Business Segment, Geographic Information, and Concentration of Risk

12 Months Ended

Jul. 02, 2021

Business Segment, 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. Historically, the Company has managed and reported under a single operating segment. Late in the first quarter of fiscal 2021, the Chief Executive Officer, who is the Company’s Chief Operating Decision Maker, announced a decision to reorganize the Company’s business by forming two separate product business units: flash-based products and hard disk drives. To align the new operating model and business structure, the Company is making management organizational changes and implementing new reporting modules and processes to provide discrete information to manage the business. Management expects to finalize its assessment of its operating segments when the implementations and transitions are completed, which is expected to be in the first quarter of fiscal 2022.

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:


	2021		2020		2019
	(in millions)
Net revenue (1)
United States	$	3,789	$	4,679	$	3,602
China	4,339		4,075		3,861
Hong Kong	3,624		2,592		3,122
Rest of Asia	1,492		1,699		2,116
Europe, Middle East and Africa	3,061		2,926		3,109
Other	617		765		759
Total	$	16,922	$	16,736	$	16,569

(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.


	2021		2020
	(in millions)
Long-lived assets (1)
United States	$	1,068	$	949
Malaysia	632		643
China	395		373
Thailand	651		472
Rest of Asia	398		366
Europe, Middle East and Africa	44		51
Total	$	3,188	$	2,854

(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, cloud service providers, resellers and retailers throughout the world. For each of 2021, 2020 and 2019, no customer accounted for 10% or more of the Company’s net revenue. For 2021, 2020 and 2019, the Company’s top 10 customers accounted for 39%, 42%, and 45%, 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 July 2, 2021 and July 3, 2020, the Company had net accounts receivable of $2.3 billion and $2.4 billion, respectively, and one customer, Kingston Technology Company, accounted for 12% and 10%, respectively, of the Company’s net accounts receivable. 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.