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We believe that we have significant know-how, unique product manufacturing processes, test and tooling,
execution skills and human resources to continue to be successful and be able to grow, as necessary, our manufacturing
operations. We strive to maintain manufacturing flexibility, high manufacturing yields, reliable products, and high-
quality components. The critical elements of our hard drive production are high volume and utilization, low cost
assembly and testing, and maintaining close relationships with our strategic component suppliers to access best-in-
class technology and manufacturing capacity.
Hard drive manufacturing is a complex process involving the production and 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 manufactur-
ing environment. Our clean room manufacturing process consists of modular production units, each of which contains
a number of work cells.
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 manufactur-
ing costs. For our non-hard drive products, we leverage the efficiencies of contract manufacturers when strategically
advantageous. For a discussion of risks related to manufacturing, see Item 1A of this Annual Report on Form 10-K.
Materials and Supplies
We use a number of components, equipment, goods and services in the manufacturing of our products. The key
components of our hard drives are: magnetic heads; magnetic media; suspensions with related head gimbal assemblies
("HGAs") and HSAs; spindle motors; custom and standard electronics such as SoC, magnetic media, motor con-
trollers, pre-amps and printed circuit boards; base and top covers; and magnets and related voice coil motors.
We design and manufacture a substantial portion of the heads and magnetic media required for our hard drives.
We acquire all of the remaining components for our products from third party suppliers. The major components used
in the manufacture of our solid-state drives (the semiconductor media and SoC) and in our media players (the con-
troller) are also acquired from third party suppliers. 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.
We generally retain multiple suppliers for each of our component requirements but in some instances use sole
sources for business reasons. Currently, we believe that there are no major issues with component availability. For a
discussion of risks related to our component supplies, see Item 1A of this Annual Report on Form 10-K.
A substantial portion of our orders are generally for shipments within 30 to 60 days of the placement of the
order. Customers' purchase orders typically may be canceled with relatively short notice to us, with little or no cost to
the customer, or modified by customers to provide for delivery at a later date. In addition, for many of our OEMs uti-
lizing just-in-time inventory, we do not generally require firm order commitments and instead, receive a periodic
forecast of requirements. Therefore, backlog information as of the end of a particular period is not necessarily
indicative of future levels of our revenue and profit and may not be comparable to prior periods.
Patents, Licenses and Proprietary Information
We have more than 6,000 patents and have many patent applications in process. We believe that although our
patents and patent applications have considerable value, the successful manufacturing and marketing of our products
depends primarily upon the technical and managerial competence of our staff. Accordingly, the patents held and
applied for do not ensure our future success.
In addition to patent protection of certain intellectual property rights, we consider elements of our product
designs and processes to be proprietary and confidential. We believe that our non-patented intellectual property, par-