What changed in this filing

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Item 1. Business

2021-08-27 compared with 2020-08-28 · 155 added, 130 removed, 121 unchanged (70% of the section changed)

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Everywhere data lives, from advanced data centers to mobile sensors to personal devices, our industry-leading solutions deliver the possibilities of data.

Our broad portfolio of technology and products address the following key end markets:

Client Devices;

Data Center Devices and Solutions;

and Client Solutions.

We also generate license and royalty revenue from our extensive intellectual property (“IP”), which is included in each of these three end market categories.

Founded in 1970 in Santa Ana, California and now headquartered in San Jose, California, Western Digital has one of the technology industry’s most valuable patent portfolios with approximately 13,500 active patents worldwide.

Since 2009, we have been a Standard & Poor’s 500 (“S&P 500”) company.

We have a rich heritage of innovation and operational excellence, a wide range of IP assets and broad research and development (“R&D”) capabilities.

The unabated growth and value of data continues, creating a global need for a larger and more capable storage infrastructure.

We continue to transform ourselves to address this growth by providing what we believe to be the broadest range of storage technologies in the industry with a comprehensive product portfolio and global reach.

Our devices and solutions are made using either rotating magnetic technology, hard disk drives (“HDD”), or semiconductor technology, referred to as flash-based memory (“flash”).

We enable cloud service providers to build more powerful, cost effective and efficient data centers.

We have deep relationships with a large range of original equipment manufacturers (“OEM”) and data center customers currently addressing storage opportunities, such as storage subsystem suppliers, major server OEMs, Internet and social media infrastructure players, and personal computer (“PC”) and Mac™ OEMs.

We have also built strong consumer brands by providing effective tools to manage fast-accumulating libraries of personal content.

Western Digital data-centric solutions are comprised of the Western Digital®, G-Technology™, SanDisk® and WD® brands.

Our products are sold through distribution, retail and direct channels worldwide.

We are a vertically integrated company with deep capabilities to transform disk drive and flash-based components into products and solutions.

We operate a series of joint ventures with Kioxia Corporation (“Kioxia,” formerly known as Toshiba Memory Corporation) that provide us with industry leading flash-based memory wafers that we use in our products (see “Ventures with Kioxia” section below).

We are well positioned to capitalize on the ongoing expansion in digital content generation and management.

This fundamental trend is linked directly to commercial enterprises’ and consumers’ need for data storage and extraction of value from the data.

The ways in which people and organizations are creating and using data are changing and the amount of data considered useful to store is expanding.

More digital content is being stored and managed in a cloud environment on both HDDs and flash-based solid state drives (“SSD”).

With a focus on innovation and value creation, our goal is to grow through strong execution and targeted investments in data center infrastructure, mobility and the cloud.

We operate in the data storage and data management industry.

Our devices and solutions provide a broad range of reliability, performance, storage capacity and data retention capabilities to our customers.

The ability to capture and create value through the use of data analytics is increasingly important to our customers.

In a connected global marketplace, across the data infrastructure, there has been a proliferation in the methods by and the rates at which content is generated, accessed, transformed, consumed and stored by end users.

When combined with fast global networks, these trends create tremendous need for cost effective, high-performance and/or high-capacity storage solutions in edge and end-point use cases such as mobile, computing and consumer electronic devices, as well as in a wide range of storage systems, servers and data centers.

The growth in computing complexity, cloud computing applications, connected mobile devices and Internet connected products is driving unabated growth in the volume of digital content to be stored.

Founded in 1970 in Santa Ana, California, Western Digital is now a Standard & Poor’s 500 (“S&P 500”) company headquartered in San Jose, California.

We have one of the technology industry’s most valuable patent portfolios with approximately 13,700 active patents worldwide.

We have a rich heritage of innovation and operational excellence, a wide range of intellectual property (“IP”) assets and broad research and development (“R&D”) capabilities.

The unabated growth in amount, value, and use of data continues, creating a global need for a larger, faster and more capable storage infrastructure.

We are a customer-focused organization that has developed deep relationships with industry leaders to continue to deliver innovative solutions to help users capture, store and transform data across a boundless range of applications.

Wherever data needs to be stored and accessed - from consumer devices such as cameras, drones and virtual reality headsets, to the most complex data centers - Western Digital is there.

We enable cloud, Internet, and social media infrastructure players to build more powerful, cost effective and efficient data centers.

We help original equipment manufacturers (“OEM”) address storage opportunities and solutions to capture and transform data in myriad devices and edge technologies.

We have also built strong consumer brands with tools to manage fast-accumulating libraries of personal content.

To increase focus, drive innovation and improve execution, we have recently structured our operations with dedicated leadership of our two broad categories of technology:

hard disk drives (“HDD”), which are based on rotating magnetic technology, and flash-based memory (“flash”), which is a semiconductor technology.

We continue to transform ourselves to address the growth in data by providing what we believe to be the broadest range of storage technologies in the industry with a comprehensive product portfolio and global reach.

We operate in the data storage industry.

The ability to access, store and share data from anywhere on any device is increasingly important to our customers.

From the intelligent edge to the cloud, data storage is a fundamental component underpinning the global technology architecture.

Our strengths in innovation and cost leadership, expansive product portfolio and broad routes to market provide a foundation upon which we are solidifying our position as an essential building block of the digital economy.

There’s tremendous market opportunity flowing from the rapid global adoption of the technology architecture built with cloud infrastructure tied to intelligent endpoints all connected by high performance networks.

The value and urgency of data storage at every point across this architecture has never been more clear.

The growth in computing complexity, cloud computing applications, connected mobile devices and Internet connected products, and edge devices is driving unabated growth in the volume of digital content to be stored and used.

This growth has led to a creation of new form factors for data storage.

The storage industry is increasingly utilizing tiered architectures with HDDs, SSDs and other non-volatile memory-based storage to address an expanding set of uses and applications.

We continuously monitor the advantages, disadvantages and advances of the full array of storage technologies, including reviewing these technologies with our customers, to ensure we are appropriately resourced to meet our customers’ storage needs.

Storage solutions that hold large amounts of data are key enablers of the trends seen in the evolution of a data driven economy, underpinned by the increase of digital content creation, consumption and monetization.

We are a market and customer driven company, focused on growth, technology, innovation and value creation for our customers, employees and shareholders.

We develop deep and collaborative relationships with our customers with a goal of enabling their continued success, an approach that has made us a trusted business partner in our served markets.

As our portfolio of storage solutions expands further, we believe our customer engagement approach is one of the key factors that will help us continue to achieve strong financial performance over the long term.

We continue to evolve our customer engagement and go-to-market model to address changing customer and market needs.

We are well positioned to expand our value-creation model within an evolving and growing storage ecosystem with our diversified product platform and unique competitive advantages.

The storage industry is increasingly utilizing tiered architectures with HDDs, solid state drives (“SSDs”) and other non-volatile memory-based storage to address an expanding set of uses and applications.

We believe our expertise and innovation across both HDD and flash technologies enable us to bring powerful solutions to a broader range of applications.

We continuously monitor the full array of storage technologies, including reviewing these technologies with our customers, to ensure we are appropriately resourced to meet our customers’ storage needs.

Our industry is highly competitive.

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Business Strategy

Our overall strategy is to leverage our technology, innovation and execution capabilities to be an industry-leading and broad-based developer, manufacturer and provider of storage devices and solutions that support the infrastructure that has enabled the unabated proliferation of data.

We believe we are the only company in the world with large-scale capabilities to develop and manufacture a portfolio of integrated data storage solutions that are based on both rotating magnetic and flash memory technologies.

Our overall strategy is to leverage our innovation, technology and execution capabilities to be an industry-leading and broad-based developer, manufacturer and provider of storage devices and solutions that support the infrastructure that has enabled the unabated proliferation of data.

We believe we are the only company in the world with large-scale capabilities to develop and manufacture a portfolio of integrated data storage solutions that are based on both HDD and flash memory technologies.

We strive to successfully execute our strategy through the following foundational elements in order to deliver the best outcome for our customers, partners, investors and employees:

• Technology Leadership:

• Innovation and Cost Leadership:

We continue to innovate and develop advanced technologies across platforms for both HDD and flash to deliver timely new products and solutions to meet growing demands for scale, performance and cost efficiency in the market.

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Our strategy provides the following benefits, which distinguish us in the dynamic and competitive data storage industry:

• differentiates us as the leading developer and manufacturer of integrated products and solutions based on both HDD and flash, making us a more strategic supply partner to our large-scale customers who have storage needs across the data infrastructure ecosystem;

• enables scaling for efficiency and flexibility, allowing us to leverage our HDD and flash R&D and capital expenditures to deliver storage solutions to multiple markets;

• results in continued diversification of our HDD and flash storage solutions portfolio and entry into additional growing adjacent markets;

• allows us to achieve strong financial performance, including healthy cash generation, thereby enabling organic and inorganic business investments and facilitating our ongoing deleveraging efforts.

Data Storage Solutions

We offer a broad line of data storage solutions to meet the evolving storage needs of end markets which include the following:

• a broad product portfolio that differentiates us as a leading developer and manufacturer of integrated products and solutions based on both HDD and flash, making us a more strategic supply partner to our large-scale customers who have storage needs across the data infrastructure ecosystem;

• efficient and flexible manufacturing capabilities, allowing us to leverage our HDD and flash R&D and capital expenditures to deliver innovative and cost-effective storage solutions to multiple markets;

• deep relationships with industry leaders across the data ecosystems that give us the broadest routes to market.

Our Data Solutions

We offer a broad line of data solutions to various end markets to meet the evolving storage needs of our customers.

Client Devices.

Client Devices consist of HDDs and SSDs for computing devices, such as desktop and notebook PCs, smart video systems, gaming consoles and set top boxes;

flash-based embedded storage products for mobile phones, tablets, notebook PCs and other portable and wearable devices, automotive, Internet of Things (“IoT”), industrial and connected home applications;

and flash-based memory wafers and components.

We provide numerous data solutions that we incorporate into our client’s devices, which consist of HDD and SSD desktop and notebook PCs, smart video systems, gaming consoles and set top boxes, as well as flash-based embedded storage products for mobile phones, tablets, notebook PCs and other portable and wearable devices, automotive applications, Internet of Things, industrial and connected home applications.

Our HDDs and SSDs are designed for use in devices requiring high performance, reliability and capacity with various attributes such as low cost per gigabyte (“GB”), quiet acoustics, low power consumption and protection against shocks.

Data Center Devices and Solutions

Data Center Devices and Solutions consist of high-capacity enterprise HDDs and high-performance enterprise SSDs, and platforms.

Data Center Devices & Solutions.

We provide an array of high-capacity enterprise HDDs and high-performance enterprise SSDs, and platforms.

Our capacity enterprise helium hard drives provide high capacity storage needs and low total cost of ownership per GB for the growing cloud data center market.

These drives are primarily for use in data storage systems, in tiered storage models and where data must be stored reliably for years.

Our high-performance enterprise class SSDs include high-performance flash-based SSDs and software solutions which are optimized for performance applications providing a range of capacity and performance levels primarily for use in enterprise servers, supporting high volume on-line transactions, data analysis and other enterprise applications.

Our high-performance enterprise class SSDs include high-performance flash-based SSDs and software solutions that are optimized for performance applications providing a range of capacity and performance levels primarily for use in enterprise servers and supporting high volume on-line transactions, data analysis and other enterprise applications.

We also provide higher value data storage platforms to the market.

Client Solutions.

Client Solutions consist of HDDs and SSDs embedded into external storage products and removable flash-based products, which include cards, universal serial bus (“USB”) flash drives and wireless drives.

We provide consumers with a portfolio of HDDs and SSDs embedded into external storage products and removable flash-based products, which include cards, universal serial bus (“USB”) flash drives and wireless drives, through our retail and channel routes to market.

Our external HDD storage products in both mobile and desktop form factors provide affordable, high quality, reliable storage for backup and capacity expansion that are designed to keep digital content secure.

We offer client portable SSDs with a range of capacities and performance characteristics to address a broad spectrum of the client storage market.

Our removable cards are designed primarily for use in consumer devices, such as mobile phones, tablets, imaging systems, still cameras, action video cameras and smart video systems.

Our removable cards are designed primarily for use in consumer devices, such as mobile phones, tablets, imaging systems, cameras and smart video systems.

Our USB flash drives are used in the computing and consumer markets and are designed for high-performance and reliability.

Our wireless drive products allow in-field back up of created content, as well as wireless streaming of high-definition movies, photos, music and documents to tablets, smartphones and PCs.

Rotating Magnetic Storage

HDDs provide non-volatile data storage based on the recording of magnetic information on a rotating disk.

We have successfully developed and commercialized HDDs that operate in an enclosed helium environment, instead of air, delivering industry leading HDD capacity and performance attributes.

Our improvements in HDD capacity, which lower product costs over time, have been enabled largely through advancements in recording head and magnetic media technology.

We develop and manufacture substantially all of the recording heads and magnetic media used in our hard drive products.

Hard Disk Drives.

HDDs provide non-volatile data storage by recording magnetic information on a rotating disk.

We have led the industry in innovation to drive increased areal density and high performance attributes.

Our improvements in HDD capacity, which lower product costs over time, have been enabled largely through advancements in magnetic recording head and media technologies.

We develop and manufacture substantially all of the recording heads and magnetic media used in our HDD products.

The recording heads act as the “to brain” of the HDD and require semiconductor production equipment and technology to produce them.

We invest considerable resources in R&D, manufacturing infrastructure and capital equipment for recording head and media technology, as well as other aspects of the magnetic recording system such as HDD mechanics, controller and firmware technology, in order to secure our competitive position and cost structure.

To support our ongoing efforts of driving innovation and continued areal density leadership, we are actively investing in both microwave-assisted magnetic recording (“MAMR”) and heat-assisted magnetic recording (“HAMR”) technology.

As part of our energy-assisted recording technology roadmap, in 2019 we introduced our 16-, 18-, and 20-terabyte drives that are using energy-assisted perpendicular magnetic recording (“ePMR”) technology.

Solid State Storage

Solid state storage products provide non-volatile data storage based on flash technology.

We develop and manufacture solid state storage products in different form factors for a variety of different markets, including enterprise or cloud storage, client storage, automotive, mobile devices and removable memory devices.

Our solid state storage products utilize our captive flash-based technology which we develop and manufacture through our business ventures with Kioxia.

Flash Technologies.

Flash based storage products provide non-volatile data storage based on flash technology.

We develop and manufacture solid state storage products for a variety of applications including enterprise or cloud storage, client storage, automotive, mobile devices and removable memory devices.

We devote significant research and development resources to the development of highly reliable, high-performance, cost-effective flash-based technology.

Over time, we have successfully developed and commercialized an increased number of storage bits per cell in an increasingly smaller form factor, further driving cost reductions.

Following our introduction and commercialization in 2018 of products based on 4-bits-per-cell architectures (“QLC technology”) and on 3-dimensional flash technology (“3D NAND”), which we refer to as BiCS4, we started shipping products based on QLC and our 4th generation 96-layer BiCS4 technologies in 2019.

Our BiCS4 QLC technology delivers an industry-leading storage capacity of 1.33 terabits on a single chip.

We have also begun initial shipments of our 5 th generation 112-layer BiCS5 products.

In addition, we implemented our advanced UFS and e.MMC interface in a new portfolio of advanced embedded flash drives to empower smartphone users to unlock the full potential of today’s data-driven applications and experiences.

We also provide a range of embedded storage solutions for customers developing high-end, highly demanding, and data-intensive automotive applications.

We expect to develop and commercialize additional generations of 3D NAND technologies over the next several years while continuing to utilize our older technology for certain markets and applications.

Over time, we have successfully developed and commercialized successive generations of 3-dimensional flash technology with increased numbers of storage bits per cell in an increasingly smaller form factor, further driving cost reductions.

We began shipping our 5th generation 112-layer BiCS5 products in 2020 and continue to pursue development of increased-capacity, lower-cost devices.

We are leveraging our expertise, resources and strategic investments in non-volatile memories to explore a wide spectrum of persistent memory and storage class memory technologies.

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This platform strategy also enables our customers to leverage their qualification efforts onto successive product models.

For a discussion of associated risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.

Research and Development

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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.

Substantially all of our flash-based supply requirements for our flash-based products is obtained from our business ventures with Kioxia, which provide us with leading-edge, high-quality and low-cost flash memory wafers.

This represents our captive supply and we are obligated to take our share of the output from these ventures or pay the fixed costs associated with that capacity.

See “Ventures with Kioxia” below for additional information.

While substantially all of our flash memory supply utilized for our products is purchased from these ventures, from time-to-time, we also purchase flash memory from other flash manufacturers, which we refer to as non-captive.

While we do not unilaterally control the operations of our ventures with Kioxia, we believe that our business venture relationship with Kioxia helps us to reduce the costs of producing our products, increases our ability to control the quality of our products and speeds delivery of our products to our customers.

Our vertically integrated manufacturing operations for our flash-based products are concentrated in three locations, with our business ventures with Kioxia located primarily in Yokkaichi, Japan, and our in-house assembly and test operations located in Shanghai, China and Penang, Malaysia.

We also leverage the efficiencies of contract manufacturers when strategically advantageous.

For a discussion of associated risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.

Materials and Supplies

HDD consists primarily of recording heads, magnetic media and a printed circuit board assembly.

We design and manufacture substantially all of the recording heads and magnetic media required for our products.

As a result, we are more dependent upon our own development and execution efforts and less reliant on recording head and magnetic media technologies developed by other manufacturers.

We depend on an external supply base for all remaining components and materials for use in our HDD product design, manufacturing, and testing.

Our flash-based products consist of flash memory, controllers and firmwares.

Substantially all of our flash-based memory is supplied by our business ventures with Kioxia.

Controllers are primarily designed in-house and manufactured by third-party foundries or acquired from third-party suppliers.

We believe the use of our in-house assembly and test facilities, as well as contract manufacturers, provides flexibility and gives us access to increased production capacity.

We have developed deep relationships with these vendors and Kioxia to establish continuous supply of flash-based memory and controllers.

We generally retain multiple suppliers for our component requirements but, for business or technology reasons, we source some of our components from a limited number of sole or single source providers.

Currently, we believe that there are no major issues with component availability.

For a discussion of associated risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.

We also leverage contract manufacturers when strategically advantageous.

Our vertically integrated, in-house assembly and test operations for our HDD products are concentrated in Prachinburi and Bang Pa-In, Thailand, Penang, Johor Bahru, and Sarawak, Malaysia, Laguna, Philippines, Shenzhen, China, San Jose and Fremont, CA, USA.

Ventures with Kioxia

Substantially all of our flash-based supply requirements for our flash-based products is obtained from our ventures with Kioxia, which provide us with leading-edge, high-quality and low-cost flash memory wafers.

While substantially all of our flash memory supply utilized for our products is purchased from these ventures, from time-to-time, we also purchase flash memory from other flash manufacturers.

While we do not unilaterally control the operations of our ventures with Kioxia, we believe that our business venture relationship with Kioxia helps us reduce product costs, increases our ability to control the quality of our products and speeds delivery of our products to our customers.

Our business ventures with Kioxia are located primarily in Yokkaichi, Japan, and our in-house assembly and test operations located in Shanghai, China and Penang, Malaysia.

We and Kioxia currently operate three business ventures in 300-millimeter flash-based manufacturing facilities in Japan, which provide us leading-edge, cost-competitive flash-based memory wafers for our end products.

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Each Flash Venture entity purchases wafers from Kioxia at cost and then resells those wafers to us and Kioxia at cost plus a small mark-up.

We are obligated to pay for variable costs incurred in producing our share of Flash Ventures’ flash-based memory wafer supply, based on our three-month forecast, which generally equals 50% of Flash Ventures’ output.

We are obligated to take our share of the output from these ventures or pay for variable costs incurred in producing our share of Flash Ventures’ flash-based memory wafer supply, based on our three-month forecast, which generally equals 50% of Flash Ventures’ output.

In addition, we are obligated to pay for half of Flash Ventures’ fixed costs regardless of the output we choose to purchase.

We are also obligated to fund 49.9% to 50% of each Flash Ventures entity’s capital investments to the extent that Flash Ventures entity’s operating cash flow is insufficient to fund these investments.

We are also obligated to fund 49.9% to 50% of each Flash Ventures entity’s capital investments to the extent that the Flash Ventures entity’s operating cash flow is insufficient to fund these investments.

We co-develop flash technologies (including process technology and memory design) with Kioxia and contribute IP for Flash Ventures’ use.

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We have jointly invested, and intend to continue to jointly invest, with Kioxia in manufacturing equipment for the Yokkaichi fabrication facilities.

In May 2019, we entered into additional agreements to extend Flash Ventures to a new wafer fabrication facility, known as “K1.” Located in Kitakami, Japan, K1 is operated by Kioxia Iwate Corporation, a wholly owned subsidiary of Kioxia.

We also entered into additional agreements to extend Flash Ventures to a wafer fabrication facility known as “K1”.

Located in Kitakami, Japan, K1 is operated by Kioxia Iwate Corporation, a wholly owned subsidiary of Kioxia.

The primary purpose of K1 is to provide clean room space to continue the transition of existing flash-based wafer capacity to newer technology nodes.

Output from the initial production line at K1 began in the third quarter of fiscal year 2020.

Meaningful output from K1 is not expected to begin until the end of calendar year 2020.

In October 2020, Kioxia announced the start of construction of the shell for a new fabrication facility in Yokkaichi, Japan, referred to as “Y7”.

We expect to continue Flash Ventures investments into Y7 in due course, following the completion of agreements with Kioxia governing the construction and operation of the new facility and according to prevailing market trends.

For a discussion of risks associated with our business ventures with Kioxia, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.

Materials and Supplies

HDD consists primarily of recording heads, magnetic media, controllers and firmware, and a printed circuit board assembly.

We design and manufacture substantially all of the recording heads and magnetic media required for our products.

As a result, we are more dependent upon our own development and execution efforts for these components and less reliant on recording head and magnetic media technologies developed by other manufacturers.

We depend on an external supply base for all remaining components and materials for use in our HDD product design, manufacturing, and testing.

We believe the use of our in-house manufacturing, assembly and test facilities provides the controls necessary to provide the demanding capabilities, performance and reliability our customers require.

Our flash-based products consist of flash memory, controllers and firmware and other components.

Substantially all of our flash-based memory is supplied by our business ventures with Kioxia.

Controllers are primarily designed in-house and manufactured by third-party foundries or acquired from third-party suppliers.

We believe the use of our in-house assembly and test facilities, as well as contract manufacturers, provides flexibility and gives us access to increased production capacity.

We have developed deep relationships with these vendors and Kioxia to establish continuous supply of flash-based memory and controllers.

For a discussion of associated risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.

Sales and Distribution

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For a discussion of associated risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.

We perform our marketing and advertising functions internally and through outside firms utilizing both consumer media and trade publications targeting various reseller and end-user categories.

We perform our marketing and advertising functions internally and through outside firms utilizing both consumer media and trade publications targeting various reseller and end-user markets.

We also maintain customer relationships through direct communication and by providing information and support through our website.

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Original Equipment Manufacturers.

OEMs purchase our products either directly or through a contract manufacturer such as an original design manufacturer and assemble them into the devices they build and market under their own brands.

OEMs purchase our products either directly or through a contract manufacturer such as an original design manufacturer (“ODM”) and assemble them into the devices they build and market under their own brands.

This category extends beyond traditional IT manufacturers and includes manufacturers that incorporate data and storage into their own products across a spectrum of applications, including gaming and personal devices, automotive, industrial and connected home applications.

OEMs typically seek to qualify two or more providers for each generation of products and generally will purchase products from those vendors for the life of that product.

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A large and growing customer base are those who integrate our storage solutions to provide services to other companies and end users primarily through the cloud.

This customer base includes hyper-scale users that utilize our storage solutions to provide cloud-based services and infrastructure including information technology services, social media, gaming, streaming media, research and other services to an ever-increasing market.

This group of customers purchase either directly, through an integrator, an original design manufacturer (“ODM”), an OEM or a combination of channels.

This customer base includes hyper-scale users that utilize our storage solutions to provide cloud-based services and infrastructure including IT services, social media, gaming, streaming media, advertising, cryptocurrency, research and other services to an ever-increasing market.

This group of customers purchase either directly, through an integrator, an ODM, an OEM or a combination of channels.

Distributors.

We use a broad group of distributors to sell our products to non-direct customers such as small computer and consumer electronics (“CE”) manufacturers, dealers, value-added resellers, systems integrators, online retailers and other resellers.

We use a broad group of distributors to sell our products to non-direct customers such as small computer and consumer electronics manufacturers, dealers, value-added resellers, systems integrators, and other resellers.

Distributors generally enter into non-exclusive agreements with us for the purchase and redistribution of our products in specific territories.

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For each of 2021, 2020 and 2019, no single customer accounted for 10% or more of our net revenue.

For a discussion of associated risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.

For additional information regarding revenue recognition and major customers, see Part II, Item 8, Note 1, Organization and Basis of Presentation, and Note 10, Business Segment, Revenue Information, Geographic Information and Concentration of Risk , of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

A substantial portion of our orders are generally for shipments within 60 days of the placement of the order.

Customers’ purchase orders 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 utilizing 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.

We have historically experienced seasonal fluctuations in our business with higher levels of demand in the first and second quarters of our fiscal year as a result of increased customer spending.

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For additional information regarding our service and warranty policy, see Part II, Item 8, Note 1, Organization and Basis of Presentation, and Note 4, Supplemental Financial Statement Data, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Environmental Regulation

We are subject to a variety of U.S.

and foreign laws and regulations in connection with our operations and relating to the protection of the environment, including those governing discharges of pollutants into the air and water, the management and disposal of hazardous substances and the clean-up of contaminated sites.

Some of our operations require environmental permits and controls to prevent and reduce air and water pollution.

These permits are subject to modification, renewal and revocation by issuing authorities.

We believe that we have obtained or are in the process of obtaining all necessary environmental permits for our operations.

We have established environmental management systems and continually update our environmental policies and standard operating procedures for our operations worldwide.

We believe that our operations are in material compliance with applicable environmental laws, regulations and permits.

We budget for operating and capital costs on an ongoing basis to comply with environmental laws.

Our properties have in some cases been operated for many years and may contain soil or groundwater contamination.

In certain of our facilities we are undertaking voluntary monitoring of soil and groundwater.

Based on available information, including our voluntary monitoring activities, we do not believe that we have a current affirmative legal obligation for any remedial action.

For a discussion of associated risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.

As of July 3, 2020, we employed a total of approximately 63,800 employees worldwide, excluding temporary employees and contractors.

Many of our employees are highly skilled and our continued success depends in part upon our ability to attract and retain such employees.

Accordingly, we offer our employees compensation and benefit programs that we believe are, in the aggregate, competitive with those offered by our competitors.

While the substantial majority of our employees are not party to a collective bargaining agreement, nearly half of our employees in Japan and China and a portion of our employees in Malaysia are subject to collective bargaining agreements.

We consider our employee relations to be good.

For a discussion of associated risks, see Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K.

Human Capital Management

Our approximately 65,600 employees worldwide are our most valuable resource.

We believe we can achieve the best business outcomes by empowering our diverse and talented employees to make an impact together.

We are committed to an inclusive environment where every individual can thrive and contribute to our technology leadership across our broad product portfolio and operational excellence to deliver value for our customers.

The Compensation and Talent Committee of our Board of Directors is responsible for providing Board-level oversight and reviews our human capital management programs and initiatives, focusing on our culture, talent development, retention and equity, inclusion and diversity.

Our global workforce is based in the following geographic regions:

Region Primary Functions Approximate # of Employees

Asia Pacific Manufacturing, engineering 54,200

The Americas Engineering, manufacturing, R&D, shared services, sales and marketing 8,000

Europe, the Middle East, Africa, Israel and India Sales, marketing, R&D and engineering 3,400

Equity, Inclusion and Diversity.

Our commitment to equity, inclusion and diversity starts at the top, where half of the members of our highly skilled and diverse Board of Directors are women.

In fiscal year 2021, women represented 25.7% of our management positions and 22.2% of our technical staff.

Additionally, members of racially or ethnically diverse groups, such as Asian, Black/African American or Hispanic/Latinx, represented 57.6% of our U.S.

management positions.

For additional detail about our workforce in fiscal 2021, including data about employee hiring, turnover, and demographics, we encourage you to review our upcoming 2021 Sustainability Report.

Our 2020 Sustainability Report and 2021 ESG Data Download are currently available on our corporate website.

Nothing on our website, including our Sustainability Reports, ESG Data Downloads or sections thereof, shall be deemed incorporated by reference into this Annual Report on Form 10-K.

We are striving to increase representation of women and members of underrepresented communities in our global workforce and particularly in leadership and technical roles.

As part of our diversity efforts, we have delivered unconscious bias training to hundreds of leaders, equipping them to lead inclusively and identify unconscious bias.

We also rolled out a required employee self-directed unconscious bias training in the U.S.

and are planning to roll out the training globally.

Compensation and Benefits.

We provide our employees competitive compensation consisting of base salary, cash short-term incentives and equity-based long-term incentives for certain employees.

We also offer a competitive benefit package that includes sick time and paid time off.

We believe people should be paid for what they do and how they do it, regardless of their gender, race, or other personal characteristics.

To fulfill that commitment, we benchmark pay using technology market data, set pay ranges based on market data and consider factors such as an employee’s role and experience, the location of their job, and their performance.

We regularly review our compensation practices, both in terms of our overall workforce and individual employees, to ensure our pay is fair and equitable.

We also monitor the competitiveness of our compensation and benefits to ensure that we remain an employer of choice in light of intense global competition for talent in the technology sector.

To further ensure consistent and fair pay practices, we have conducted pay equity reviews of our U.S.

employees since 2017, using a reputable third-party expert.

If our review identifies any unexplainable pay gaps, we take action to remedy them.

In fiscal year 2021, we expanded our annual pay review to include two international sites, and in fiscal year 2022, we will further expand to ensure we have a comprehensive global review.

We plan to publish more information about our fiscal year 2021 U.S.

pay equity analysis in our forthcoming 2021 Sustainability Report, which we will publish on our corporate website.

Talent Attraction and Development.

We have targeted recruitment strategies and innovative development and advancement programs to meet our objective to attract, retain and develop a diverse and talented workforce.

Our management team is committed to diverse interview panels and diverse candidate slates for open positions at the director-level and above.

We have relationships with diversity-focused student organizations and programs at our target universities for recruitment and are exploring new relationships with colleges that graduate significant percentages of underrepresented students.

We implemented a global, multi-week program to develop leadership capabilities in high-potential women to accelerate their advancement.

We also sponsor and participate in various conferences and summits focused on developing our pipeline of underrepresented talent.

Our Business Resource Group community includes seven active groups, each with an executive sponsor, and supports our

diverse workforce, including our female, Black, Hispanic/Latinx and LGBTQ employees, as well as Veterans and future leaders.

Turnover rates indicate the health of our workforce culture, and we monitor these metrics carefully in support of our business strategy and execution.

We are proud that our worldwide voluntary turnover rate in fiscal year 2021 was 9.2%, which was below the industry average of 13.8%.

Employee Engagement and Culture.

In fiscal year 2021, we implemented a continuous employee listening platform to collect feedback to better understand and improve the employee experience and identify opportunities to strengthen employee engagement.

Our inaugural survey had a 92% employee participation rate and identified key strengths including that employees felt that their work was meaningful, that they felt a sense of belonging at the company and that they were excited about our future.

To promote our 11 global culture attributes, including inclusion and integrity, we designated approximately 100 culture advocates representing our employees around the world and 20 culture champions selected by members of our executive leadership team to represent our culture attributes at the leadership level.

With the support of our culture advocates and champions, our business leaders and employees have been embracing the attributes and bringing them to life.

In 2021, we were named one of the World’s Most Ethical Companies by Ethisphere Institute, our third year in a row achieving that distinction, which reflects our culture of ethics.

Our Global Code of Conduct is a unifying guide anchored in our core values and our ethical and legal obligations.

It is available to our workforce in 11 languages.

We also provide comprehensive annual training on key compliance topics and our Global Code of Conduct to our worldwide workforce, from our factory employees to our executive leadership team.

Health, Safety and Wellness.

The physical health, financial well-being, life balance and mental health of our employees are vital to our success.

We sponsor global wellness programs designed to enhance physical, financial, and mental well-being for all our employees around the world.

We offer locally appropriate medical, retirement, disability and life insurance benefits.

We provide 12 weeks of paid time off for all new parents in the U.S.

We offer an employee assistance program to our employees in several countries, which provides confidential counseling for support with a wide range of personal issues and concerns at no cost.

We are expanding this program to cover all employees globally in fiscal year 2022.

Throughout the year, we encourage healthy behaviors through regular communications, podcasts, educational sessions, wellness challenges, and other incentives.

Our manufacturing facilities continue to present our most significant health and safety risks, due to higher potential for exposure to chemicals, infectious diseases, hazardous substances and machinery-related hazards.

Managing and reducing risks at these facilities remains a focus, and a specific health and safety assessment is performed at each of our sites.

We also use an integrated management system to manage health and safety standards.

In response to the COVID-19 pandemic, we quickly implemented robust safety measures, including adoption of personal protective equipment for our workforce, enhanced sanitation and social distancing practices, work from home policies, contact tracing and temperature screening at our sites.

As the number of COVID-19 cases decline and vaccination rates have increased, we have been welcoming employees who transitioned to working from home during the pandemic back to the office, based on an evaluation of local conditions and regulations.

We have provided our workforce with locally relevant information about the pandemic, including how employees can get vaccinated, and we continue to follow guidance from governmental authorities and health officials everywhere we operate.

In locations where vaccines are not readily available, we have organized vaccine drives for our employees and their dependents.

Government Regulation

Our worldwide business activities are subject to various laws, rules, and regulations of the United States as well as of foreign governments.

Compliance with these laws, rules, and regulations has not had a material effect upon our capital expenditures, results of operations, or competitive position.

Nevertheless, compliance with existing or future governmental regulations, including, but not limited to, those pertaining to global trade, the environment, consumer and data protection, employee health and safety, and taxes, could have a material impact on our business in subsequent periods.

Refer to “Item 1A.

Risk Factors” for a discussion of these potential impacts.

Corporate Responsibility and Sustainability

7 unchanged sentences

• We utilize a robust integrated management system, with associated policies and procedures, to evaluate and manage occupational health and safety risks, environmental compliance, and chemical and hazardous substance risks.

• We work to minimize our impacts on the environment through emissions reduction targets and other initiatives and to evaluate and enhance our climate resiliency.

• We innovate to reduce the energy used by our products, the energy used to manufacture them, and the amount of new materials required to manufacture them.

• We proactively protect the health and safety of our employees through policies and practices that help employees maintain safe distances from others (including remote work and social distancing at our facilities), ensure our facilities are regularly sanitized, and provide support to employees who have been or are at risk of being infected by dangerous viruses though an emergency leave plan for absences caused directly or indirectly by COVID-19.

• We continue to proactively protect the health and safety of our employees through a phased return-to-site plan based on local guidance and global best practices, by encouraging employees to get vaccinated, including through vaccine drives in India, Thailand, Malaysia and the Philippines and by providing paid leave for employees impacted by COVID-19.

Available Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business