19990615
Western Digital to move out bulk of drive ops
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By Jennifer Lien
By Sept, 70% of output will be transferred to M'sia
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[SINGAPORE] Higher costs in Singapore have claimed another victim, as loss-making disk drive maker Western Digital makes plans to shift the bulk of its desktop drive operations to Malaysia.
Local and foreign sources told BT that by September, the US-based company will have moved some 70 per cent of its Singapore output to its plant near Kuala Lumpur, its only other facility.
WD officials in Singapore declined comment.
Production lines are being transferred to Malaysia, where new, cutting-edge production cleanrooms have been recently built.
After the move, WD will build only high-end drives at its Chai Chee facility, as well as half of the desktop drives co-developed with IBM Corp.
WD's high-end shipments last quarter accounted for less than 5 per cent, or 255,000, of total unit shipments of 5.1 million. Suppliers estimate that WD's high-end output in the current June quarter will be around 220,000 drives.
As for the IBM-designed drives, sources estimate that over half a million may be built in Singapore, bringing total output in Singapore to over 800,000 drives.
This is just over 14 per cent of WD's estimated build plan of 5.6 million drives this quarter. As Singapore is supposed to build half of WD's total drive shipments, this means WD's remaining activity in Singapore would be cut to less than 30 per cent of its normal Singapore output.
But suppliers say Singapore output has dwindled in the last few months, to under two million this quarter.
It is not known what WD will do with redundant staff and factory space after the move. Following the January merger of its Tuas and Chai Chee plants, WD is estimated to have under 4,000 staff left. One source said WD may have to lay off some 1,500 workers, but this could not be confirmed.
Cyrille Tan, secretary-general of the United Workers of Electronic and Electrical Industries, which represents bargainable workers at WD, said yesterday he was not aware of any new retrenchment plans there.
WD cut 450 staff in January with the closure of the Tuas plant, and had earlier cut 480 staff last year.
WD rents factory space from the Jurong Town Corp at Chai Chee Industrial Park, while its empty Tuas plant has yet to find a buyer.
Another sign that the balance of power is shifting to Malaysia: for the first time, the new head of Asian operations will be based in Malaysia, not Singapore.
Also, Singapore used to be WD's launchpad for new drives, with high-volume production then transferred to Malaysia. But sources said WD is beginning to move new disk drives direct to Malaysia from its US labs. Observers see WD's latest move as cost-driven, despite a resurgence in its product line and strong industry reviews. "They just have too much overhead (costs)," said a sales manager with a component supplier.
In the meantime, the disk drive sector is facing another price war as inventory levels escalate in the industry. Two weeks ago, Quantum Corp said its earnings would be half of analysts' forecasts due to industry-wide price cuts.
Economist Song Seng Wun from GK Goh Research said he was not surprised at WD's plans, as dwindling disk-drive export figures in recent months have likely reflected this. Still, he expects disk drive exports to remain flat, held up by strong output from competitors.
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