Western Digital 2010 Annual Report Download - page 20

has higher “read” performance attributes than hard drives, it has lower “write” performance attributes. Flash memory
could become more competitive in the near future for additional applications requiring less storage capacity than that
provided by hard drives. However, we believe that the traditional high-volume computing markets will remain the
domain of 3.5-inch and 2.5-inch hard drives based on the hard drive industry’s attributes of reliability, availability,
storage capacity and cost.
Our competitors in the external hard drive market include companies such as EMC Corporation, Hitachi Global
Storage Technologies, LaCie S.A., Melco Holdings Inc. and Seagate Technology. Our competitors in the solid-state drive
market include companies such as Intel Corporation, Micron Technology, Inc., Samsung Electronics Co. Ltd., Smart
Modular Technologies, Inc. and STEC, Inc. Our competitors in the media player retail market include companies such as
Apple Inc., EMC Corporation, LaCie S.A., Roku, Inc. and Seagate Technology.
For an additional discussion of risks related to competition, see Item 1A of this Annual Report on Form 10-K.
Seasonality
We have historically experienced seasonal fluctuations in our business with higher levels of demand in the first and
second quarters of our fiscal year. This seasonality is a result of consumer spending at the beginning of the school year and
during the holiday season.
Service and Warranty
We generally warrant our newly manufactured products against defects in materials and workmanship from one to
five years from the date of manufacture depending on the type of product. Our warranty obligation is generally limited to
repair or replacement. We have engaged third parties in various countries in multiple regions, including Africa, Asia
Pacific, Australia, Europe, India, Latin America, the Middle East and North America, to provide various levels of testing,
processing and/or recertification of returned products for our customers.
Manufacturing
We believe that we have significant know-how, unique product manufacturing processes, execution skills and
human resources to continue to be successful and have the ability to grow, as necessary, our manufacturing operations. To
be competitive, we must manufacture high quality hard drives with industry leading time-to-volume production at
competitive unit costs. We strive to maintain manufacturing flexibility, high manufacturing yields, reliable products,
and high-quality components that we manufacture ourselves, while insisting that our suppliers provide high-quality
components at competitive prices. The critical elements of our hard drive production are high volume and utilization,
low cost assembly and testing, and establishment and maintenance of key supplier relationships. By establishing close
relationships with our strategic component suppliers, we believe we access best-of-class technology and manufacturing
quality. In addition, we believe that our sourcing strategy currently enables us to have the business flexibility needed to
select the highest quality, low cost of ownership suppliers as product designs and technologies evolve.
Hard drive manufacturing is a complex process involving the assembly of precision components with narrow
tolerances and thorough testing. The assembly process occurs in a “clean room” environment that demands skill in
process engineering and efficient space utilization to control the operating costs of this manufacturing environment. Our
clean room manufacturing process consists of modular production units, each of which contains a number of work cells.
We manufacture hard drives in Malaysia and Thailand. We continually evaluate our manufacturing processes in an
effort to increase productivity, sustain and improve quality and decrease manufacturing costs. We continually evaluate
which steps in the manufacturing process would benefit from automation and how automated manufacturing processes
can improve productivity and reduce manufacturing costs.
We use our wafer fabrication facilities in Fremont, California and our slider fabrication facility in Bang Pa-In,
Thailand, to design and manufacture a substantial portion of the heads and head gimbal assemblies (“HGAs”) we include
in the hard drives we manufacture.
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