Adaptec 2001 Annual Report Download - page 10

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in North America, Asia and Europe. Technical support is essential to our customers’ success,
and we provide this through field application engineers, technical marketing and factory
systems engineers. We also provide more detailed information and support for our product
line through our corporate website and special customer-accessible extranet sites. We believe
that providing comprehensive product service and support is critical to shortening customers’
design cycles and maintaining a competitive position in the networking market.
We sell our products both directly and through distributors and independent manufacturers’
representatives. In 2001, approximately 40% of our orders were shipped by our distributors;
approximately 40% were sent by us directly to the contract manufacturers as selected by the
OEMs; and the balance of the shipments were sent directly by us to our OEM customers.
Our largest distributor is Memec Group Holdings Ltd. w ho represents our products worldwide
(excluding Japan). We believe that on a going-forw ard basis many of our customers will be
seeking to reduce supply chain costs and will, therefore, request that we ship more of our
products to the contract manufacturers they have selected. Based on this trend, we expect that
our largest customers will have us ship a higher percentage of their orders directly to the
contract manufacturers and a lower percentage will be shipped through our distributors over
time.
Cisco Systems and Lucent Technologies each represented more than 10% of our 2001 revenues
based on total sales to end customers (i.e. based on shipments through our distributors, to the
sub-contractors as selected by our customers, or to the OEM s directly). Our sales outside of the
United States accounted for 42% of total revenue in 2001, 38% in 2000, and 30% in 1999.
MANUFA CTURIN G
We are a fabless company, meaning we do not own or operate foundries for the production of
silicon wafers from which our products our made. Instead, w e use independent foundries and
chip assemblers for the manufacture of our products.
Typically, the manufacture of our chips requires 12-16 weeks. We refer to this as our lead-time.
Based on this lead-time, our team of production planners will initiate a purchase order with an
independent foundry to fabricate the required wafers. The wafers once fabricated must be
probed, or inspected, to determine usable from unusable chip parts, referred to as die, on the
wafer. The wafers are sent to an outside assembly house where they are cut and the good die
are in turn packaged into chips. The chips are then run through various electrical and visual
tests before delivery to the customer. With most of our products, we have the option to probe
the wafers or test the final chips in-house or subcontract the probing or testing out to
independent subcontractors.
We receive more than 90% of the silicon wafers with which we derive our products from
Chartered Semiconductor Manufacturing Ltd. ("Chartered"), Taiwan Semiconductor
Manufacturing Corporation ("TSMC"), and IBM. These independent foundries produce our
netw orking products at feature sizes down to 0.13 micron. By using independent foundries to
fabricate our wafers, we are better able to concentrate our resources on the designing,