Western Digital 2009 Annual Report Download - page 34

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Spending to improve our technology and develop new technology to remain competitive may negatively impact our financial
results.
In attempting to remain competitive, we may need to increase our capital expenditures and expenses above our
historical run-rate model in order to attempt to improve our existing technology and develop new technology. Increased
investments in technology could cause our cost structure to fall out of alignment with demand for our products which
would have a negative impact on our financial results.
Our head manufacturing operations include a single wafer fabrication facility in California and a single slider fabrication
and head gimbal assembly facility in Thailand, our magnetic media operations include three facilities in Malaysia, and our
high volume hard drive manufacturing operations include facilities in Thailand and Malaysia, which subjects us to
substantial risk of damage or loss if operations at any of these facilities are disrupted.
We design and manufacture a substantial portion of the heads and magnetic media required for the hard drives we
manufacture. Approximately 80-90% of our requirement for heads is satisfied by wafers fabricated in our Fremont,
California facility. Wafers are then sent to our Thailand facility for slider fabrication and wafer slicing and HGA assembly
and testing. Additionally, we manufacture the majority of our magnetic media and substrates in three facilities in
Malaysia. Our high volume hard drive manufacturing facilities are in Malaysia and Thailand, and the manufacturing
facilities of many of our suppliers are also in Asia. A fire, flood, earthquake or other disaster, condition or event such as
political instability, civil unrest or a power outage that adversely affects any of these facilities would significantly affect
supply of our heads or magnetic media and limit our ability to manufacture hard drives, which would result in a
substantial loss of sales and revenue and a substantial harm to our operating results. Similarly, a localized health risk
affecting our employees or the staff of our suppliers, such as the spread of the Influenza A (H1N1) or a new pandemic
influenza, could impair the total volume of hard drives that we are able to manufacture, which would result in substantial
harm to our operating results.
Our operating results will be adversely affected if we fail to optimize the overall quality, time-to-market and time-to-volume
of new and established products.
To achieve consistent success with our customers, we must balance several key attributes such as time-to-market,
time-to-volume, quality, cost, service, price and a broad product portfolio. Our operating results will be adversely
affected if we fail to:
maintain overall quality of products in new and established programs;
produce sufficient quantities of products at the capacities our customers demand while managing the integration
of new and established technologies;
develop and qualify new products that have changes in overall specifications or features that our customers may
require for their business needs;
obtain commitments from our customers to qualify new products, redesigns of current products, or new
components in our existing products;
obtain customer qualification of these products on a timely basis by meeting all of our customers’ needs for
performance, quality and features;
maintain an adequate supply of components required to manufacture our products; or
maintain the manufacturing capability to quickly change our product mix between different capacities, form
factors and spin speeds in response to changes in customers’ product demands.
Manufacturing and marketing our products abroad subjects us to numerous risks.
We are subject to risks associated with our foreign manufacturing operations and foreign marketing efforts,
including:
obtaining requisite U.S. and foreign governmental permits and approvals;
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