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I use a Microsoft Exchange account for my business and use a Samsung Galaxy S3.

If I sync my contacts to the phone from the exchange account, are they actually stored on my phone or SD card or are the actually just in the cloud?

I want to have access to all the people, but don't want it to take up memory. I have over 1,000 contacts and it grows.

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The contacts themselves are synced to your phone's internal memory, so they do take up space. The contacts are then updated every time the phone syncs with the server.

If they were only in the cloud you wouldn't be able to access them if you happen to lose the network connection, and contact lookup would be noticeably slower. Also, some mobile network technologies can't maintain a voice call and data connection simultaneously, so you wouldn't be able to match incoming calls to contacts, because the data connection would temporarily be disconnected.

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