Seagate 2012 Annual Report Download - page 10

Table of Contents
• product quality and reliability, commonly expressed in annualized return rates; and
• energy efficiency, commonly measured by the power output necessary to operate the disk drive.
Areal density is a measure of storage capacity per square inch on the recording surface of a disk. The storage capacity of a disk drive is
determined by the number of disks it contains as well as the areal density capability of these disks. We have been pursuing, and will continue to
pursue, a number of technologies to increase areal densities across the entire range of our products for expanding disk drive capacities and
reducing the number of disks and heads per drive to further reduce product costs.
Manufacturing
Vertically integrated hard drive manufacturers design and produce their own read/write heads and recording media, which are critical
technologies for disk drives. This integrated approach enables manufacturers to lower costs and to improve the functionality of components so
that they work together efficiently.
We believe that because of our vertical design and manufacturing strategy, we are well suited to meet the challenges posed by the close
interdependence of components for disk 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;
• 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
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