Seagate 2009 Annual Report Download - page 11

Table of Contents
Media. Information is written to the media, or disk, as it rotates at very high speeds past the read/write head. The media is made from
non-magnetic material, usually aluminum alloy or glass, and is coated with a thin layer of magnetic material. We use a combination of internally
manufactured and externally sourced finished media and aluminum substrates, the mix of which varies based on product mix, technology and
our internal capacity levels. We purchase all of our glass substrates from third parties, which we use in the disk drives we make for mobile
products.
Printed Circuit Board Assemblies. The printed circuit board assemblies (PCBAs) are comprised of standard and custom ASICs and
ancillary electronic control chips. The ASICs control the movement of data to and from the read/write heads and through the internal controller
and interface, which communicates with the host computer. The ASICs and control chips form electronic circuitry that delivers instructions to a
head positioning mechanism called an actuator to guide the heads to the selected track of a disk where the data is recorded or retrieved. Disk
drive manufacturers use one or more industry standard interfaces such as serial advanced technology architecture (SATA); small computer
system interface (SCSI); serial attached SCSI (SAS); or Fibre Channel (FC) to communicate to the host systems. We outsource to third parties
the manufacture and assembly of the PCBAs used in our disk drives. We do not manufacture any ASICs, but we participate in their proprietary
design.
Head Disk Assembly. The head disk assembly consists of one or more disks attached to a spindle assembly powered by a spindle motor
that rotates the disks at a high constant speed around a hub. The disks, or recording media, are the components on which data is stored and from
which it is retrieved. Each disk consists of a substrate of finely machined aluminum or glass deposited with layers of thin-
film magnetic material.
Read/write heads, mounted on an arm assembly, similar in concept to that of a record player, fly extremely close to each disk surface and record
data on and retrieve it from concentric tracks in the magnetic layers of the rotating disks. The read/write heads are mounted vertically on an E-
shaped assembly that is actuated by a voice-coil motor to allow the heads to move from track to track. The E-block and the recording media are
mounted inside the head disk assembly. We purchase spindle motors from outside vendors and from time to time participate in the design of the
motors that go into our products.
Disk Drive Assembly. Following the completion of the head disk assembly, it is mated to the PCBA, and the completed unit goes through
extensive defect mapping and testing prior to packaging and shipment. Disk 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 Minnesota. In addition, third parties manufacture and assemble
components for us in various Asian countries, including China, Japan, South Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and
Vietnam, in Europe and in the United States.
Suppliers of Components and Industry Constraints. Due to industry consolidation, there are a limited number of independent suppliers of
components, such as recording heads and media, available to disk drive manufacturers. Vertically integrated disk drive manufacturers, who
manufacture their own components, are less dependent on external component suppliers than less vertically integrated disk drive manufacturers.
We believe the supply chain was generally tight for the industry during most of fiscal year 2010. Availability of glass substrates, finished
media and heads improved during the June 2010 quarter. However, supply of these critical components is still expected to be generally tight for
the second half of the 2010 calendar year, reflecting typical seasonal patterns.
Commodity and Other Manufacturing Costs. The production of disk drives requires precious metals, scarce alloys and industrial
commodities, which are subject to fluctuations in prices and the supply of which has at times been constrained. We believe that currently there is
an adequate supply of these precious metals, scarce alloys and industrial commodities. Additionally, volatility in fuel costs may increase our
costs
9