Seagate 2007 Annual Report Download - page 12

Table of Contents
The proposed closure is part of our ongoing focus on cost-efficiencies in all areas of our business. We plan to cease production at our Limavady
facility during the first quarter of fiscal year 2009. We are in the process of adding an aluminum substrate manufacturing facility in Johor,
Malaysia which will allow us to be more cost competitive and position us for future expansion, and reduce our external substrate purchases to
approximately 50%. We expect meaningful output from our Johor facility in during the first quarter of fiscal year 2009.
Commodity and Other Manufacturing Costs. The production of disc drives requires precious metals, scarce alloys and industrial
commodities, that are subject to fluctuations in prices, and the supply of which has at times been constrained. Recent increases in the price of
many commodities have resulted in higher material costs for our products. Additionally, adverse economic conditions such as rising fuel costs
may further increase our costs related to commodities, manufacturing and freight. Should we not be able to pass these increased costs onto our
customers, our gross margins may be impacted.
In order to mitigate susceptibility to these conditions, we may maintain increased inventory of precious metals, scarce alloys and industrial
commodities. In addition, we have increased our use of ocean shipments to help offset the increase in freight costs.
Printed Circuit Boards. Printed circuit boards are the boards that contain the electronic circuitry and ASICs that provide the electronic
controls of the disc drive and on which the head-disc assembly is mounted. During fiscal year 2008, we completed the outsourcing of the
manufacture and assembly of the printed circuit boards used in our disc drives to third parties.
Spindle Motors.
We participate in the design of many of our spindle motors and purchase them principally from outside vendors in Asia,
whom we have licensed to use our intellectual property and technology.
ASICs. We participate in the design of many of the ASICs used in our disc drives for motor and actuator control, such as interface
controllers, read/write channels and pre-amplifiers. We do not manufacture any ASICs but, rather, buy them from third-party suppliers.
Disc Drive Assembly. Following the production of the individual components of the disc drive, the first step in the manufacture of a disc
drive itself is the assembly of the actuator arm, read/write heads, discs and spindle motor in a housing to form the head-disc assembly. The
production of the head-disc assembly involves largely automated processes. Printed circuit boards are then mated to the head-disc assembly and
the completed unit is tested prior to packaging and shipment. Disc drive assembly and test operations occur primarily at facilities located in
China, Singapore and Thailand. We perform subassembly and component manufacturing operations at our facilities in China, Malaysia,
Northern Ireland, Singapore, Thailand, and in the United States, in California and Minnesota. In addition, third parties manufacture and assemble
components for us in various Asian countries, including China, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and
Vietnam, in Europe and the United States.
Products
We offer a broad range of disc drive products for the enterprise, mobile computing, desktop, consumer electronics and branded solutions
markets of the disc drive industry. We now utilize perpendicular recording technology in all the major markets described below. In addition, we
intend to introduce SSD products for select markets in the future.
We offer more than one product within each product family, and differentiate products on the basis of price/performance and form factor,
the dimensions of the disc drive, capacity, interface, power consumption efficiency, security features like full disc encryption and other customer
integration requirements. More than ever, our industry is characterized by continuous and significant advances in technology, which contributes
to rapid product life cycles. We list below our main current product offerings.
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