Design. Build. Ship. Service. Sean Burke President, Computing Flextronics Mid-Year Business Update November 17, 2009 Design. Build. Ship. Service. Design. Build. Ship. Service. Agenda Segment Overview and Operating Footprint History Product Strategies Customers and Competition Financials Design. Build. Ship. Service. FlexComputing Products and Scope Full system and subsystem design, ODM & EMS manufacturing, fulfillment, and aftermarket services Notebooks Server Desktop PCs Servers Storage Design. Build. Ship. Service. FlexComputing History Computing Acquisition of CSDC Expansion Intro of Innovation Segment formed MyMedia into Storage Ingredients Arima Computer Taiwan Notebook Creation of CSDC, Taipei Acquisition Start Completed Arima R&D Expansion Computer Acquisition of Shanghai Acquisition WuZhong iWill Corp. R&D Center Expansion 2006 2007 2008 2009 1000 800 Engineering Resources 600 400 200 0 2006 2007 2008 2009 2010 Design. Build. Ship. Service. Two major ways in which we compete 1) Scale and Footprint 2) Innovation and integration Design. Build. Ship. Service. We compete on our scale and footprint Venray, Netherlands Logistics Sarvar/Zala, Hungary WuZhong, China Toronto, Canada Manufacturing R&D and PC R&D Manufacturing Wujiang, China Notebook Manufacturing San Jose, USA Shanghai,China HQ Memphis, TN R&D Logistics Taipei, Taiwan R&D Zhuhai, China Manufacturing Juarez, Mexico Manufacturing Sorocaba, Brazil Manufacturing The most comprehensive computing manufacturing footprint and The most comprehensive computing manufacturing footprint and breadth of design capability in the industry breadth of design capability in the industry Design. Build. Ship. Service. Computing Segment Design Centers CSDC SDC CSNC TDC • Taipei, Taiwan • Shanghai, China • Taipei, Taiwan • Burlington, Canada • Product Focus: • Product Focus: • Product Focus: • Product Focus: - Desktop, AIO, Server, - Desktop - Notebook, Netbook - Sys, Emb, App SW - Innovation Ingredients Storage - AIO • Technical Expertise: - Automated SW, Des. Val • Technical Expertise: • Technical Expertise: - Elec, Mech, System & Mfg Systems - Elec, Mech, System - Elec, Mech design design - BIOS, Signal Analysis - FW / BIOS / SW • Technical Expertise: - FW / BIOS / SW - Tooling, Signal - SW Dev ((MSFT, Linux, - System Validation Android) - Tooling, Signal Integrity, System Integrity, System Validation - Sys Eng, Sys Design Validation - Elec, Mech, Materials Design. Build. Ship. Service. We compete on innovation and Integration Full Notebook System A/B/C/D Enclosure Screen Touch CPU Heatsink LCD Panel SODIMM Packaging Parts Hubbing MB IO Daughter Cards VMI Management CTO Manufacturing Cables & Flexible Circuits Graphics Logistics Keyboard Antenna Systems Postponement Bluetooth, 802.xx Retail Technical Services Touch Hard Disk Pad Service Parts Logistics Chassis System Level Repair GFX Heatsink System Refurbishment CDROM Camera Modules Environmental Disposal Battery Wireless Modules AC/DC Power Adapter Design. Build. Ship. Service. We compete on innovation and Integration Flextronics Notebook Vertical Content A/B/C/D Enclosure Screen Touch LCD Panel Packaging Parts Hubbing MB IO Daughter Cards VMI Management CTO Manufacturing Cables & Flexible Circuits Graphics Logistics Postponement Retail Technical Services Touch Pad Service Parts Logistics Chassis System Level Repair GFX Heatsink System Refurbishment Camera Modules Environmental Disposal Wireless Modules AC/DC Power Adapter Design. Build. Ship. Service. Key Markets Market Rev FY10 Market Share 1 Notebook ~$1,000M 2.0% 2 Desktop $857M 1.9% 3 Server/Storage $2,372M 15.3% 4 Other $257M N/A Revenue $4,486M Design. Build. Ship. Service. FlexComputing Overview – Notebooks • Notebook Market Trend: - 18% CAGR to 300Mu market size in FY14 - <13”, Thin-n-Light NB & Netbook to take 50% mrket - Top 5 ODMs have 85% of supply, top 5 OEM have 66% 49.3% • Notebook Product Strategy: - Build OEM confidence by delivering difficult programs - Ultra Hi-end to Thin-n-Light, now Mainstream - Pre-RFQ roadmaps & prototypes to shorten TTM - Deliver Innovation Ingredients for add’l opportunities - Develop leading concepts, new materials (Ti clad), new features (touch), etc • Key Design Wins: - 8 wins including refresh models from HP & Dell in CY09 - In development with new notebooks/netbooks - Working additional quotes for more volume in 2010 • Flextronics Vertical Opportunities: - PSU, Webcam, Mechanicals, Cosmetic Finishes, PCB, Touch Aggressive Tier 11account penetration and product line growth Aggressive Tier account penetration and product line growth Design. Build. Ship. Service. FlexComputing Overview – Desktops 60,000 50,000 • Desktop Market Trend: System Volume (000's) 40,000 • Market moving to smaller form factors – by 2011 • Small/ultrasmall form factor & All-in-One systems will 30,000 make up > 35% of market, ~ 50M units/yr (IDC 2009) 20,000 10,000 • Desktop Product Strategy: 0 • Targeting fastest growing desktop segments 2006 2007 2008 2009 2010 2011 2012 2013 • AIO/USFF products can leverage notebook capability Small FF Ultrasmall FF Tiny Desktop FF All-in-One FF • Targeted Desktop Product Categories: 1. All-in-One systems 2. Small & Ultrasmall form-factor systems 3. Gaming PCs • Flextronics Vertical Opportunities: • PSU, PCB, camera modules, touch, cosmetic finishes, plastic/metals Compelling DT business growth in new disruptive product lines Compelling DT business growth in new disruptive product lines Design. Build. Ship. Service. FlexComputing Overview – Servers 10,000,000 Volume Servers Units (June 2009 35,000.00 Fcst) Volume Servers Rev (June 2009 9,000,000 Fcst) 30,000.00 • Server Market Trend: 8,000,000 - WW server market revenue declined ~30% YoY in 7,000,000 25,000.00 2Q09 (IDC, Sept ’09) Volume Server Units 6,000,000 Revenue in $M 20,000.00 - 4th consecutive Qtr of rev decline 5,000,000 - Lowest Qtr server rev since IDC began tracking 4,000,000 15,000.00 Qtrly data in 1996 3,000,000 - Increasing demand for low-power 10,000.00 2,000,000 - Greater energy efficiency driving evolution to higher 5,000.00 1,000,000 density configurations 0 0.00 2007 2008 2009 2010 2011 2012 2013 • Server Product Strategy - Targeting High Density, Energy Efficient Solutions - 2-Socket (1U & 2U rack & tower, Intel & AMD) - 1-Socket (1U rack & tower servers, Intel & AMD) - Focused effort for leverage and reuse • Flextronics Vertical Opportunities: • PSU, PCB, Mechanicals Server business expansion through innovative industry-leading designs Server business expansion through innovative industry-leading designs Design. Build. Ship. Service. FlexComputing Overview – Enterprise Storage 25000 • Storage Market Trends: 20000 • Economic crisis having less impact on storage than other segments of computing sector 15000 • Storage systems WW sales YoY decline ~3.1% in 10000 2009 (IDC ’09) • Storage design & mfg outsourcing transition continues 5000 • Some custom storage systems moving to industry- 0 standard, server building blocks 2006 2007 2008 2009 2010 2011 2012 Rev.($M) 18500 20000 21500 20800 21300 22500 23700 • Storage Product Strategy 1. Continue delivering JDM-based solutions with OEMs 2. Leveraged Server products for new Storage wins 3. Partner/Acquisition to provide RAID Stack and Management SW • Flextronics Vertical Opportunities: • PSU, PCB, metals Delivery of world-class products driving strong storage business growth Delivery of world-class products driving strong storage business growth Design. Build. Ship. Service. Competition Computing DT/ NB AIO Server Storage Revenue Nettop (2008, $B) * Dell, HP, HP, Dell Apple Apple Dell, HP $26.4 IBM Acer, Dell, HP, Dell, HP Lenovo LSI $19.9 Lenovo, Apple Acer, Dell, HP, HP, Dell, HP Dell, HP $12.0 Lenovo Lenovo Acer, Dell, HP, Lenovo $11.9 Pegatron Asus, Lenovo Asus, HP $11.1 HP HP Dell, HP HP $10.9 HP HP $1.8 Dell, HP Dell $1.5 Dell, LSI, Dell, Dell, HP, Dell, HP Lenovo Sun, $5.5 Lenovo IBM, Sun Xyratex Design. Build. Ship. Service. * Computing Revenue (NB, DT, Server, Storage), IDC, Q2 2009 Customers – Q3 FY09 DT/ NB AIO Gaming Server Storage Nettop X X X X X X X X X X X Design. Build. Ship. Service. Customers – Today (Q3 FY10) DT/ NB AIO Gaming Server Storage Nettop X X X X X X X X X X X X X X X X X X X X Design. Build. Ship. Service. Major ODM Customers • Top three ODM Customers: HP •FY09 = $1.35B •FY10 = $2.20B $20,000 •FY11 = $4.15B $15,000 • Targeted Plan for FY13 is $8.2B Desktop $10,000 Notebook • Target Rev at 15-25% customer share is Enterprise more than $19.0B $5,000 Lenovo $0 Total Flex FY13 Target Current 8,000 7,000 6,000 Desktop 5,000 Notebook Enterprise Dell 4,000 3,000 $16,000 2,000 $14,000 1,000 $12,000 0 $10,000 Desktop Total Flex FY13 Target Notebook Current $8,000 Enterprise $6,000 $4,000 Notes: $2,000 • Customer data represents annualized estimated COGS. $0 Total Flex FY13 Target • Current Revenue is based on FY 2Q11 run rate Current Design. Build. Ship. Service. Computing Summary • Geographic scale and size a huge advantage • We compete on innovation and integration using all Flex divisions • ODM market share at 3% -- massive opportunity for future growth This is the biggest and most outsourced market in the world today and we are excited about the next 5 years Design. Build. Ship. Service. Thank you Design. Build. Ship. Service.