Seagate 2012 Annual Report Download - page 11

Table of Contents
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 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. 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 (E-block) 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. We use a combination of internally
manufactured and externally sourced head disk assemblies.
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 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 and disk
drive assemblies for us in various countries worldwide.
Suppliers of Components and Industry Constraints. 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.
Commodity and Other Manufacturing Costs. The production of disk drives requires rare earth elements, precious metals, scarce alloys
and industrial commodities, which are subject to fluctuations in prices and the supply of which has at times been constrained. In addition to
increased costs of components and commodities, volatility in fuel costs may also increase our costs related to commodities, manufacturing and
freight. As a result, we may increase our use of ocean shipments to help offset any increase in freight costs.
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