or a TV tuner in a x1 add-in card slot, corporations tend to value compatibility and stability over performance and will more likely have older PCI or even proprietary PCI add-in cards to support for longer periods.

T A B L E 3

Worldwide PCI/PCI Express Penetration in PCs 2005–2 0 1 0

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Notebook Shipment Forecast Market Share 38.9% 73.3% 92.2% 98.5% 100.0% 100.0% Units Shipments 25,407,197 60,230,960 92,626,413 117,211,915 136,784,047 155,233,187 43.6 Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share 59.4% 87.2% 97.4% 99.7% 100.0% 100.0% Units Shipments 80,782,868 122,224,377 143,186,054 154,901,382 161,952,134 168,935,575 15.9

Source: IDC, December 2006

F I G U R E 3

Worldwide PCI/PCI Express Penetration in PCs Foreca s t

180,000,000 160,000,000 140,000,000 120,000,000 100,000,000 80,000,000 (Units) 60,000,000 40,000,000 20,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks Desktops

Source: IDC, December 2006

PCI-E has become mainstream in desktop and mobile PCs due to the support by a broad swath of device OEMs and semiconductor suppliers, including all of the major desktop and mobile chipset suppliers. Over the next two to three years, we expect

©2006 IDC # 7 that PCI-E will fill out its mission of replacing PCI (as originally intended) as a common interconnect between chips and between chips and devices inside client and mobile PCs. In desktop PCs, this includes completely replacing AGP slots for graphics cards slots in and entirely replacing PCI add-in slots. In mobile PCs, this includes replacing AGP sockets for graphics controller modules and entirely replacing Mini-PCI add-in sockets with Mini-PCI-E add-in sockets. Presently, OEMs use Mini- PCI or Mini-PCI-E sockets to embed Wi-Fi wireless LAN modules, but we expect contention for these sockets to grow as new wireless connectivity standards emerge, including WWAN and WiMax and new technologies, such as NAND flash caching modules. PCI-E will also be used by hot-pluggable cards compatible with the PCMCIA's new ExpressCard standard, which can utilize either the USB 2.0 or PCI- Express buses to connect a device to a mobile PC.

In the long-term, we expect PCI-E to move outside the box as an interconnect between devices. These devices could be containers for subsystems heretofore contained within a single PC chassis. Creative OEMs could, for example, put storage drives and add-in device slots in one box at an end-user's desk and remove the mainboard components to a second box that resides in a centrally controlled data center or that is a workgroup device supporting several end-users. Additionally, PCI-E could serve even non-PC applications, including networking and telecommunications devices.

Please see the "ExpressCard" and "PCI and PCI-Express Graphics" sections for additional discussion of PCI-E-related technologies.

Key Assumption(s)

The cost structure of the PC encourages standards that are applied across multiple PC subsystems. PCI-Express' backwards-compatibility with PCI and initial support by major device and semiconductor suppliers are driving initial volume and development of infrastructure that will reduce future implementation costs which, in turn, will make PCI-E increasingly attractive as a common interconnect for other subsystems.

Increasing performance across multiple subsystems in a PC (e.g. processor and memory) forces development of any subsystem that becomes a bottleneck. PCI- E's scaleable architecture will encourage use of multiple-lane implementations that leverage existing PCI-E infrastructure.

Serial Port

The serial port has been a staple interface in PCs used to connect peripherals, such as a modem, to a PC. However, the significance of the serial port has diminished with the emergence of USB, which is smaller, faster and more flexible than the serial port.

Still, the serial port interface continues to have a presence in PCs because of legacy issues associated with the commercial segment. The size of the serial port makes it a convenient fit in notebooks as well as desktops.

Worldwide Serial Port Penetration in PCs 2005–2010

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Notebook Shipment Forecast Market Share 14.9% 8.5% 3.9% 0.0% 0.0% 0.0% Units Shipments 9,750,048 6,965,782 3,918,649 - - - -100.0 Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share 21.6% 15.4% 9.3% 0.0% 0.0% 0.0% Units Shipments 29,343,219 21,622,118 13,739,635 - - - -100.0

Source: IDC, December 2006

F I G U R E 4

Worldwide Serial Port Penetration in PCs Forecast

35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 (Units) 10,000,000 5,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks Desktops

Source: IDC, December 2006

Worldwide Serial Port Penetration in PCs Forecast b y S e g m e n t

35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 (Units) 10,000,000 5,000,000 0 2005 2006 2007 2008 2009 2010

Commercial notebook Consumer notebook

Commercial desktop Consumer desktop

Source: IDC, December 2006

We expect the penetration rate of the serial port interface to nose dive. USB has been established in the market for some time and with the pending emergence of wireless USB and Bluetooth there are even fewer reasons for serial to continue to exist. The verticals within the commercial market supporting serial are already moving away from the serial port interface.

In the short term, the serial port interface will hold a dwindling share in the market buoyed by verticals within the commercial market. However, as those niches move away from the serial port interface in the medium term, support for the serial port interface will become nonexistent as will its share.

Key Assumption(s)

Support for the serial interface by the commercial PC segment continues on its current declining trajectory.

Parallel Port

The parallel port interface has been a staple interface in PCs used to connect peripherals, such as printers, to a PC. However, USB has proven to be a smaller, more efficient interface for those peripherals and has supplanted the parallel port.

Still, the slow refresh rates of printers and legacy issues associated with the commercial segment have allowed the parallel port interface to maintain a shrinking share in the PC market. The size of the parallel port limits it addressable market to desktops.

T A B L E 5

Worldwide Parallel Port Penetration in Desktops 200 5 – 2 0 1 0

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 157,751,252 3.0 Shipment Forecast Market Share 21.6% 15.4% 9.3% 0.0% 0.0% 0.0% Units Shipments 29,343,219 21,622,118 13,739,635 - - - -100.0

Source: IDC, December 2006

F I G U R E 6

Worldwide Parallel Port Penetration in Desktops For e c a s t

35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 (Units) 10,000,000 5,000,000 0 2005 2006 2007 2008 2009 2010

Source: IDC, December 2006

The parallel port interface has been losing ground to USB for some time. In the short term, we expect niches within the commercial PC segment to continue to move away from the parallel port interface. In the medium term, we expect total support for the parallel port interface to collapse completely.

Key Assumption(s)

Support for the parallel interface by the commercial PC segment continues on its current declining trajectory.

Bluetooth and Ultra-Wideband

Bluetooth, the original wireless personal area network technology (WPAN), was designed to be a low-power, short-range technology that would allow multiple kinds of devices, including mobile phones, headsets, and mobile PCs to connect to each other for data and voice communications. Ultra-wideband (UWB) is another WPAN technology focused on high-speed wireless communications between a PC and the peripherals and consumer electronic devices that surround it, such as a digital television or a set-top box.

T A B L E 6

Worldwide Ultrawideband and Bluetooth Penetration i n PCs 2005–2010

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall Notebook 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Shipment Forecast Market Share 0.0% 0.0% 0.0% 5.4% 8.8% 15.0% Ultrawideband Units Shipments - - - 6,428,441 12,036,996 23,284,978 Ultrawideband Market Share 16.7% 25.8% 35.8% 44.8% 44.7% 42.0% Bluetooth Units Shipments 10,920,036 21,158,898 35,928,460 53,367,968 61,156,148 65,197,938 43.0 Bluetooth Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share 0.0% 0.0% 0.0% 3.2% 5.8% 10.6% Ultrawideband Units Shipments - - - 4,970,513 9,393,224 17,907,171 Ultrawideband Market Share 4.7% 7.9% 13.7% 20.6% 23.7% 25.0% Bluetooth Units Shipments 6,452,207 11,082,373 20,212,859 32,067,576 38,423,144 42,233,894 45.6 Bluetooth

Source: IDC, December 2006

Worldwide Ultrawideband and Bluetooth Penetration i n PCs F o r e c a s t

70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 (Units) 20,000,000 10,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks Ultrawideband Desktops Ultrawideband

Notebooks Bluetooth Desktops Bluetooth

Source: IDC, December 2006

Bluetooth adoption in PCs has been slower than originally forecasted. Principally, Bluetooth has depended on connectivity to mobile phones, so the technology has been waiting for adoption in mobile phones to move ahead and to drive the need to connect phones to PCs. IDC expects that cell phone adoption in mobile phones to reach approximately 35% this year.

The standard technology upon which UWB is based has only just emerged after one of the two competing UWB industry groups, the Ultra-Wideband Forum, collapsed due to lack of industry support. The surviving WiMedia Alliance and its members have proceeded to develop UWB infrastructure, and compliant devices are available, leaving interoperability one of the chief hurdles to mass adoption.

In 2006, the Bluetooth Special Interest Group (SIG) and the WiMedia Alliance announced that the Bluetooth SIG will reference the WiMedia Alliance's UWB specification. Bluetooth technology will continue to support low-power applications while UWB will be approved for high-speed applications and branded under the Bluetooth trademark. Devices that need to connect to both low-power and high-speed WPAN devices, will incorporate both a Bluetooth radio and a UWB radio.

Wireless USB (WUSB) is an extension to the wired USB standard and so represents the successor to the wired USB 2.0 standard for connecting peripherals to PCs. WUSB runs the USB protocol over the UWB WPAN technology. Also under

Key Assumption(s)

Standardization of a technology is the primary prerequisite before mass adoption. For any connectivity standard, compatibility with the standard and proven interoperability of products being connected is the next prerequisite. UWB adoption will be facilitated as interoperability is proven through 2007.

Wireless Networking Interfaces

Wireless Networking – 802.11abg

This interface refers to wireless access to resources, such as a shared Internet connection or a printer, on a local network.

This interface is based on industry standards and free radio spectrum making it an inexpensive and popular technology for connecting devices and services. Product manufacturers have taken advantage of this affordable wireless interface and embedded in most mobile products. Notebooks have benefited from and provided an ideal platform for demonstrating the utility of Wi-Fi technology. The range of wireless networking is limited but the throughput within the range of a network is very high compared to other networks with a larger range. This section refers to the 802.11 a,b and g specifications, which are current industry standards and have been tested for interoperability by industry groups. A new specification, 802.11n, is in the process of being standardized and will increase the range and throughput of Wi-Fi networks. This new standard will likely continue to build on the momentum of Wi-Fi networking.

T A B L E 7

Worldwide Wi-Fi 802.11abg Penetration in Notebooks 2 0 0 5 – 2 0 1 0

Source: IDC, December 2006

Worldwide Wi-Fi 802.11abg Penetration in Notebooks F o r e c a s t

120,000,000

100,000,000

80,000,000

60,000,000 (Units) 40,000,000

20,000,000

0 2005 2006 2007 2008 2009 2010

Source: IDC, December 2006

F I G U R E 9

Worldwide Wi-Fi 802.11abg Penetration in Notebooks Forecast by Segment

70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 (Units) 20,000,000 10,000,000 0 2005 2006 2007 2008 2009 2010

Commercial Consumer

Source: IDC, December 2006

Wi-Fi networking based on the existing standards is reaching the zenith of its popularity. Still, we don't expect a major shift in the market presence of this connectivity technology. We expect to see an evolution of the technology similar to

©2006 IDC # 15 what occurred when 802.11g came on the scene and took over for the 802.11b standard. Since 802.11g and 802.11b are backward-compatible and 802.11g just added more throughput to Wi-Fi networks, the hand off was fairly seamless. We expect the transition to 802.11n to play out similarly.

Market share growth for Wi-Fi technology based on 802.11abg standards embedded in notebooks will continue to be steep through 2007 when it reaches its peak at nearly 98 percent penetrated in notebooks shipped. This high saturation rate will be driven mainly by the low cost of the technology, its near omnipresence in public spaces and its utility.

Concurrent with the peaking of Wi-Fi technology based on 802.11abg standards is the emergence of products based on the draft version of the 802.11n specification. The consumer market will be more accepting of products based on the 802.11n specification since it is less security and infrastructure conscious than the commercial segment. The consumer segment is also hungrier for additional range and, to a lesser degree, throughput. The result will be a gradual ebbing of market share for embedded Wi-Fi technology based on 802.11abg standards driven mainly by consumer migration to 802.11n based products. As the 802.11n specification is standardized and tested for interoperability, the commercial segment will gradually grow to accept products based on the 802.11n standard.

Over the long term, we don't expect the market for products based on different Wi-Fi standards to become a zero sum game. We expect the markets for products based on the different Wi-Fi standards to combine as they had done historically. We also expect Wi-Fi technology to complement a larger patchwork of wireless connectivity technologies each fitting specific usage models. Products using Wi-Fi technology will provide high speed local connections while Bluetooth will provide shorter range connections for peripherals and products using WAN technology will provide lower throughput but farther reaching connectivity.

Key Assumption(s)

The 802.11n standard will be compatible with the 802.11bg standards. The adoption of other wireless connectivity specifications will be gradual and their throughputs won't rival that of the Wi-Fi technologies.

Wireless Networking – 802.11n

This interface refers to wireless access to resources, such as a shared Internet connection or a printer, on a local network.

This interface is based on what we expect will soon become an industry standard and free radio spectrum making it an inexpensive and popular technology for connecting devices and services. Our forecast includes notebooks using draft versions of the 802.11n specification. The 802.11n specification differs from the Wi-Fi standards by allowing for networks with farther range and higher throughputs. Still the range of wireless networks using 802.11n is limited compared to other networks with a larger range, such as cellular WAN. This emerging specification will likely continue to build on the momentum of Wi-Fi networking.

T A B L E 8

Worldwide 802.11n Penetration in Notebooks 2005–201 0

2005 2006 2007 2008 2009 2010 Overall Notebook Shipment 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 Forecast Market Share 0.0% 0.5% 15.0% 30.6% 50.2% 76.1% Units Shipments - 403,758 15,037,734 36,434,915 68,637,792 118,190,035

Source: IDC, December 2006

F I G U R E 1 0

Worldwide 802.11n Penetration in Notebooks Forecast

140,000,000 120,000,000 100,000,000 80,000,000 60,000,000 (Units) 40,000,000 20,000,000 0 2005 2006 2007 2008 2009 2010

Source: IDC, December 2006

Worldwide 802.11n Penetration in Notebooks Forecast by S e g m e n t

70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 (Units) 20,000,000 10,000,000 0 2005 2006 2007 2008 2009 2010

Commercial Consumer

Source: IDC, December 2006

We expect the curve for the penetration rate of notebooks with 802.11n to be fairly predictable. A desire for farther reaching networks and higher throughputs will drive the penetration rate of 802.11n-based notebooks and will start in the consumer segment. Initial traction for the emerging 802.11n specification in consumer notebooks will start in high-end portables. The adoption curve in the consumer segment will be fairly linear. The adoption curve in the commercial segment will be less linear. The commercial notebook segment will wait until the specification is ratified as a standard, interoperability tests are completed and prices come down before it will widely adopt 802.11n. Once the cautions are removed, the curve for the penetration rate will be steep.

We don't expect the adoption of the 802.11n standard to result in the exclusion of the other 802.11 standards. Eventually we expect the standards to combine and penetration rates of the Wi-Fi standards in notebooks to be very high.

Key Assumption(s)

The 802.11n standard will be compatible with the 802.11bg standards. The standardization process and the interoperability testing process will be completed in 2007. The adoption of other wireless connectivity specifications will be gradual and their throughputs won't rival that of the Wi-Fi technologies.

Cellular Wide Area Networking

This interface refers to broadband wireless access to the Internet over cellular-based networks, such as EVDO and HSPDA, embedded mainly in notebooks.

18 # ©2006 IDC Wi-Fi networking has helped to popularize the concept of being wirelessly connected more often. However, the coverage limitations of hot spots presents an opportunity for cellular wide are networks which have greater range but less throughput. The appeal seems fairly obvious to users thanks to the familiarity of wireless connectivity built up by Wi-Fi networks. The relatively recent availability of this interface, low customer base and high cost of the service have limited its penetration thus far.

T A B L E 9

Worldwide Cellular Penetration in Notebooks 2005–20 1 0

Source: IDC, December 2006

F I G U R E 1 2

Worldwide Cellular Penetration in Notebooks Forecas t

45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 (Units) 15,000,000 10,000,000 5,000,000 0 2005 2006 2007 2008 2009 2010

Source: IDC, December 2006

Worldwide Cellular Penetration in Notebooks Forecas t by S e g m e n t

30,000,000

25,000,000

20,000,000

15,000,000 (Units) 10,000,000

5,000,000

0 2005 2006 2007 2008 2009 2010

Commercial Consumer

Source: IDC, December 2006

In the short term, we believe the prospect for cellular wide area technology embedded in notebooks is fairly low as there aren't many notebooks with embedded cellular radios in the market and the high cost of cellular PC Cards have not made the opportunity available to users yet. In addition, the high cost of the service ($60 to $80 per month) is another significant obstacle essentially restricting consumer growth. Commercial markets have been targeted by vendors as the initial and key market for the moment.

Vendors view this technology as a key differentiator with pent up demand based on the popularity of Wi-Fi-based wireless networking. As a result, vendors have become very aggressive in making cellular wide area technology available. We expect a rise in the shipments of notebooks with cellular radios which will encourage cellular carriers to lower the cost of the service. They have already become more flexible in the service options available, including offering a day pass for cellular broadband service. This will result in a penetration rate of 6 percent in 2007.

In the medium term, we expect a wider availability of notebooks with embedded cellular radios with costs for the radios coming down. These radios will increasingly become included in high-end consumer notebooks. As volumes of devices with access to cellular networks increase, we expect service costs to decrease as well. While declining service costs will not fall enough to capture a significant segment of the mainstream market, we do expect an up tick in consumer adoption in 2009. We expect penetration growth rates to increase rapidly and the penetration rate will reach up to 15 percent by 2009.

20 # ©2006 IDC In the long term, we expect the momentum for cellular wide area technology will continue with a high penetration growth rate and penetration rate reaching 25 percent of notebook shipments.

Key Assumption(s)

Monthly service costs will stay above $30 through most of the forecast period. An increase in the volumes of embedded radios will justify a decrease in service fees over the forecast period resulting in an increase in penetration across the commercial and consumer segments.

WiMax

Although major industry players, including Sprint, Motorola, Intel, and Samsung have announced sizeable investments in WiMax, the technology's future is uncertain and likely will not achieve mass adoption until 2010 or beyond. Despite being marketed as a long-rage extension of Wi-Fi, and so focused on mobile PCs, WiMax has little in common with Wi-Fi The biggest difference is that Wi-Fi can be enabled with an inexpensive client and a $30 access point, but WiMAX needs a carrier-grade wireless infrastructure for a full rollout. Even with these differences, key PC players such as Intel are expecting nomadic and fully-mobile WiMAX implementations to be competitive with and sometimes complementary to Wi-FI. The buzz around "Metro-Fi" or citywide Wi-Fi also poses some questions to WiMAX usage, although this Wi-Fi business model has yet to be proven. A lot of the hype around WiMAX is the potential for the technology to be used as a backhaul for Wi-Fi hotspots, but the small number of hotspots, and the differences in regional usage models (rural areas and developing countries are the ideal target for WiMAX, while hotspots tend to be in more developed area) does not make for a serious WiMAX opportunity.

T A B L E 1 0

Worldwide WiMax 802.16e Penetration in Notebooks 20 0 5 – 2 0 1 0

Source: IDC, December 2006

Worldwide WiMax 802.16e Penetration in Notebooks Fo r e c a s t

60,000,000

50,000,000

40,000,000

30,000,000 (Units) 20,000,000

10,000,000

0 2005 2006 2007 2008 2009 2010

Source: IDC, December 2006

F I G U R E 1 5

Worldwide WiMax 802.16e Penetration in Notebooks Fo recast by Segment

40,000,000 35,000,000 30,000,000 25,000,000 20,000,000

(Units) 15,000,000 10,000,000 5,000,000 0 2005 2006 2007 2008 2009 2010

Commercial Consumer

Source: IDC, December 2006

In the short term, the growth of WiMAX will be slow and steady as more fixed networks come online. IDC expects much of this growth to come from rural or semi- rural areas and developing regions, where cable and DSL plants do not reach

22 # ©2006 IDC potential subscribers, or there is no wired infrastructure at all. Even then, WiMAX will face some competition from satellite broadband and, increasingly, broadband over power lines. WiMAX also faces difficulty with finding spectrum worldwide, which may limit its rollout in certain geographies.

The WiMAX mobility play will kick in during 2007, starting with some nomadic 802.16- 2004 implementations, then followed by 802.16e or potentially mixed-mode networks. Intel will continue to drive WiMAX, especially mobile WiMAX, since mobile broadband will increase demand for new mobile PCs. Although Intel had been positioning WiMAX against 3G, and it is very likely that Intel will include WiMAX in future versions of its Centrino platform, the company softened its stance when it put a WWAN solution on its Centrino platform roadmap this year.

Key Assumption(s)

A majority of broadband subscribers will use WiMax rather than alternative technologies where cable, DSL, and Ethernet services are not available.

Intel will bring WiMax into its Centrino platform before the end of the decade.

Wired Networking Interfaces v.90/92 Analog Modems

As the lowest common denominator in communication between PCs all over the world, modems continue to be common devices in PCs. However, some PC segments, notably corporate desktops, have begun to remove modems due to the assumption of the availability of a higher speed ethernet data network.

Modems have been around so long and have been so cost-reduced that the digital portions of the modem have long been integrated into the core logic chipset, leaving only the analog (CODEC and digital access arrangement) portion behind in discrete form. In fact, the majority of modem functionality is actually run in software form on the host CPU, so that modems today are commonly referred to as "soft modems."

T A B L E 1 1

Worldwide Modem Penetration in PCs 2005–2010

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Notebook Shipment Forecast Market Share 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Units Shipments 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share 50.0% 35.0% 25.0% 15.0% 10.0% 0.0% Units Shipments 68,052,188 49,052,269 36,770,943 23,299,280 16,195,213 - -100.0

Source: IDC, December 2006

F I G U R E 1 6

Worldwide Modem Penetration in PCs Forecast

180,000,000 160,000,000 140,000,000 120,000,000 100,000,000 80,000,000 (Units) 60,000,000 40,000,000 20,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks Desktops

Source: IDC, December 2006

IDC believes that PC OEMs will slowly migrate modem technology out of PCs over the forecast period, out of corporate desktop PCs first, then out of consumer desktop PCs as the availability of consumer broadband technology becomes assured. OEMs will retain modems in their mobile PCs well through the end of the decade until wireless communications in PCs—short range (e.g. WLAN), metropolitan (e.g.

Key Assumption(s)

OEM support for v.90/92 analog modem support in client PCs depends upon the availability of a high-speed data network in the customer (consumer or commercial) and regional segment where the client PC will operate. The assumption of high-speed ethernet networks in corporate sites means that modems will be retired from commercial desktop first. As consumer broadband technology becomes ubiquitous in a given region, modem adoption will decrease in PCs available in that region.

Fast Ethernet and Gigabit Ethernet

While the need for the additional bandwidth that Gigabit Ethernet (GbE) provides over Fast Ethernet (FE) remains dubious, the shrinking premium of GbE, particularly the pending integration of the media access controller (MAC) portion of the technology into new PC core logic chipsets, means that cost is less an issue to corporations seeking to future proof PCs against the eventual need for that bandwidth. Few IT managers, after years of budget restraints, are concerned with the relatively small cost of upgrading the client side of their infrastructure when they consider that cost in the context of upgrading their entire networking infrastructure in PCs, servers, LAN wiring closets, and datacenters. One facilitator of GbE's penetration in PCs will be the introduction of the PCI Express serial interface which, as opposed to PCI, can take advantage of GbE's bandwidth capabilities. All major OEMs of corporate desktop PCs have made GbE standard except for their extremely value conscious lines and those for emerging markets.

T A B L E 1 2

Worldwide Fast Ethernet and Gigabit Ethernet Penetr ation in PCs 2005–2010

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Notebook Shipment Forecast Market Share 31.5% 11.1% 5.0% 1.0% 0.0% 0.0% Fast Ethernet Units Shipments 20,528,102 9,120,923 5,022,852 1,190,452 - - -100.0 Fast Ethernet Market Share 62.1% 80.0% 90.0% 97.0% 100.0% 100.0% Gigabit Ethernet Units Shipments 84,498,543 112,119,473 132,375,396 150,668,679 161,952,134 168,935,575 14.9 Gigabit Ethernet Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share 37.9% 20.0% 10.0% 3.0% 0.0% 0.0% Fast Ethernet Units Shipments 51,605,834 28,029,868 14,708,377 4,659,856 - - -100.0 Fast Ethernet Market Share 68.6% 88.9% 95.0% 99.0% 100.0% 100.0% Gigabit Ethernet Units Shipments 44,744,082 73,049,554 95,434,188 117,854,759 136,784,047 155,233,187 28.2 Gigabit Ethernet

Source: IDC, December 2006

Worldwide Fast Ethernet and Gigabit Ethernet Penetr ation in PCs Forecast

180,000,000 160,000,000 140,000,000 120,000,000 100,000,000 80,000,000 (Units) 60,000,000 40,000,000 20,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks Fast Ethernet Desktops Fast Ethernet

Notebooks Gigabit Ethernet Desktops Gigabit Ethernet

Source: IDC, December 2006

Key Assumption(s)

The integration of GbE media access controllers into the southbridge of mainstream core logic chipsets is boosting GbE adoption towards 100% in corporate markets.

Increasing adoption of high-speed connectivity technologies, including 802.11n and possibly WiMax, in the home, will spur GbE adoption in consumer PCs.

Storage Interfaces

Parallel ATA and Serial ATA

The parallel (data sent on multiple wires all at once) version of the AT Attachment (ATA) storage interface standard has been a feature of PC designs since the mid- 1980s. However, beginning in 2003, new chipsets that support the serial (data sent on a single wire at higher speed) version of ATA began to usher in demand for hard drives supporting SATA.

Worldwide PATA and SATA Penetration in PCs 2005–201 0

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall Notebook 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Shipment Forecast Market Share PATA 100.0% 100.0% 80.0% 40.0% 13.0% 4.0% Units Shipments 65,272,183 82,170,477 80,365,632 47,618,085 17,781,926 6,209,327 -37.5 PATA Market Share SATA 75.0% 100.0% 100.0% 100.0% 100.0% 100.0% Units Shipments 48,954,138 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 26.0 SATA Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share PATA 100.0% 67.0% 20.0% 11.0% 5.0% 1.0% Units Shipments 136,104,376 93,900,059 29,416,755 17,086,139 8,097,607 1,689,356 -58.4 PATA Market Share SATA 95.0% 100.0% 100.0% 100.0% 100.0% 100.0% Units Shipments 129,299,158 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 5.5 SATA

Source: IDC, December 2006

F I G U R E 1 8

Worldwide PATA and SATA Penetration in PCs Forecast

180,000,000 160,000,000 140,000,000 120,000,000 100,000,000 80,000,000 (Units) 60,000,000 40,000,000 20,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks PATA Desktops PATA

Notebooks SATA Desktops SATA

Source: IDC, December 2006

28 # ©2006 IDC While cost of SATA hard drives initially inhibited adoption, the support for more SATA drives and fewer PATA drives by these chipsets have facilitated SATA adoption and, as volume has increased, the price premium for SATA drives has ebbed away. Today, all major OEMs support SATA hard drives in their PCs. This year, chipset vendors are focused on encouraging optical drives to convert to the SATA standard by reducing the number of PATA drives supported in a system to either one or zero. Desktop optical drives will transition in 2007 and 2008, mobile optical drives will transition in 2009 and 2010.

Key Assumption(s)

The reduction of available Parallel ATA channels supported by new core logic chipsets will spur storage devices, notably optical drives, heretofore reliant on PATA to transition to the SATA interface in 2006 and 2007.

Graphics Interface and Technologies

Integrated and Discrete Graphics

Discrete graphics processing units (GPUs), such as those from AMD and Nvidia, reside on a graphics card that plugs into a motherboard slot (desktop PC) or socket (mobile PC) with a dedicated path to the northbridge of the core logic chipset. The graphics card supports dedicated DRAM, called a frame buffer, to support the functions of the GPU. In systems with integrated graphics processing units (IGPs), the GPU is built into the northbridge itself. For IGPs, rarely is discrete DRAM used for the frame buffer. Instead, the frame buffer is effectively merged with main memory in the form of a shared memory architecture (SMA), also referred to as a unified memory architecture (UMA).

Since Intel introduced its IGP chipsets for value systems in the late 1990s, IGP has served as a baseline for minimally acceptable graphics capabilities in a PC. With the advent of no single graphics-intensive mainstream application to drive massive demand for a discrete GPU, as the capabilities of IGPs have improved, the percentage of systems shipping with IGPs have increased as the expensive of discrete GPUs.

T A B L E 1 4

Worldwide Integrated and Discrete Graphics Penetrat ion in PCs 2005–2010

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall Notebook 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Shipment Forecast Market Share 72.1% 79.5% 84.0% 88.0% 90.0% 90.0% Integrated Units Shipments 47,093,566 65,325,529 84,383,913 104,759,786 123,105,642 139,709,868 24.3 Integrated Market Share 29.5% 27.7% 28.0% 28.6% 29.6% 26.0% Discrete Units Shipments 19,248,767 22,777,656 28,085,277 34,029,074 40,488,078 40,360,629 16.0 Discrete Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share 67.8% 75.0% 80.0% 83.0% 85.0% 85.0% Integrated Units Shipments 92,244,260 105,112,006 117,667,019 128,922,684 137,659,314 143,595,239 9.3 Integrated Market Share 59.6% 59.7% 60.1% 60.1% 61.3% 55.0% Discrete Units Shipments 81,051,082 83,715,976 88,366,460 93,422,348 99,286,375 92,914,566 2.8 Discrete

Source: IDC, December 2006

Worldwide Integrated and Discrete Graphics Penetrat ion in PCs Forecast

160,000,000 140,000,000 120,000,000 100,000,000 80,000,000

(Units) 60,000,000 40,000,000 20,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks Integrated Desktops Integrated

Notebooks Discrete Desktops Discrete

Source: IDC, December 2006

IDC expects that the penetration of integrated graphics chipsets will level off in the 80-90% range, depending on form factor, due to a certain percentage of less cost- sensitive PC buyers who disdain integrated graphics in favor of the performance level offered by discrete graphics. We estimate these buyers to be roughly 20% of the discrete graphics controller market, those in the performance and enthusiast segments. Additionally, the significant percentage of PCs that are shipped with two graphics controllers — one integrated and one on a graphics card — suggests that even mainstream PC buyers, if the price is right, will upgrade to discrete graphics at the time of purchase. Such a phenomenon suggests a saturation point or ceiling for integrated graphics penetration.

Key Assumption(s)

Integrated graphics will continue to be able to support the vast majority of mainstream productivity applications in a PC and so integrated graphics' low cost will make IGP chipsets the rule and discrete graphics the exception

Microsoft's Windows Vista operating system, particularly its 3D user interface, and its DX10 3D graphics programming interface will create more mainstream demand for the performance capabilities of discrete graphics controllers. Core logic chipset suppliers will accelerate support for DX10 in the IGP products.

The Accelerated Graphics port was introduced in 1997 to provide a dedicated interface for graphics cards and remove the burden of carrying graphics signals from the overburdened PCI bus. PCI-Express, described in the "PCI and PCI- Express/Mini-PCI and Mini PCI-Express" section of this study was introduced in 2004 to begin unifying chip and device interconnects back under a common standard, starting with graphics and add-in card I/O. Today, systems still supporting the Accelerated Graphics Port (AGP) are increasingly confined to the most value- conscious systems and in emerging markets and we expect that AGP will disappear by the end of the forecast period.

T A B L E 1 5

Worldwide AGP and PCI Express Graphics Penetration in PCs 2005–2010

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall Notebook 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Shipment Forecast Market Share AGP 61.1% 26.7% 7.8% 1.5% 0.0% 0.0% Units Shipments AGP 39,864,986 21,939,517 7,830,626 1,833,296 - - -100.0 Market Share PCI 59.4% 87.2% 97.4% 99.7% 100.0% 100.0% Express Units Shipments PCI 25,407,197 60,230,960 92,626,413 117,211,915 136,784,047 155,233,187 43.6 Express Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share AGP 40.6% 12.8% 2.7% 0.3% 0.0% 0.0% Units Shipments AGP 55,321,509 17,924,964 3,897,720 427,153 - - -100.0 Market Share PCI 38.9% 73.3% 92.2% 98.5% 100.0% 100.0% Express Units Shipments PCI 80,782,868 122,224,377 143,186,054 154,901,382 161,952,134 168,935,575 15.9 Express

Source: IDC, December 2006

Worldwide AGP and PCI Express Graphics Penetration in PCs F o r e c a s t

180,000,000 160,000,000 140,000,000 120,000,000 100,000,000 80,000,000 (Units) 60,000,000 40,000,000 20,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks AGP Desktops AGP

Notebooks PCI Express Desktops PCI Express

Source: IDC, December 2006

Key Assumption(s)

Increasing standardization upon PCI-Express as a chip and device interconnect will drive competing graphics interconnect standards out of the market.

Security

Trusted Platform Modules

The industry's first significant attempt to make security fundamental is the IC called the Trusted Platform Module (TPM). The TPM is a microcontroller used to store passwords and digital keys. A PC's functions relating to security are ground in this IC which, being on a motherboard or integrated along with another IC on the motherboard, fixes the PC's identity. The TPM acts a common slave to all security- related functions (applications and services) by storing and reporting fundamental configuration information. Manufacturers of discrete TPM ICs include Atmel, Infineon, Lenovo (in China), Sinosun, ST Microelectronics, and Winbond (after purchasing National Semiconductor's PC division). Manufacturers of integrated TPMs include Broadcom, which has integrated the technology into a Gigabit Ethernet (GbE) controller, and Winbond, which has integrated the TPM into a Super I/O chip.

Worldwide TPM Penetration in PCs 2005–2010

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall Notebook 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Shipment Forecast Market Share 35.9% 47.4% 59.0% 72.1% 88.8% 100.0% Units Shipments 23,400,114 38,937,432 59,277,897 85,877,685 121,449,282 155,233,187 46.0 Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share 1.2% 2.9% 11.2% 40.5% 78.8% 96.3% Units Shipments 1,676,755 3,996,148 16,513,946 62,903,436 127,544,093 162,613,562 149.7

Source: IDC, December 2006

F I G U R E 2 1

Worldwide TPM Penetration in PCs Forecast

180,000,000 160,000,000 140,000,000 120,000,000 100,000,000 80,000,000 (Units) 60,000,000 40,000,000 20,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks Desktops

Source: IDC, December 2006

Worldwide TPM Penetration in PCs Forecast by Segmen t

120,000,000

100,000,000

80,000,000

60,000,000 (Units) 40,000,000

20,000,000

0 2005 2006 2007 2008 2009 2010

Commercial desktops Commercial notebooks

Consumer desktops Consumer notebooks

Source: IDC, December 2006

IDC believes that the TPM technology will increasingly penetrate the PC bill of materials integrated into other ICs. To be successful, the security solution demands for ubiquity and integration into other technologies means that the TPM technology can be offered as a value-added feature for little or no additional cost and reduce the space it occupies. Therefore, we believe that the long-term proposition for discrete TPMs as a revenue opportunity is limited. However, we also believe that, due to certification requirements that lend themselves to a discrete IC, a notable number of corporate servers and desktop PCs will retain discrete TPMs. Beginning in 2004, our forecast for TPM penetration accelerated when Dell began adopting the IC in many of its PCs. In 2005, penetration accelerated as more OEMs incorporated the technology.

Key Assumption(s)

The demand for greater security inside PCs has increased in the last two years. Driving demand is greater awareness of the vulnerabilities of PCs to outside threats. One characteristic of this awareness is that security needs to be fundamental to the construction of the PC and not solely an overlay solution consisting of some piece of software or external solution such as smart card or fingerprint reader.

The next major factor in TPM adoption in desktop PCs, mobile PCs, and PC servers will be Microsoft's support for TPMs within its Windows Vista operating system enabled by Microsoft's Next-Generation Secure Computing Base.

PC Card/CardBus

This interface connects peripherals, such as modems, network adapters, sound cards, radio transceivers, solid state disks and hard disks, to a notebook via a credit- card sized, removable module, which slides into a slot in the notebook. Data can be transferred between the peripheral and the notebook at rates up to 132MB per second over a 32-bit data path.

Many functions of the peripherals that were connected via the PC Card/CardBus interface have either been integrated into notebooks or can be connected via other faster or smaller interfaces, such as USB ports. The size and limited bandwidth of the PC Card/CardBus interface have rendered it a legacy interface, meaning continues to exist because of an installed based of peripherals still in use by users.

T A B L E 1 7

Worldwide PC Card/CardBus Penetration in Notebooks 2 0 0 5 – 2 0 1 0

Source: IDC, December 2006

F I G U R E 2 3

Worldwide PC Card/CardBus Penetration in Notebooks F o r e c a s t

80,000,000 70,000,000 60,000,000 50,000,000 40,000,000

(Units) 30,000,000 20,000,000 10,000,000 0 2005 2006 2007 2008 2009 2010

Source: IDC, December 2006

Worldwide PC Card/CardBus Penetration in Notebooks Forecast by Segment

50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000

(Units) 20,000,000 15,000,000 10,000,000 5,000,000 0 2005 2006 2007 2008 2009 2010

Commercial Consumer

Source: IDC, December 2006

We believe the PC Card/CardBus interface will gradually waste away with the emergence of the ExpressCard interface (the forecast of ExpressCard follows PC Card/CardBus) and the further integration of features that previously existed as peripherals and connected to notebooks via the PC Card/CardBus slot. PC Card/CardBus will continue to linger in the market, mainly due to legacy concerns from the commercial market. In the short term, PC Card/Bus will maintain a high penetration rate, 91.4 percent in 2006. The market is going through a chicken and egg scenario with regards to ExpressCard and that is slowing the decline of PC Card/CardBus. Peripheral makers aren't rapidly supporting the ExpressCard interface because it isn't being widely adopted by PC makers and vice versa. However, some major PC makers have embraced ExpressCard across their consumer lines.

Therefore in the medium and long term, we expect the penetration rate of the PC Card/CardBus interface to dwindle with the emergence of ExpressCard. In the medium term for the commercial segment, we expect larger notebooks to incorporate PC Card/CardBus and ExpressCard slots and smaller notebooks to favor the PC Card/CardBus interface. We expect ExpressCard slots to be more prevalent in notebooks targeting the consumer segment. In the long term, we expect the PC Card/CardBus and ExpressCard overlap to decrease and shift more towards ExpressCard.

Key Assumption(s)

The commercial notebook market continues to be conservative and hang onto PC Card/CardBus peripherals for the sake of legacy. The adoption of ExpressCard will be gradual.

This interface connects peripherals, such as cellular WAN cards and TV tuners, to a notebook via a card-sized, removable module, which slides into a slot in the notebook. Smaller than cards fitting in PC Card slots, cards fitting in ExpressCard slots come in 54mm and 34mm sizes. The hot swappable cards can use either USB 2.0 or a single lane (x1) PCI Express technology between a peripheral and a notebook.

Viewed as the successor to PC Card/CardBus, adoption for the ExpressCard interface has been slow. The ExpressCard interface has been caught in a chicken and egg dynamic where peripheral makers haven't rapidly supported the ExpressCard interface because it hasn't being widely adopted by PC makers and vice versa. However, some major PC makers have recently embraced ExpressCard across their consumer lines.

T A B L E 1 8

Worldwide ExpressCard Penetration in Notebooks 2005 – 2 0 1 0

Source: IDC, December 2006

F I G U R E 2 5

Worldwide ExpressCard Penetration in Notebooks Fore c a s t

120,000,000

100,000,000

80,000,000

60,000,000 (Units) 40,000,000

20,000,000

0 2005 2006 2007 2008 2009 2010

Source: IDC, December 2006

Worldwide ExpressCard Penetration in Notebooks Fore cast by S e g m e n t

60,000,000

50,000,000

40,000,000

30,000,000 (Units) 20,000,000

10,000,000

0 2005 2006 2007 2008 2009 2010

Commercial Consumer

Source: IDC, December 2006

The ExpressCard interface has been in a state of limbo but some PC makers are gradually incorporating the interface broadly into their consumer lines and selectively into their commercial lines. There have been a limited number of ExpressCard peripherals available in the market but the support from the handful of major PC makers has the promise of volume. We expect a greater number of ExpressCard peripherals to become available and, in turn, we expect the number of PC manufacturers embedding ExpressCard to increase. The built-in support of ExpressCard into Intel's Centrino mobile PC platform has certainly helped the prospects for ExpressCard and we expect that to continue and increase in the Santa Rosa version of the mobile platform due out in the first half of next year.

In the short term, ExpressCard penetration growth will be modest driven by the consumer segment. The commercial segment is expected to maintain a conservative adoption behavior to protect legacy peripheral purchases and a standard wait and see period. The consumer segment will be more accepting of new technologies, essentially taking what PC makers given them in cutting edge designs.

In the medium term, we're expecting higher penetration and wider consumer adoption followed by a solid growth in the commercial segment. More and more PC makers will embrace ExpressCard, initially offering in combination with CardBus in larger form factor notebooks.

Over the long term, we expect ExpressCard slots to become more prevalent with growth in the commercial segment gradually matching and exceeding growth in the consumer segment. We expect the penetration rate for ExpressCard to exceed that of PC Card/CardBus in 2009.

The commercial notebook market continues to be conservative and hang onto PC Card/CardBus peripherals for the sake of legacy. The adoption of ExpressCard will be gradual.

External storage interfaces

Floppy disk drives

The floppy disk drive interface is for the transfer of data from low capacity removable storage media. Standard capacity of the media is 1.44MB but enhanced versions can reach 2.88MB.

The continued presence of the floppy disk drive interface is a legacy issue due in large part by the conservative nature of mainly the government vertical in the commercial segment. The capabilities of the floppy disk drive interface have been over taken by other removable storage solutions, such as USB flash drives (UFDs, a.k.a thumb drives), which can store significantly more data and transfer it at a much faster rate.

T A B L E 1 9

Worldwide Floppy Disk Drive Penetration in Notebook s 2005–2010

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share 18.5% 9.3% 5.0% 0.0% 0.0% 0.0% Units Shipments 25,151,330 12,973,271 7,327,806 - - - -100.0

Source: IDC, December 2006

Worldwide Floppy Disk Drive Penetration in Commerci a l Notebooks Forecast

30,000,000

25,000,000

20,000,000

15,000,000 (Units) 10,000,000

5,000,000

0 2005 2006 2007 2008 2009 2010

Source: IDC, December 2006

We don't expect floppy disk drives to have a long term future. In the best case scenario, floppy disk drives will have a medium term future. The decline of floppy drives is occurring on a quarter to quarter basis. The usefulness of floppy disk drives even in government environments is waning.

Key Assumption(s)

The commercial notebook market will continue its conservative behavior when it comes to holding onto legacy technologies and the phase out of floppy disk drives will be gradual.

Video interfaces

VGA

The Video Graphics Array display standard outputs analog signals to monitors and displays. It is the most mature of the video interfaces and is the most widely used. Still, this antiquated technology offers less-than-perfect display images, it is incapable of adequately driving the latest generation of large, high-resolution digital monitors, and it doesn't support the copy-protection schemes required by the entertainment industry to view high-definition content. While maintaining its market share leading position throughout this forecast period, VGA by itself will gradually be replaced by other video interfaces over time. We do expect to see VGA to continue in large number of systems, but it will become the secondary interface, with the primary focus being on the digital display alternatives.

Worldwide VGA Penetration in PCs 2005–2010

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall Notebook 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Shipment Forecast Market Share 97.2% 93.8% 88.2% 66.6% 51.3% 29.2% Units Shipments 63,445,378 77,079,649 88,567,055 79,293,910 70,183,042 45,356,134 -6.5 Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share 97.6% 94.2% 89.8% 71.6% 47.9% 29.9% Units Shipments 132,859,623 131,958,807 132,060,122 111,154,480 77,533,453 50,462,968 -17.6

Source: IDC, December 2006

F I G U R E 2 8

Worldwide VGA Penetration in PCs Forecast

160,000,000 140,000,000 120,000,000 100,000,000 80,000,000

(Units) 60,000,000 40,000,000 20,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks Desktops

Source: IDC, December 2006

Worldwide VGA Penetration in PCs Forecast by Segmen t

90,000,000 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 (Units) 30,000,000 20,000,000 10,000,000 0 2005 2006 2007 2008 2009 2010

Commercial desktops Commercial notebooks

Consumer desktops Consumer notebooks

Source: IDC, December 2006

From a market share perspective, VGA-only connections’ have seen their best days. Peaking in 2005, market share for VGA has begun to decline driven by the increasing demand for large, high-resolution displays and copy protection technology. We expect a slight drop in market share starting in 2007 as competing digitally-friendly video interfaces begin to penetrate the market. Market share for the VGA interface will drop from 93.8 percent in desktops and 94.2 percent in notebooks to 88.2 for desktops and 89.8 percent in notebooks. Support for VGA-only systems is expected to gradually decline at a faster pace beginning in 2008 as other video interfaces gain traction in the PC and consumer electronics markets. By 2010, market penetration of HMDI and DisplayPort in the PC market will be in full bloom and manufacturers will begin to gradually pull the VGA interface out of systems. Market share for VGA-only will decline to about 30 percent in desktops and notebooks.

Key Assumption(s)

The demand for large, high-resolution digital displays will continue to drive evolution of video interfaces. HDMI and DisplayPort will continue to garner support from PC and consumer electronics makers.

DVI

The Digital Visual Interface (DVI) offers a digital version of the video signal to connect between PCs and other display devices. Originally introduced around 1999, DVI offers the advantage of a completely digital signal path from a PC’s video interface circuitry (either via integrated chipset graphics or dedicated video cards) straight to a

©2006 IDC # 43 digital display, such as an LCD monitor or projector. DVI is available in several types including DVI-D, which carries only the digital video signal, and DVI-I, which carries both the digital signal and an analog copy on separate pins. DVI-I in conjunction with an adaptor can be used to connect to older VGA-only displays. DVI’s adoption rate was slow initially because of the high price of LCD monitors when it was first introduced and the incremental costs necessary to add DVI ports to PCs. In addition, the size of the connector is a problem on notebook computers where real estate is at a premium and the height of notebooks is continuously decreasing.

T A B L E 2 1

Worldwide DVI Penetration in PCs 2005–2010

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall Notebook 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Shipment Forecast Market Share 2.8% 5.7% 7.7% 2.7% 0.0% 0.0% Units Shipments 1,826,806 4,679,975 7,706,843 3,169,397 - - -100.0 Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share 2.4% 5.5% 7.7% 3.4% 0.0% 0.0% Units Shipments 3,244,754 7,749,253 11,266,419 5,338,841 - - -100.0

Source: IDC, December 2006

F I G U R E 3 0

Worldwide DVI Penetration in PCs Forecast

70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 (Units) 20,000,000 10,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks Desktops

Source: IDC, December 2006

Worldwide DVI Penetration in PCs Forecast by Segmen t

40,000,000 35,000,000 30,000,000 25,000,000 20,000,000

(Units) 15,000,000 10,000,000 5,000,000 0 2005 2006 2007 2008 2009 2010

Commercial desktops Commercial notebooks

Consumer desktops Consumer notebooks

Source: IDC, December 2006

Despite some of these issues, DVI has managed to capture a reasonable amount of market share in the PC world, particularly after the introduction of the HDCP (High Definition Copy Protection) scheme, which many content owners insisted on having in place before they would release high-quality content. (Note that not all DVI connections support HDCP—it’s an option that’s specifically called out on certain devices). DVI has been particularly successful on higher-end gaming PCs that use dedicated video cards, but it has also found some success on Media Center PCs. Specifically, DVI has about a 5.5% share of the desktop market and a 5.8% share of notebooks in 2006 with the standard peaking in 2007 at 7.7% and 7.8% respectively, for desktops and notebooks. After that point, we expect it will decline to nothing in 2009 as the HDMI and Displayport interfaces supplant it.

Key Assumption(s)

Despite the transition to digital display interfaces, DVI will be left out as PC makers prefer the smaller connectors and stronger capabilities found in the HDMI and DisplayPort standards.

HDMI

The High Definition Multimedia Interface (HDMI) combines the digital video signal of DVI with up to 8 channels of high-resolution digital audio over a single cable with a smaller, consumer-friendly connector. In addition, the specification defines support for other types of signals to be carried over the cable, such as CEC (Consumer Electronics Control) commands, which can be used to provide system-level

©2006 IDC # 45 intelligence to an HDMI-connected group of devices. With the new version 1.3 of the standard, HDMI now supports the potential to have larger, higher-resolution displays, more and higher resolution colors (up to 48-bit, compared to today’s typical 24-bit color) and more. HDMI’s initial success has come in the world of consumer electronics and digital TVs, where it is now a defacto standard. HDMI in conjunction with HDCP is also a required part of both the Blu-Ray and HD-DVD standards. As a result, any CE device that includes a blue-laser optical drive must include an HDMI connector.

HDMI requires royalty payments, however, and many PC vendors have balked at making them. As a result, two different efforts were initially developed to create a cost-free or cost-reduced digital video solution: Displayport (discussed below) and the Universal Display Interface or UDI. The UDI specification was completed in the fall of 2006, but it appears to have died before it even came to market. UDI was expected to offer a royalty-free, more limited version of the HDMI specification (essentially HDMI 1.2 minus the digital audio), but its backers have seemingly given up on the standard in light of the success of full HDMI and the growing support for Displayport.

T A B L E 2 2

Worldwide HDMI Penetration in PCs 2005–2010

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall Notebook 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Shipment Forecast Market Share 0.0% 0.5% 3.2% 17.2% 25.5% 36.9% Units Shipments - 410,852 3,178,571 20,518,514 34,907,710 57,310,583 Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share 0.0% 0.3% 2.3% 14.1% 28.0% 36.0% Units Shipments - 441,281 3,315,981 21,944,392 45,344,788 60,795,893

Source: IDC, December 2006

F I G U R E 3 2

Worldwide HDMI Penetration in PCs Forecast

70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 (Units) 20,000,000 10,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks Desktops

Source: IDC, December 2006

Worldwide HDMI Penetration in PCs Forecast by Segme n t

40,000,000 35,000,000 30,000,000 25,000,000 20,000,000

(Units) 15,000,000 10,000,000 5,000,000 0 2005 2006 2007 2008 2009 2010

Commercial desktops Commercial notebooks

Consumer desktops Consumer notebooks

Source: IDC, December 2006

As a result of its success in the CE market, we believe HDMI will be relatively commonplace on consumer desktops and notebooks by the end of the decade. In the commercial market, however, we believe HDMI will be challenged by Displayport. HDMI-equipped PCs made their market debut in 2006 and we expect the overall desktop and notebook attach rates to achieve nearly 36% by 2010. In the near term, we expect HDMI to maintain a lead over its DisplayPort rival because Intel is expected to provide some support for the standard in its chipset in 2007. However, as with its earlier support for DVI, the Intel chipset solutions will require an extra chip (and therefore extra costs) in order for a PC vendor to put an HDMI connector on the back of their PC. So, our short term forecast is relatively modest, but by 2008 and 2009 we expect to see major growth in both desktops and notebooks.

Key Assumption(s)

HDMI support will be partially enabled in Intel’s integrated graphics solutions in 2007 and both AMD and Intel will have more complete support in 2008 and onwards. The enormous success that HDMI has enjoyed in the CE world will translate over to consumer-focused PCs as consumers will be looking for easy ways to integrate their PCs with their new flat-panel digital TVs.

DisplayPort

As mentioned above, the Displayport digital interface was originally created as a cost- free alternative to HDMI and has received support form a number of major PC OEMs, most notably Dell. Displayport defines a digital interface standard that works not only

T A B L E 2 3

Worldwide DisplayPort Penetration in PCs 2005–2010

2005 2006 2007 2008 2009 2010 Five-Year CAGR (%) Overall Notebook 65,272,183 82,170,477 100,457,040 119,045,211 136,784,047 155,233,187 18.9 Shipment Forecast Market Share 0.0% 0.0% 1.0% 13.5% 23.2% 33.9% Units Shipments - - 1,004,570 16,063,391 31,693,296 52,566,470 Overall Desktop 136,104,376 140,149,341 147,083,774 155,328,535 161,952,134 168,935,575 4.4 Shipment Forecast Market Share 0.0% 0.0% 0.3% 10.9% 24.1% 34.1% Units Shipments - - 441,251 16,890,823 39,073,893 57,676,714

Source: IDC, December 2006

F I G U R E 3 4

Worldwide DisplayPort Penetration in PCs Forecast

70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 (Units) 20,000,000 10,000,000 0 2005 2006 2007 2008 2009 2010

Notebooks Desktops

Source: IDC, December 2006

Worldwide DisplayPort Penetration in PCs Forecast b y S e g m e n t

50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000

(Units) 20,000,000 15,000,000 10,000,000 5,000,000 0 2005 2006 2007 2008 2009 2010

Commercial desktops Commercial notebooks

Consumer desktops Consumer notebooks

Source: IDC, December 2006

Given the tremendous success that the HMDI standard has enjoyed in the world of consumer electronics, we initially gave little hope to the success of Displayport. Recently, however, it’s become clear that a groundswell of support for Displayport has been developing among critical PC semiconductor suppliers, notably Intel and AMD. As a result, we now expect Displayport to make a major impact in the market starting in 2008 when it receives system-level support from Intel and AMD. Specifically, we believe the desktop adoption rates will jump to nearly 11% in desktops and over 13% in notebooks in 2008 and those numbers will grow to 34.2% for desktops and 34.8% for notebooks by 2010. We expect most of Displayport’s success will come in the commercial market, but we also expect it will be found in consumer PCs. By 2010, we believe that HDMI will hold a slight edge over Displayport in terms of overall PC attach rates, but both interfaces will be firmly entrenched in the market at that time.

Key Assumption(s)

Displayport is expected to be supported in integrated graphics solutions from both Intel and AMD in 2008, leading to strong growth for the new standard in that time frame. Given Dell’s strong support for the standard as well as the interest expressed by other commercially-oriented PC vendors, we believe Displayport will have more success with more commercial PCs than with consumer ones.

Key Forecast Assumptions for the Worldwide PC Inter face Forecast, 2005-2010

Accelerator/ Inhibitor/ Certainty of Market Forces IDC Assumptions Impact Neutral Assumption

Macroeconomics

Global Economy IDC assumes that worldwide and Moderate. The economy - regional economic growth will be lower - in its stable but lower 2007 compared to 2006. The US will fall growth -- is now a net below 3%, Western Europe will be neutral influence on IT under 2%, and Latin America, Eastern spending. It does seem Europe, and Asia Pacific outside of able to withstand oil ↔ Japan will all drop. While Japan is shocks and terrorism. expected by Consensus Economics to achieve 2.2%, IDC analysts in Japan believe the country will beat expectations.

Regional Market The US market and markets in other High. The U.S. market Differences established regions will be driven by PC continues to drive IT replacement cycles. Markets in spending and business developing regions, such as China, investment. The Asia India, and Brazil, will be driven by new Pacific market, driven by PC unit purchases. China, continues to enjoy a healthy spending cycle for PCs. Emerging markets' desire for value- conscious PCs will encourage the industry to continue to drive down ↔ price points and so bring in new customers. Developed markets will continue to segment and will encourage the industry to continue to develop new form factors and high-end niche segments that obtain good margins.

Saturation The concept of saturation is a tricky one Moderate. There will be a in the context of IT&C. Markets that general increase in the seem saturated (e.g., PC shipments in amount of research and the U.S.), can be "unsaturated" by new marketing devoted to price thresholds or new functionality segmentation; there will (DVD playback) that spur faster also be potential ↑↑↑ replacement or bring new users into the organization disruption as market. Thus IDC assumes that while vendors re-align to better all markets have a fixed number of approach these potential adopters (people or segments. companies), there is usually a price, feature, or solution that can drive

Key Forecast Assumptions for the Worldwide PC Inter face Forecast, 2005-2010

Accelerator/ Inhibitor/ Certainty of Market Forces IDC Assumptions Impact Neutral Assumption

additional spending. Also with IT generally less than 3% of an enterprise's expenses (or a country's GDP), there is tremendous opportunity to turn internal spending on staff or business processes into external spending on IT&C products and services. IDC assumes that market "saturation" will be a moving target that varies by sub market, but that in almost all case can be countered.

IT Spending Hardware markets continue to defy Moderate. Hardware gravity and remained positive this year. spending, about 40% of IDC expects about the same total IT spending, drives performance in 2007, with pockets of spending as well in both growth and decline. IDC assumes software and services. ↔ 6%-7% growth in IT hardware spending (including network equipment sold to carriers and enterprises) in 2007.

Market

Characteristics

Hardware Markets PC semiconductor market continues to High. Despite modest consolidate. overall market growth, PC semiconductor vendor growth still occurs through displacement in 2006 due ↓↓↓ to gains being concentrated in hands of a few large vendors.

PC OEM Vendors continue to chase new form Moderate. PC Customers factors in order to enable new markets, semiconductor vendors but success will be limited to R&D segment product lines to spending and ability to innovate. support successful new ↑↑↑ form factors, but most new form factors will fail.

Target Markets Total mobile PC unit CAGR from 2006- Moderate. 2011 is 17.0%, compared to 12.2% for Semiconductor suppliers x86 servers and 5.5% for desktop PCs. will focus on ICs suitable Mobility, connectivity, and alignment to these trends and whose with consumer markets continue to basic technology can be ↑↑↑ drive growth through forecast period, applied across multiple though not as much as in 2004 and form factor (derivative of 2005. platform approach assumption). For

Key Forecast Assumptions for the Worldwide PC Inter face Forecast, 2005-2010

Accelerator/ Inhibitor/ Certainty of Market Forces IDC Assumptions Impact Neutral Assumption

example, semiconductor suppliers will focus on power-managed chips and wireless chips (WLAN, WWAN, WPAN) which are suitable to mobile PCs.

PC Replacement Worldwide, PC refresh cycles will drive Moderate. OEM and Cycles unit shipments in PCs more than actual suppliers must increase PC unit growth. Mobile PC units grow at the churn rate and timing expense of desktop PC units. X86 of upgrades in order to be server units grow at expense of mid- successful. Larger mobile ↔ range and high-end servers, especially PC unit growth makes those with proprietary solutions, such as segmentation of markets ASICs. more critical.

PC Silicon Content Lower PC price bands and low PC OEM Moderate. Silicon Value margins put pressure on the average percent of BOM semiconductor bill-of-materials. continues to decrease, by 1-2% per year in desktop PCs and by 1-5% in ↓↓↓ mobile PCs. Silicon revenue per PC price band continues to decrease.

PC OEM Contract equipment (ODM) vendors and High. Contract Outsourcing dedicated foundries continue to manufacturers have more capitalize on PC OEM and PC influence in board and semiconductor supplier efforts to system design and maintain margins. Outsourcing pricing. However, PC suppliers, in fact, will expand their semiconductor suppliers ↑↑↑ portfolio of services in order to drive shift more resources (I.e. new revenue streams and provide PC field engineers) to support OEM and PC semiconductor customers contract manufacturers with a broader portfolio of services. using their products.

Form factor Emerging mobile usage models High. PC microprocessor competition accelerate mobile PC-specific vendors continue to development and segmentation. Mobile develop mobile-specific computing's benefits continue to draw processor technologies PC buyers. while also maintaining mobile processor pricing ↔ at levels to discourage the diversion of desktop processors into mobile PCs.

Key Forecast Assumptions for the Worldwide PC Inter face Forecast, 2005-2010

Accelerator/ Inhibitor/ Certainty of Market Forces IDC Assumptions Impact Neutral Assumption

Supply chain Outsourcing and the growth of channel Moderate. PC continue to strain supplier resources semiconductor suppliers and ability to plan for demand. lose visibility into significant portion of ↓↓↓ demand and increasingly fail to align supply with demand.

Technology and

Manufacturing

300mm volume 300mm production and new process High. The 300mm production and technologies will be driven by DRAM, migration will minimize the process technology MPUs, and graphics controllers. playing field among evolution suppliers and increase manufacturing partnerships due to rising costs. Intel, TSMC, IBM, and Samsung are among ↔ the few to maintain 300mm production for PC semiconductors by themselves. Process technology evolution will continue to occur rapidly, every 2-2.5 years.

Moore's Law PC semiconductor manufacturing High. Process roadmaps processes continue to improve on a from major suppliers cycle of every 2 years. Processor indicate that the providers have turned away from using transitions to 65nm process improvements to improve processes occurred in performance via clock speed to using 2006-2007 and to 45nm ↔ process lithography to integrate multiple will happen in 2008. Each processor cores to increase transition enables performance. suppliers to drive integration and drive down cost.

Killer Applications No "killer apps" or new technologies Neutral. No change. come to drive overall industry growth in the same way Windows and office ↔ suites did in the ear 1990s or the Internet in the late 1990s

Semiconductor Shorter design cycles and growth High. Favors larger PC Platform Approach opportunities through selling more PC semiconductor suppliers ↑↑↑ components to established customers with a broad product encourage leading PC semiconductor

Key Forecast Assumptions for the Worldwide PC Inter face Forecast, 2005-2010

Accelerator/ Inhibitor/ Certainty of Market Forces IDC Assumptions Impact Neutral Assumption

suppliers to utilize multi-component (I.e. portfolio. processors+chipset+graphics) solutions under a single brand (I.e. Centrino, AMD Live!). Re-arranging these components according to the needs of specific end-user usage models enables shorter design cycles and faster time to market.

PC tech impact Expect evolution rather than revolution. Moderate. Incremental Media Center PCs, tablet PCs, blade improvements will add up. clients, and other new designs have Wireless and broadband attracted interest but remain small are the most promising in markets. The design evolution does the short term. ↑↑↑ contribute to replacements and long- term growth but will take time to establish significant market share.

Mid- to long-term Technology will remain a fundamental High. Future must-haves tech impact long-term market driver. are hard to anticipate, but usage patterns and ↑↑↑ priorities are changing and will drive spending.

New Microsoft Vista is expected to be released to the Moderate. New features operating system mainstream market in 2007. are unlikely to cause a surge in PC demand, and the commercial segment will take time to evaluate the new OS. New OS technology (and phasing out of support for older ↔ versions) will certainly support market growth but is seen as more of a pervasive factor than an event synchronizing PC purchases.

Killer apps No "killer apps" or new technologies will Moderate. Wireless, come to drive overall industry growth in broadband, and other the way Windows and office suites did technologies will sustain in the 1980s or the Internet did in the growth, although none will ↔ late 1990s. be as dramatic as a "killer app."

Form factor

dynamics

Key Forecast Assumptions for the Worldwide PC Inter face Forecast, 2005-2010

Accelerator/ Inhibitor/ Certainty of Market Forces IDC Assumptions Impact Neutral Assumption

Shift to a broader As the PC market matures and Moderate. Any market mix of desktop and consumer's familiarity with technology changes to new form portable PC form increases, vendors will cater to more factors will be gradual and factors specific niches and consumers will look will have limited impact as ↑↑↑ for systems that better match their price premiums are needs. generally attached to new cases.

Pricing for smaller The emergence of small form factor as Moderate/ Low. Initially, components will a high volume desktop PC chassis will the impact will be limited decrease contribute to lower prices on smaller PC as small form factor components. This will have a cross over chassis are already effect leading to higher shipments of available and smaller ultrasmall form factor and all-in-one parts will be used in those systems. cases. However, over the ↔ long term it will help to diversify the desktop PC form factor landscape although at a slower rate than previously expected.

Continued Challenges, such as few digital High. These challenges confusion around download services, confusion around are holding back the digital home PCs standards, difficult set ups and high transition to an all digital prices, will continue to make to tough for entertainment market. ↓↓↓ vendors to explain to consumers why they need a living room PC.

Competitive

Dynamics

Industry Consolidation forces suppliers to High. Consolidation, such Consolidation partner (I.e. AMD with IBM) in order to as in DRAM market, remain competitive against Intel and stabilizes industry by Samsung. enabling surviving ↓↓↓ suppliers to better control supply and ASPs beyond 2007.

PC Subsystems

x86 instruction set x86 is an industry standard architecture. Neutral. Compatibility with x86 is a requirement for PC semiconductor ↔ suppliers. No change.

Microsoft Windows Penetration of many technologies High. Vista's performance Vista Operating depends on Microsoft's support in its and feature requirements ↑↑↑ will increase demand for

Key Forecast Assumptions for the Worldwide PC Inter face Forecast, 2005-2010

Accelerator/ Inhibitor/ Certainty of Market Forces IDC Assumptions Impact Neutral Assumption

System operating systems. more dedicated semiconductors (such as discrete graphics controllers), more memory capacity, and new features (such as Trusted Platform Module for security) beginning in late 2007.

Microsoft DX10 PC graphics and core logic chipset Moderate. DX10's suppliers respond to requirements of requirements push need the new version of Microsoft's graphics for discrete graphics programming interface. controllers beginning in late 2006. Core logic chipset suppliers either ↑↑↑ accelerate support for DX10 or integrated graphics core logic penetration is lackluster.

Intel core logic Due to Intel's high market share and Neutral. No change. market share licensing policies, penetration of many technologies depends upon Intel's ↔ support in core logic chipset.

Consumer market Consumer market increasingly High. PC OEM's will demands compatibility between PCs incorporate consumer- and consumer devices. level video and audio into their products, which will drive need for 3D ↑↑↑ graphics, CD-quality audio, and full-motion/full- screen digital video.

Corporate market Corporate market increasingly adds Moderate. PC OEMs will security to its requirements. increase demand for security-related ICs, such ↑↑↑ as the Trusted Platform Module, in corporate PCs.

Pricing

Short- to midterm Pricing will continue to be a significant Moderate. The market impact demand stimulus but limit profit growth. expects competitive ↑↑↑ pricing and low margins.

Continued Price will remain a key concern, High. Low-cost systems expansion of low- particularly in lower-income (new user) will stimulate demand. ↑↑↑

Key Forecast Assumptions for the Worldwide PC Inter face Forecast, 2005-2010

Accelerator/ Inhibitor/ Certainty of Market Forces IDC Assumptions Impact Neutral Assumption

cost PCs and emerging markets.

PC installed base

Household PC Penetration will continue to rise, but High. Improvements in penetration adoption will be far from universal. pricing and utility will Mature regions will see only incremental continue to make PCs growth from new users, while emerging more affordable, more markets will expand penetration more essential, and more rapidly. ubiquitous. Nevertheless, ↑↑↑ we don't expect to reach 100% penetration, and new adoption will be slow in mature markets.

Corporate refresh Replacement demand seems to have High. PC replacement is cycle peaked in mid- to late 2004. a crucial part in Replacements will continue into 2006 maintaining overall and future years and even represent the demand. We expect majority of shipments, but will have a gradual replacements in less dramatic impact on overall growth the short to medium terms going forward. rather than a sudden burst of growth from ↑↑↑ synchronized upgrades. Mobile adoption should accelerate refreshes, although mobile PCs' smaller share of the market will limit their impact on overall growth.

Legend: very low, low, moderate, high, very high Source: IDC, December 2006

ESSENTIAL GUIDANCE

IDC's basic guidance for technology providers and PC OEMs alike is to assure that any technology or interface you touch develops to meets the identified basic end user requirements of (low) cost, simplicity, reliability, usability, compatibility, and interoperability. Further, assure that your application of any technology or interface aligns with the major current demand trends that include mobility, connectivity, consumer alignment (the PC as a hub for consumer devices or as a consumer device itself) and, in corporate markets, security. Also, for technology providers, who as suppliers must conform to the demand trends that OEMs pass up the supply chain, adopt the platform approach and emphasize your mastery of standardized

Our extended guidance is to be aware of the implications of these trends. Standardization that is the prerequisite for market adoption puts emphasis on market timing; track the process carefully. Being too early to the game risks adding in the cost of a subsystem that users are unwilling to pay for or dropping a feature that many buyers still want. Being too late risks allowing competitors to reap the lion's share of the harvest as market dynamics change. For semiconductor providers specifically, while a new technology may represent opportunity for sales of discrete ICs, the opportunity for silicon supplies to generate revenue from the technology may quickly pass due to pending integration into other silicon, such as the core logic chipset. Indeed, for most PC interface technologies, the revenue window of opportunity is defined by the three- or four-year period from when functionality is rolled out in the form of discrete silicon on add-in cards or embedded onto motherboards to when that silicon's contribution to the PC silicon BOM is wiped away by its absorption into the southbridge of the core logic chipset.

Implications of the three demands trends includes the interaction among interfaces and technologies in the same devices. For example, the interaction among the mobility and connectivity trends is manifested in the approach of multiple wireless connectivity technologies going into mobile PCs. The need to accommodate WLAN alone in PCs has already forced issues of power management and, going forward, the need to accommodate WLAN, WPAN, and wireless WAN (WWAN) technologies, and the intelligence to switch seamlessly among all three will further force issues of semiconductor integration, power management, thermal management, and the overhead of protocol management. Also, an implication of the consumer and mobility trends is aggressive growth of compact and handheld devices. Size matters to the consumer which further emphasizes the need to pay attention to system-level usability and semiconductor-level integration trends, power management, and thermal management.

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Related Research

Worldwide PC Semiconductor 2006-2011 Market Forecast (IDC #204498, December 2006)

IDC Worldwide and U.S. PC Client Form Factor 2006–2010 Forecast (IDC Doc # 204809, December 2006)

HDMI Versus DisplayPort: Adoption Predictions for the Next Big Standards Battle (IDC# 204817, December 2006)

Worldwide and U.S. Media Center PC 2006–2010 Forecast: Opportunities and Challenges in a Growing Digital Home Market (IDC Doc # 203368, September 2006)

S y n o p s i s

This IDC study looks at the worldwide market for interfaces embedded in PCs out to 2010. Thirty one interfaces are tracked and their shipments are estimated.

"The supplanting of older interfaces by the latest industry offerings is a game of timing, listening to customers and observing market dynamics. For the purposes of this study, we will define interface as ports or other technologies embedded in PCs connecting the systems to devices or networks. Remove an interface too early and OEMs will hear about it from customers, such was the case recently with 1394 ports in notebooks. Remove an interface too late and an OEM will needlessly add cost to a system as well as restrict design flexibility, something crucial particularly in tiny desktops and ultraportable notebooks. Still the benefits of achieving greater cost efficiencies and improving performance of systems will continue to be powerful motivations to drive OEMs."—Richard Shim, senior research analyst with IDC's Personal Computing team.

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