Seagate 2015 Annual Report Download - page 32

TableofContents
couldexperienceashortageinsupplyoranincreaseinproductioncosts,whichwouldadverselyaffectourresultsofoperations.
Consolidationamongcomponentmanufacturershasresultedandmaycontinuetoresultinsomecomponentmanufacturersexitingtheindustryornotmaking
sufficientinvestmentsinresearchtodevelopnewcomponents.
Ifthereisashortageof,ordelayinsupplyinguswith,criticalcomponents,equipmentorrawmaterials,then:
•itislikelythatoursupplierswouldraisetheirpricesand,ifwecouldnotpassthesepriceincreasestoourcustomers,ouroperatingmarginwould
decline;
•wemighthavetoreengineersomeproducts,whichwouldlikelycauseproductionandshipmentdelays,makethereengineeredproductsmorecostly
andprovideuswithalowerrateofreturnontheseproducts;
•wewouldlikelyhavetoallocatethecomponentswereceivetocertainofourproductsandshiplessofothers,whichcouldreduceourrevenuesand
couldcauseustolosesalestocustomerswhocouldpurchasemoreoftheirrequiredproductsfrommanufacturersthateitherdidnotexperience
theseshortagesordelaysorthatmadedifferentallocations;and
•wemightbelateinshippingproducts,causingpotentialcustomerstomakepurchasesfromourcompetitors,thuscausingourrevenueandoperating
margintodecline.
Wecannotassureyouthatwewillbeabletoobtaincriticalcomponentsinatimelyandeconomicmanner.
Weoftenaimtoleadthemarketinnewtechnologydeploymentsandleverageuniqueandcustomizedtechnologyfromsinglesourcesupplierswhoareearly
adoptersintheemergingmarket.Ouroptionsinsupplierselectioninthesecasesarelimitedandthesupplierbasedtechnologymayconsequentlybesinglesourced
untilwideradoptionofthetechnologyoccursandanynecessarylicensesbecomeavailable.Insuchcasesanytechnicalissuesinthesupplier'stechnologymay
causeustodelayshipmentsofournewtechnologydeploymentsandthereforeharmourfinancialposition.
Ifrevenuesfallorcustomerdemanddecreasessignificantly,wemaynotmeetallofourpurchasecommitmentstocertainsuppliers.
Fromtimetotime,weenterintolong-term,non-cancelablepurchasecommitmentsormakelargeup-frontinvestmentswithcertainsuppliersinordertosecure
certaincomponentsortechnologiesfortheproductionofourproductsortosupplementourinternalmanufacturingcapacityforcertaincomponents.Ifouractual
revenuesinthefuturearelowerthanourprojectionsorifcustomerdemanddecreasessignificantlybelowourprojections,wemaynotmeetallofourpurchase
commitmentswiththesesuppliers.Asaresult,itispossiblethatourrevenueswillnotbesufficienttorecoupourup-frontinvestments,inwhichcasewewillhave
toshiftoutputfromourinternalmanufacturingfacilitiestothesesuppliersormakepenalty-typepaymentsunderthesecontracts.
Conflictmineralsregulationsmaycauseustoincuradditionalexpensesandcouldlimitthesupplyandincreasethecostofcertainmetalsusedin
manufacturingourproducts.
InAugust2012,theSECadoptedrulesestablishingadditionaldisclosureandreportingrequirementsregardingtheuseofspecifiedminerals,orconflict
minerals,thatarenecessarytothefunctionalityorproductionofproductsmanufacturedorcontractedtobemanufactured.Theseruleswillrequireustodetermine,
discloseandreportwhetherornotsuchconflictmineralsoriginatefromtheDemocraticRepublicoftheCongooranadjoiningcountry.Themostrecentreportwas
filedonMay27,2016.Theserulescouldaffectourabilitytosourcecertainmaterialsusedinourproductsatcompetitivepricesand
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