Seagate 2007 Annual Report Download - page 11

Table of Contents
meet the challenges posed by the close interdependence of components for disc drives. Our manufacturing efficiency and flexibility are critical
elements of our integrated business strategy. We continuously seek to improve our manufacturing efficiency and cost by:
• employing manufacturing automation to enhance our efficiency and flexibility;
•
improving product quality and reliability, and reducing costs;
• integrating our supply chain with suppliers and customers to enhance our demand visibility and reduce our working capital
requirements;
• coordinating between our manufacturing group and our research and development organization to rapidly achieve volume
manufacturing; and
Manufacturing our disc drives is a complex process that begins with the production of individual components and ends with a fully
assembled unit. We design, fabricate and/or assemble a number of the most important components found in our disc drives, including read/write
heads and recording media. Our design and manufacturing operations are based on technology platforms that are used to produce various disc
drive products that serve multiple disc drive applications and markets. As an example, our 3.5-inch SATA disc drive with perpendicular
recording technology platform is sold to customers for use in desktop, enterprise and consumer electronics applications. Our main technology
platforms are primarily focused around areal density of media and read/write head technologies. Our integrated platform technologies and
manufacturing allow our set of disc drive products to be used in a wide range of electronic data storage applications and in a wide range of
industries.
Read/Write Heads. The function of the read/write head is to scan across the disc as it spins, magnetically recording or reading
information. The tolerances of recording heads are extremely demanding and require state-of-the-art equipment and processes. Our read/write
heads are manufactured with thin-film and photolithographic processes similar to those used to produce semiconductor integrated circuits,
though challenges in magnetic film properties and topographical structures are unique to the disc drive industry. Beginning with six and eight-
inch round ceramic wafers, we process more than 30,000 head elements at one time. Each of these head elements goes through more than 500
steps, all in clean room environments. We have upgraded our fabrication facilities in capital equipment and systems to deliver the required
complexity and precision needed to complete our product transition to perpendicular recording technology, which we achieved during fiscal year
2008. Additional capital investments will be driven primarily by volume. We perform all primary stages of design and manufacture of read/write
heads at our facilities. We currently manufacture all of our read/write heads. We are currently evaluating third party read/write head for use in
future products.
Recording Heads and Media. The percentage of our requirements for recording media that we produce internally varies from quarter to
quarter. Our long-term strategy is to externally purchase approximately 10% of total recording media requirements. In July 2008, we announced
the proposed closure of our recording media manufacturing facility in Milpitas, California. The closure is part of our ongoing focus on cost-
efficiencies in all areas of our business. We plan to cease production at the Milpitas manufacturing facility in October 2008. We are continuing
to expand our recording media production facilities in Singapore. We expect meaningful output from our new media facility in Singapore
beginning the first quarter of fiscal year 2009 and we believe we will have adequate internal and external supply plans in place to support our
requirements. Similar to our long-term strategy on recording media supply, our future plans include the evaluation and external purchase of
approximately 10% of recording heads requirements.
We purchase all of our glass substrates from third parties (mainly in Japan), which are used to manufacture our disc drives for mobile and
small form factor consumer electronics products. Historically, we purchase approximately 70% of our aluminum substrates for recording media
production from third parties. In December 2007, we announced the proposed closure of our substrate manufacturing facility in Limavady,
Northern Ireland.
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rationalizing the facilities we operate and reducing the number of personnel we employ.