Seagate 2008 Annual Report Download - page 11

Table of Contents
Printed Circuit Boards. 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. The disks, or recording media, are the components on which data is stored and from
which it is retrieved. Each disk consists of a substrate of finely machined aluminum or glass deposited with layers of thin-
film magnetic material.
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 which 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.
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, Singapore 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 for us in various Asian countries, including China, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and
Vietnam, in Europe and the United States.
Suppliers of Components and Capital Equipment. Due to industry consolidation, 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.
Generally, we believe that there is more than adequate supply of components to meet currently identified industry demand. However, we
believe that the supply of glass substrates, a component in mobile disk drives, may be below adequate levels to support demand for mobile
drives. This supply constraint may be particularly pronounced if global macroeconomic conditions improve in the near term or if the shift in
demand from desktop compute to mobile compute accelerates.
Drive manufacturers have adjusted their capital spending plans in reaction to the reduction in demand. As a result, capital equipment
manufacturers may be increasingly financially constrained and, therefore, may be less able to supply equipment when needed.
Commodity and Other Manufacturing Costs. The production of disk drives requires precious metals, scarce alloys and industrial
commodities, that are subject to fluctuations in prices, and the supply of which has at times been constrained. In order to mitigate susceptibility
to these conditions, we may maintain increased inventory of precious metals, scarce alloys and industrial commodities. We believe that currently
there is adequate supply of these precious metals, scarce alloys and industrial commodities. Additionally,
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