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Trace Makes New Start as SDK’s HD Subsidiary in Taiwan

November 11, 2004

Showa Denko HD Trace Corp., former Trace Storage Technology Corp., today held a ceremony in Taipei, Taiwan, to mark its new start as a consolidated subsidiary of Showa Denko K.K. (SDK). The ceremony was attended by around 130 people, including Mitsuo Ohashi, President & CEO of SDK, and Dr. Jeffrey Koo, Chairman of Chinatrust Financial Holding Co., Ltd., who represented Taiwanese shareholders in Trace.

Demand for hard disks (HDs) is increasing rapidly in such new areas as DVD recorders, MP3 mobile music players and other consumer electronic devices, in addition to the conventional desktop PC application.

Furthermore, installation of small-sized HDs in mobile phones is being considered. Thus, the HD market is expected to continue to grow at an annual rate of 10% or more. Supply of high-quality HDs is expected to become especially tight.

To meet the growing demand, SDK last year acquired Mitsubishi Chemical Group’s HD business in Singapore and expanded production capacity there. SDK also last year concluded a technology license agreement with Trace and obtained the right to preferentially purchase Trace’s product. In July this year, SDK invested in Trace and acquired two-thirds of the outstanding shares, making Trace its consolidated subsidiary.

As a result, in the second quarter of 2004, SDK Group’s share in the world’s HD market is estimated to have reached 25%, meaning that SDK has become the leading supplier. SDK is now expanding its HD production capacities at Chiba (Japan), Singapore and Taiwan mainly through debottlenecking. By the end of this year, SDK will have a total production capacity of more than 10 million disks a month, establishing its status as the world’s largest OEM supplier of HDs in terms of both production capacity and market share.
After becoming SDK’s consolidated subsidiary, Trace has been operating at full capacity and its products are sold out. Trace will therefore increase its production capacity to three million disks a month by the end of this year, from two million disks a month as of July this year.

Trace introduced SDK’s 80-gigabyte HD technology last year. In addition, SDK engineers have been stationed at Trace since July this year. As a result of the technical exchanges, Trace has improved its production efficiency, using SDK’s latest technology. Trace will play a key role within the SDK Group in the production of HDs for desktop PC applications. SDK will further explore the possibility of transferring its small-sized HD production technology to Trace.

“ SDK’s investment in Trace is based on the mutual trust that increased in the course of technical exchanges since last year. As OEM supplier of HDs, we already have the world’s largest production capacity and employ 2,500 workers. To fully meet customer requirements, we are going to increase our total capacity to 10 million HDs a month,” said SDK President Ohashi at today’s opening ceremony.

“While the HD industry is very competitive and requires very speedy technical development, SDK has always been at the forefront of the industry. Trace has decided to cooperate with SDK in order to become a world-class company. After the consolidation of Trace, the SDK Group obtained the largest share in the world’s HD market in the second quarter of this year. As far as OEM suppliers are concerned, SDK Group’s market share exceeds 50%. The cooperation between SDK and Trace will further encourage the growth of Japanese investment in Taiwan,” said Dr. Koo, Chairman of Chinatrust at the same ceremony.

[Profile of Showa Denko HD Trace Corp.]

Head office 8, Technology Fifth Road, Science-Based Industrial Park, Hsinchu, Taiwan
Established September 1990
Capital NT$4,892 million (of which: 66.6% is owned by SDK)
Chairman Shinji Sakai (Corporate Officer, Chief Manager, Planning Department, Electronics Sector, SDK)
Number of employees Approx. 750
Annual sales Approx. NT$4,700 million

Showa Denko HD Trace

At the opening ceremony in Taipei on Nov. 11
From right; Mr. Sakai, Chairman of Showa Denko HD Trace,
Mr. Ohashi, President&CEO of SDK,
Dr. Koo, Chairman of Chinatrust Financial Holding and
Mr. Tung, Vice Chairman of Showa Denko HD Trace