What changed in this filing

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Item 1. Business

2024-08-20 compared with 2023-08-22 · 129 added, 139 removed, 118 unchanged (69% of the section changed)

Western Digital Corporation (“Western Digital”) is on a mission to unlock the potential of data by harnessing the possibility to use it.

We are a leading developer, manufacturer, and provider of data storage devices and solutions based on both NAND flash and hard disk drive technologies.

With dedicated flash-based products (“Flash”) and hard disk drives (“HDD”) business units driving advancements in storage technologies, our broad and ever-expanding portfolio delivers powerful Flash and HDD storage solutions for everyone from students, gamers, and home offices, to the largest enterprises and public clouds to capture, preserve, access, and transform an ever-increasing diversity of data.

Our broad portfolio of technology and products in Flash and HDD address multiple end markets of “Cloud”, “Client” and “Consumer.”

Cloud is comprised primarily of products for public or private cloud environments and end customers, which we believe we are uniquely positioned to address as the only provider of both Flash and HDD.

Through the Client end market, we provide our original equipment manufacturer (“OEM”) and channel customers a broad array of high-performance flash and hard drive solutions across personal computer, mobile, gaming, automotive, virtual reality headsets, at-home entertainment, and industrial spaces.

Western Digital is a leading developer, manufacturer and provider of data storage devices and solutions based on both hard disk drive and NAND flash technologies.

With a differentiated innovation engine driving advancements in storage and semiconductor technologies, our broad and ever-expanding portfolio delivers powerful hard disk drives (“HDD”) and flash-based products (“Flash”) storage solutions for everyone from students, gamers and home offices, to the largest enterprises and public clouds to capture, preserve, access and transform an ever-increasing diversity of data.

Our broad portfolio of technology and products addresses multiple end markets:

“Cloud,” “Client” and “Consumer.”

Cloud is comprised primarily of products for public or private cloud environments and end customers.

Through the Client end market, we provide our original equipment manufacturer (“OEM”) and channel customers a broad array of high-performance hard drive and flash solutions across personal computer, mobile, gaming, automotive, virtual reality headsets, at-home entertainment, and industrial spaces.

The Consumer end market is highlighted by our broad range of retail and other end-user products, which capitalize on the strength of our product brand recognition and vast points of presence around the world.

On October 30, 2023, we announced that our Board of Directors had completed its strategic review of our business and, after evaluating a comprehensive range of alternatives, authorized us to pursue a plan to separate our HDD and Flash business units to create two independent, public companies.

We believe the separation will better position each business unit to execute innovative technology and product development, capitalize on unique growth opportunities, extend respective leadership positions and operate more efficiently with distinct capital structures.

The completion of the planned separation is subject to certain conditions, including final approval by our Board of Directors.

Significant effort is underway and extensive progress has been made with respect to the separation as we continue to drive towards completing the work required to separate the businesses by the end of calendar year 2024.

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 13,000 active patents worldwide.

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

We have valuable patent portfolios containing approximately 13,000 active patents , covering groundbreaking memory technologies and beyond.

We have extensive customer, partner and channel relationships across a number of end markets and geography and have a rich heritage of innovation and operational excellence, a wide range of intellectual property (“IP”) assets, broad research and development (“R&D”) capabilities and large-scale, efficient manufacturing supply chains.

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

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We help OEMs address storage opportunities and solutions to capture and transform data in a myriad of devices and edge technologies.

We have also built strong consumer brands with tools to manage vast libraries of personal content and to push the limits of what’s possible for storage.

We have also built strong consumer brands with tools to manage vast libraries of personal content and to push the limits of what is possible for storage.

At Western Digital, 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.

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Our strengths in innovation and cost leadership, diversified 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 is 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 have never been clearer.

The increase in computing complexity and advancements in artificial intelligence, along with growth in 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.

We believe there is 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 increase in computing complexity and advancements in artificial intelligence (“AI”), along with growth in 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 the creation of new form factors for data storage.

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

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

We believe our expertise and innovation across both HDD and Flash technologies enable us to bring powerful solutions to a broad 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.

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Flash Technologies .

Flash 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.

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 devote significant research and development resources to the development of highly reliable, high-performance, cost-effective flash-based technology and are continually pursuing developments in next-generation flash-based technology capacities.

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.

We have also initiated, defined and developed standards to meet new market needs and to promote wide acceptance of flash storage standards through interoperability and ease of use.

Hard Disk Drives.

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

Our multi-year product roadmap for high-capacity HDD, which combine ePMR, OptiNAND, UltraSMR and triple stage actuators to deliver a cutting-edge portfolio of drives, in commercial volumes, at a wide variety of capacity points, puts Western Digital in a strong position to capitalize on the opportunities presented by the large and growing storage markets.

Our multi-year product roadmap for high-capacity HDD, which combines ePMR, OptiNAND, UltraSMR and triple stage actuators to deliver a cutting-edge portfolio of drives, in commercial volumes, at a wide variety of capacity points, puts Western Digital in a strong position to capitalize on the opportunities presented by the large and growing storage markets.

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.

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

Flash Technologies .

Flash-based 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, client, automotive, mobile devices and removable memory devices.

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

We devote significant R&D resources to the development of highly reliable, high-performance, cost-effective flash-based technology and are continually pursuing developments in next-generation flash-based technology capacities.

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.

We have also initiated, defined and developed standards to meet new market needs and to promote wide acceptance of flash storage standards through interoperability and ease of use.

Our Data Solutions

Our broad portfolio of technology and products address multiple end markets of “Cloud”, “Client” and “Consumer” and are comprised of the Western Digital®, SanDisk® and WD® brands.

Cloud represents a large and growing end market comprised primarily of products for public or private cloud environments and enterprise customers, which we believe we are uniquely positioned to address as the only provider of both flash and hard drive products.

We provide the Cloud end market with an array of high-capacity enterprise HDD and high-performance enterprise SSD, and platforms.

Our capacity enterprise hard drives provide high-capacity storage needs and a low total cost of ownership per gigabyte for the growing cloud data center and smart video system markets.

Our broad portfolio of technology and products addresses multiple end markets of “Cloud,” “Client” and “Consumer” and are comprised of the Western Digital®, SanDisk® and WD® brands.

Cloud represents a large and growing end market comprised primarily of products for public or private cloud environments and enterprise customers.

We provide the Cloud end market with an array of high-capacity enterprise HDD, high-performance enterprise SSD and platforms.

Our capacity enterprise hard disk drives provide high-capacity storage needs and a low total cost of ownership for the growing cloud data center and smart video system markets.

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 SSD include high-performance flash-based SSD 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 online transactions, data analysis and other enterprise applications.

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

Through the Client end market, we provide numerous data solutions that we incorporate into our client’s devices, which consist of HDD and SSD desktop and notebook PCs, 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 HDD and SSD are designed for use in devices requiring high performance, reliability and capacity with various attributes such as low cost per gigabyte, quiet acoustics, low power consumption and protection against shocks.

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The Consumer end market provides consumers with a portfolio of HDD and SSD embedded into external storage products and removable Flash, which include cards, universal serial bus (“USB”) flash drives and wireless drives, through our retail and channel routes to market.

We serve the Consumer end market with a portfolio of HDD and SSD embedded into external storage products and removable Flash, 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.

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Our industry is highly competitive.

We compete with manufacturers of Flash and HDD for Cloud, Client, and Consumer end markets.

In Flash, we compete with vertically integrated suppliers such as Kioxia, Micron Technology, Inc., Samsung Electronics Co., Ltd., SK hynix, Inc., Yangtze Memory Technologies Co., Ltd.

and numerous smaller companies that assemble flash into products.

We believe we are well-positioned with our leading product portfolio, premium consumer brand, differentiated semiconductor innovation engine and leadership in driving cost efficiency.

Nevertheless, we face strong competition from other manufacturers of HDD and Flash in the Cloud, Client and Consumer end markets.

In HDD, we compete with Seagate Technology Holdings plc and Toshiba Electronic Devices & Storage Corporation.

In Flash, we compete with vertically integrated suppliers such as Kioxia, Micron Technology, Inc., Samsung Electronics Co., Ltd., SK Hynix, Inc., Yangtze Memory Technologies Co., Ltd.

and numerous smaller companies that develop and manufacture flash-based products.

Business Strategy

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 Flash and HDD technologies.

We strive to successfully execute our strategy through the following foundational elements in order to create long-term value for our customers, partners, investors and employees:

• Innovation and Cost Leadership:

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

• Broad Product Portfolio:

We leverage our capabilities in firmware, software and systems in both Flash and HDD to deliver compelling and differentiated integrated storage solutions to our customers that offer the best combinations of performance, cost, power consumption, form factor, quality and reliability, while creating new use cases for our solutions in emerging markets.

• Operational Excellence:

We are focused on delivering the best value for our customers in Cloud, Client and Consumer end markets through a relentless focus on appropriately scaling our operations across both Flash and HDD technologies to efficiently support business growth;

achieving best in class cost, quality and cycle-time;

maintaining industry leading manufacturing capabilities;

and having a competitive advantage in supply-chain management.

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

• a broad product portfolio that differentiates us as a leading developer and manufacturer of integrated products and solutions based on both Flash and HDD, 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 Flash and HDD 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;

• industry leading consumer brand awareness and global retail distribution presence.

In June 2022, we announced that we are reviewing potential strategic alternatives aimed at further optimizing long-term value for our stockholders.

The Executive Committee of our Board, chaired by our CEO, is overseeing the assessment process, and the potential strategic alternatives include, among other things, options for separating our Flash and HDD business units.

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Our overall strategy focuses on leadership, innovation and execution 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.

Our strategy reflects the following foundational elements that we strive to meet:

• Drive Leadership in HDD

▪ Provide reliable capacity growth and improved total cost of ownership

▪ Enhance customers’ ability to generate value from data

▪ Develop new technologies across the storage landscape

• Drive Differentiated Leadership in Flash

▪ Capitalize on market transition to solid state drives

▪ Focus on gross margin leadership

▪ Leverage consumer brand strength

• Lead in Storage Innovation

▪ Lead in areal density

▪ Invest in leading HDD technologies to enable future drive capacity transition

▪ Drive capital-efficient bit growth in flash

▪ Explore tailored storage solutions to address the evolving workload requirements of generative AI

• Deliver Customer Value

▪ Increase long-term engagement and through-cycle agreements with key hyperscalers

▪ Maintain and expand strategic relationships with customers while transitioning into two market-leading companies

• Accelerate Operational Excellence

▪ Achieve operational excellence to translate technology into stockholder value

▪ Meet cost reduction targets to improve gross margin

▪ Focus on sustainability and digital innovation of our manufacturing processes

Research and Development

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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.

Manufacturing

Manufacturing and Suppliers

We believe that we have significant know-how, unique product manufacturing processes, test and tooling, execution skills, human resources and training to continue to be successful and to adjust our manufacturing operations as necessary.

We strive to maintain manufacturing flexibility, high manufacturing yields, reliable products and high-quality components.

The critical elements of our production of Flash and HDD are high volume and utilization, low-cost assembly and testing, strict adherence to quality metrics and maintaining close relationships with our strategic component suppliers to access best-in-class technology and manufacturing capacity.

The critical elements of our production of both HDD and Flash are high volume and utilization, low-cost assembly and testing, strict adherence to quality metrics and maintaining close relationships with our strategic component suppliers to access best-in-class technology and manufacturing capacity.

We continually monitor our manufacturing capabilities to respond to the changing requirements of our customers and maintain our competitiveness and position as a data technology leader.

Flash and HDD manufacturing are complex processes involving the production and assembly of precision components with narrow tolerances and rigorous testing.

HDD and Flash manufacturing are each complex processes involving the production and assembly of precision components with narrow tolerances and rigorous testing.

The manufacturing processes involve a number of steps that are dependent on each other and occur in “clean room” environments that demand skill in process engineering and efficient space utilization to control the operating costs of these manufacturing environments.

We continually evaluate our manufacturing processes in an effort to increase productivity, sustain and improve quality and decrease manufacturing costs.

For example, we have taken aggressive actions to restructure our client HDD manufacturing footprint in light of ongoing trends in the HDD Client market as PCs shift from using HDD to Flash technology.

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 also leverage contract manufacturers when strategically advantageous.

For more information on our agreement to sell a majority interest in one of our manufacturing facilities, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Developments .

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 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 vertically integrated, in-house assembly and test operations for our HDD products are concentrated in Prachinburi and Bang Pa-In, Thailand;

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Shenzhen, China;

San Jose and Fremont, CA, USA.

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Ventures with Kioxia

Substantially all of our flash-based supply requirements for Flash 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 and Kitakami, Japan, and our in-house assembly and test operations are 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.

Through Flash Partners Ltd., Flash Alliance Ltd., and Flash Forward Ltd., which we collectively refer to as Flash Ventures, we and Kioxia collaborate in the development and manufacture of flash-based memory wafers using semiconductor manufacturing equipment owned or leased by each of the Flash Venture entities.

We hold a 49.9% ownership position in each of the Flash Venture entities.

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

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 50.0% 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.

The agreements governing the operations of the Flash Venture entities also set out a framework for any investment by the joint venture partners in flash manufacturing capacity.

Since its inception, Flash Ventures’ primary manufacturing site has been located in Yokkaichi, Japan.

The Yokkaichi site, which is owned and operated by Kioxia, currently includes six wafer fabrication facilities.

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

We also have agreements that extend Flash Ventures to a wafer fabrication facility located in Kitakami, Japan, referred to as “K1”, which is operated by Kioxia Iwate Corporation, a wholly-owned subsidiary of Kioxia.

In January 2022, we entered into agreements regarding Flash Ventures’ investment in a new wafer fabrication facility in Yokkaichi, Japan, referred to as “Y7”, which is the sixth wafer fabrication facility at the Yokkaichi site.

The primary purpose of Y7 is to provide clean room space to continue the transition of existing flash-based wafer capacity to newer flash technology nodes.

The first phase of construction of Y7 is now complete and has commenced output.

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

Our Flash consists of flash-based memory, controllers and firmware and other components.

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

and San Jose and Fremont, CA, USA.

Substantially all of our flash memory supply utilized for our flash-based products is purchased from our joint ventures with Kioxia.

From time to time, we also purchase flash memory from other flash manufacturers.

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 believe the use of our 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 a continuous supply of flash-based memory and controllers.

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.

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

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.

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

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

Ventures with Kioxia

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

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

We and Kioxia currently operate three business ventures, Flash Partners Ltd., Flash Alliance Ltd.

and Flash Forward Ltd., (collectively “Flash Ventures”) across seven flash-based manufacturing facilities in Japan, six of which are located in Yokkaichi, Japan and one of which is located in Kitakami, Japan.

Flash Ventures will begin flash-based manufacturing operations at an eighth facility in Japan in calendar year 2025.

Through Flash Ventures, we and Kioxia collaborate in the development and manufacture of flash-based memory wafers using semiconductor manufacturing equipment owned or leased by each of the Flash Ventures entities.

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

We hold a 49.9% ownership position in each of the Flash Ventures entities.

We jointly control with Kioxia the operations of Flash Ventures, and we believe our participation in Flash Ventures helps us reduce product costs, increases our ability to control the quality of our products and speeds delivery of our products to our customers.

Kioxia owns the facilities and provides wafer manufacturing services to Flash Ventures at cost using manufacturing equipment owned or leased by Flash Ventures and process technologies co-owned or contributed by us and Kioxia.

We and Kioxia are entitled to purchase a share of Flash Ventures’ output, which generally equals 50% each.

The price for which we and Kioxia pay Flash Ventures for flash memory wafers is cost plus a small markup.

We are obligated to pay for variable costs incurred in producing our share of Flash Ventures’ flash-based memory wafer supply, based on a rolling forecast.

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

The agreements governing the operations of the Flash Ventures entities also set out a framework for any investment by the joint venture partners in flash manufacturing capacity.

We have jointly invested, and intend to continue to jointly invest, with Kioxia in the manufacturing equipment needed to support Flash Ventures’ flash manufacturing operations.

In addition, we are obligated to fund 49.9% to 50.0% 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.

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.

Sales and Distribution

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

Seasonality can also be impacted by cyclicality in the industry and macroeconomic conditions.

Seasonality is also impacted by cyclicality in the industry and macroeconomic conditions.

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

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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.

Human Capital Management

In order to support our company’s strategy, a continued emphasis on talent is required.

Despite the current industry headwinds, we continue to focus on attracting, developing, engaging and retaining the best talent for our company.

Our people strategy supports our purpose of being the world’s iconic data storage company through thoughtful offerings and inclusive practices that aim to attract, develop and engage talent.

At the end of 2024, we employed approximately 51,000 people worldwide.

Our diverse team spans 36 countries with approximately 85% of our employees in Asia Pacific, 13% in the Americas and 2% in Europe, the Middle East and Africa.

Diversity, Equity and Inclusion

We are committed to diversity and promoting an inclusive environment where every individual can thrive through a sense of belonging, respect and contribution.

We support inclusive hiring, training and development opportunities and ensuring equitable pay for employees, and we continue to focus on increasing diverse representation at every level of our company.

To attract and retain the best talent, we strive to cultivate an inclusive environment where every individual can thrive through a sense of belonging, respect and contribution.

Our Employee Resource Groups (“ERGs”) are designed to promote an inclusive culture that embraces the uniqueness of our employees.

We have eight ERGs with multiple global chapters that focus on women, LGBTQ+, racial and ethnic minorities, military veterans and people with disabilities.

In support of creating an inclusive environment, we also launched unconscious bias education to all professional and technical employees in 2024.

We have multiple initiatives that focus on attracting talent and fostering our diverse representation across our global workforce, including diversity in personal characteristics, experience, skills, gender, race, ethnicity and membership in underrepresented communities.

We continue to foster early talent through our intern and new college graduate recruitment programs, and in 2024, we converted nearly half of our global intern population to employees.

In 2024, we launched our first-ever U.S.

Department of Labor approved apprenticeship program, serving as a career pathway for veterans and other underserved populations.

Furthermore, to minimize bias from the hiring process, we adopted data-driven tools as well as provided in-person and on-demand unconscious bias trainings to our recruiters and hiring managers.

As of June 28, 2024, women represented 26% of our management positions and 24% of our technical staff.

Additionally, members of Asian, Black/African American, Hispanic/Latino or other racially or ethnically diverse communities, represented 62% of our U.S.

management positions, which is a 1.4 percentage point increase compared to 2022.

We have a number of initiatives that focus on increasing our diverse representation, including our new college graduate recruitment and hiring programs as well as veteran hiring and training programs.

Our Employee Resource Groups (“ERGs”) help create an inclusive culture that embraces the uniqueness of our employees.

We have several ERG communities, focusing on women, LGBTQ+, racial and ethnic minorities, military and people with disabilities.

For additional detail about our workforce, we encourage you to review our Sustainability Report, which we publish annually and make available on our corporate website.

Additionally, members of Asian, Black/African American, Hispanic/Latino and other racially or ethnically diverse communities, represented 60% of our U.S.

management positions.

For additional details about our workforce, we encourage you to review our Sustainability Report, published annually and posted on our corporate website.

Nothing on our website shall be deemed incorporated by reference into this Annual Report on Form 10-K.

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In 2023, we continued the self-identification initiative launched in the previous year by inviting new hires to share more about who they are across dimensions of gender, gender identity, veterans and disabilities.

Participation was optional, data was protected and the results were anonymized.

We believe an in-depth understanding of our employee population will enable us to better engage and retain our talent.

Talent Development and Engagement

We believe in supporting our people through learning and development opportunities and our pay for performance philosophy.

To help our employees reach their full potential, we aim to cultivate an environment that encourages learning, development and career growth.

Our performance framework includes developing goals collaboratively through transparent and actionable feedback in regular check-ins and performance designations.

Our new on-demand learning management system, launched in 2024, offers learning activities and tools to help employees chart their career journey and track their progress.

To give employees the skills they need to lead, we offer learning through virtual fireside chats with external speakers and through our flagship program Leader Essentials, which received the bronze medal from the Brandon Hall Group HCM Excellence Awards for Leadership Development in 2024.

We also provide upskilling and reskilling opportunities to our factory employees through on-the-job training, technical classes, workshops and partnerships with universities and colleges.

We believe ongoing engagement is key to retention, and we prioritize that in many ways.

We believe that listening is crucial to identifying opportunities to strengthen employee engagement and influence our overall strategy.

Our latest survey completed in 2024 had a participation rate of nearly 90%.

The survey results indicated that for our professional/technical employees, the company excels in areas of manager satisfaction, prioritization of work and sense of purpose.

Our factory employees indicated that sense of purpose, company prospects and feeling of belonging were the top areas of strengths.

We also engage employees by taking action to promote and ground them in our core values and beliefs, and to support our commitment to conducting business in an ethical way.

In 2024, we were named one of the World’s Most Ethical Companies by Ethisphere Institute for the sixth consecutive year.

Our employees also regularly participate in philanthropy to support the communities in which they work and live.

In 2024, more than half of our employees gave their time to participate in company-sponsored volunteer events.

Compensation and Benefits

We believe in the importance of investing in our people, and we do that through a robust Total Rewards program.

We believe that recognition is crucial for retaining and motivating our employees, and we are committed to rewarding performance with competitive compensation consisting of base salary and short-term and long-term incentives.

We also offer a global recognition program to celebrate the contributions of employees who bring to life our core values – to think big, create possibility, make it happen and do it together.

We invest in the physical, mental and financial well-being of our people through a dynamic and differentiated Total Rewards program that aligns to our culture and values.

We provide competitive benefits (which vary by country/region), including health coverage, life and disability insurance, retirement plans, paid time off, employee assistance program and employee stock purchase plan.

In 2024, we continued our multi-year journey to modernize our benefits portfolio to offer more choices to meet the unique needs of our diverse employees.

We benchmark our compensation and benefits programs annually using market data from reputable third-party consultants.

We also conduct internal focus groups and employee surveys to inform programs and identify opportunities.

We promote a pay-for-performance culture and offer employees competitive compensation consisting of base salary and both short-term and long-term incentives.

We also offer a global recognition program to celebrate the contributions of employees who bring our core values to life.

To ensure that our pay practices are fair and equitable, we conduct an annual pay equity assessment to promote equal pay for equal work for men and women.

As part of this review, we analyze current pay which takes into consideration various, non-discriminatory factors, such as seniority, experience, skills, performance, location, track and hiring and promotion dates.

To ensure that our pay practices are fair and equitable, we conduct an annual pay equity assessment to promote equal pay for equal work regardless of gender.

This review analyzes current pay considering various non-discriminatory factors, such as seniority, experience, skills, performance, location, track and hiring and promotion dates.

We use the results to make pay adjustments as needed.

In 2023, we expanded our assessment to cover 100% of our employee population globally.

In the coming year, we plan to further our pay equity efforts by engaging in a living wage analysis.

We also believe in creating an environment that allows our employees to prioritize their physical, mental and financial well-being.

We provide competitive benefits, including health coverage, life and disability insurance, retirement, paid time off, an employee assistance program and an employee stock purchase plan.

In 2023, we continued our multi-year journey to modernize and improve our benefits portfolio with the goal of offering more choice to meet the unique needs of our diverse employees.

Talent Attraction, Development and Engagement

Foundational to our people strategy is the attraction, development and engagement of our employees.

We continued our skills-based screening to hire employees based on capabilities and potential as well as our anonymous hiring pilot to identify and remove any potential for bias from our hiring process for interns.

Additionally, we revamped our event experience by focusing on career fairs and conferences.

Fostering the next generation of talent continues to be a key priority, and in 2023 we increased our U.S.

intern conversion rate by over 40 percentage points.

We are also a corporate sponsor for the Quad Fellowship by Schmidt Futures, which aims to “empower exceptional engineering, mathematics, science, and technology graduate students to advance research and innovation with a lens of positive social impact.”

Developing our talent is key to helping us reach our business goals and retaining our people.

We foster an environment of continuous learning through on-demand tools to help employees chart their career journey and track their progress.

To equip employees with the skills needed to build resilience and manage the economic uncertainty, we shifted our focus to address critical capabilities in real-time.

Alongside our flagship program Leader Essentials, we introduced self-directed development modules to help employees at all levels cultivate skills such as how to navigate dynamic times, have a learning mindset, seek insights and communicate effectively.

We were recognized by Fast Company as one of the 10 most innovative companies in manufacturing in calendar year 2023 for upskilling 42% of our workforce at our Penang, Malaysia facility while working towards our sustainability goals.

Ongoing engagement is a keystone to our people strategy.

We believe that listening is crucial to identifying opportunities to strengthen employee engagement as well as influencing our overall strategy.

We also engage employees by taking actions to promote and ground them in our core values and beliefs as a company, so that we are conducting business in an ethical way.

As a result of this focus, in 2023, we were named one of the World’s Most Ethical Companies by Ethisphere Institute for the fifth consecutive year.

Our employees regularly engage in philanthropy to support the communities in which they work and live.

In 2023, 32% of our employees participated in a company-sponsored volunteer event, which was bolstered by a 27-percentage point increase in participation among our factory worker population.

In 2024, our assessment covered 100% of our global employee population, and we furthered our pay equity efforts by engaging in a living wage analysis.

Health and Safety

We are committed to creating a safe work environment everywhere we operate.

We provide extensive health and safety resources and training to all of our employees, especially for those who work in our manufacturing and operations.

We provide extensive health and safety resources and training to all of our employees, especially those who work in our manufacturing and operations.

We use an integrated management system to manage health and safety standards at our manufacturing facilities.

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Government Regulation

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Item 1. Business