Business Segment, Revenue Information, Geographic Information and Concentration of Risk

12 Months Ended

Jun. 28, 2019

Business Segment, Revenue Information, Geographic Information and Concentration of Risk

The Company manufactures, markets, and sells data storage devices and solutions in the U.S. and in foreign countries through its sales personnel, dealers, distributors, retailers, and subsidiaries. Based upon the management structure under the current operating model, the Company determined that the Company’s Chief Operating Decision Maker, its Chief Executive Officer, evaluates performance of the Company and makes decisions regarding allocation of resources based on total Company results. As a result, the Company concluded it operates in one segment, data storage devices and solutions.

The following table summarizes the Company’s revenue by end market product category, between Client Devices (mobile, desktop, gaming and digital video hard drives, SSDs, embedded products and wafers); Data Center Devices and Solutions (capacity and performance enterprise HDDs, enterprise SSDs, data center software and system solutions); and Client Solutions (removable products, hard drive content solutions and flash content solutions):



	2019		2018		2017
	(in millions)
Client Devices	$	8,095	$	10,108	$	9,520
Data Center Devices & Solutions	5,038		6,075		5,505
Client Solutions	3,436		4,464		4,068
Total revenue	$	16,569	$	20,647	$	19,093

The following table summarizes the Company’s revenue by form factor category, between HDD and flash-based products:



	2019		2018		2017
	(in millions)
HDD	$	8,746	$	10,698	$	10,640
Flash-based	7,823		9,949		8,453
Total revenue	$	16,569	$	20,647	$	19,093

The Company’s operations outside the United States include manufacturing facilities in China, Japan, Malaysia, the Philippines and Thailand, as well as sales offices throughout the Americas, Asia Pacific, Europe and the Middle East. The following tables summarize the Company’s operations by geographic area:



	2019		2018		2017
	(in millions)
Net revenue⁽¹⁾
United States	$	3,602	$	4,640	$	3,881
China	3,861		4,393		4,271
Hong Kong	3,122		4,022		3,257
Rest of Asia	2,116		2,752		3,181
Europe, Middle East and Africa	3,109		3,858		3,276
Other	759		982		1,227
Total	$	16,569	$	20,647	$	19,093


⁽¹⁾	Net revenue is attributed to geographic regions based on the ship-to location of the customer. License and royalty revenue is attributed to countries based upon the location of the headquarters of the licensee.


⁽²⁾	Prior year information is presented in accordance with the accounting guidance in effect during that period and has not been updated for Topic 606. The impact of the adoption of Topic 606 was not material



	June 28, 2019		June 29, 2018
	(in millions)
Long-lived assets⁽¹⁾
United States	$	962	$	1,187
Malaysia	667		737
China	420		427
Thailand	405		349
Rest of Asia	335		336
Europe, Middle East and Africa	54		59
Total	$	2,843	$	3,095


⁽¹⁾	Long-lived assets include property, plant and equipment and are attributed to the geographic location in which they are located.

Customer Concentration and Credit Risk

The Company sells its products to computer manufacturers, resellers and retailers throughout the world. For each of 2019, 2018 and 2017, no customer accounted for 10% or more of the Company’s net revenue. For 2019, 2018 and 2017, the Company’s top 10 customers accounted for 45%, 42%, and 36%, respectively, of the Company’s net revenue.

The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral. The Company maintains allowances for potential credit losses, and such losses have historically been within management’s expectations. At any given point in time, the total amount outstanding from any one of a number of its customers may be individually significant to the Company’s financial results. As of June 28, 2019, two customers, Dell Technologies Inc. and Huawei Investment & Holding Co., accounted for 14% and 10%, respectively, of the Company’s net accounts receivable. As of June 29, 2018, two customers, Apple, Inc. and Dell Inc., accounted for 13% and 10%, respectively, of the Company’s net accounts receivable. As of June 28, 2019 and June 29, 2018, the Company had net accounts receivable of $1.20 billion and $2.20 billion, respectively, and reserves for potential credit losses were not material as of each period end.

The Company also has cash equivalent and investment policies that limit the amount of credit exposure to any one financial institution or investment instrument and requires that investments be made only with financial institutions or in investment instruments evaluated as highly credit-worthy.

Supplier Concentration

All of the Company’s flash memory system products require silicon wafers for the memory and controller components. The Company’s flash memory wafers are currently supplied almost entirely from Flash Ventures and the controller wafers are all manufactured by third-party sources. The failure of any of these sources to deliver silicon wafers could have a material adverse effect on the Company’s business, financial condition and results of operations.

In addition, some key components are purchased from single source vendors for which alternative sources are currently not available. Shortages could occur in these essential materials due to an interruption of supply or increased demand in the industry. If the Company was unable to procure certain of such materials, the Company’s sales could decline, which could have a material adverse effect upon its results of operations. The Company also relies on third-party subcontractors to assemble and test a portion of its products. The Company does not have long-term contracts with some of these subcontractors and cannot directly control product delivery schedules or manufacturing processes. This could lead to product shortages or quality assurance problems that could increase the manufacturing costs of the Company’s products and have material adverse effects on the Company’s operating results.