Seagate 2011 Annual Report Download - page 12

Table of Contents
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;
• 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
•
leveraging the facilities we operate and the personnel we employ.
A vertically integrated model, however, tends to have less flexibility when demand moderates as it exposes us to higher unit costs as
capacity utilization is not optimized.
Due to the significant challenges posed by the need to continually innovate and improve manufacturing efficiency and the continued
demands on capital and research and development investments required to do so, the disk drive industry has undergone significant consolidation
as disk drive manufacturers and component manufacturers merged with other companies or exited the industry.
Components and Raw Materials
Disk drives incorporate certain components, including a head disk assembly and a printed circuit board mounted to the head disk assembly,
which are sealed inside a rigid base and top cover containing the recording components in a contamination controlled environment. We maintain
a highly integrated approach to our business by designing and manufacturing a significant portion of the components we view as critical to our
products, such as recording heads and media.
Read/Write Heads. The function of the read/write head is to scan across the disk 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 disk drive industry. We perform all primary stages
of design and manufacture of read/write heads at our facilities. We use a combination of internally manufactured and externally sourced
read/write heads, the mix of which varies based on product mix, technology and our internal capacity levels.
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
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