Singapore, Malaysia May Benefit From Disk Drive Price Increase
11/11/99 10:10:00 PM
Source: Bloomberg News
Singapore, Nov. 12 (Bloomberg) -- For Southeast Asian countries such as Singapore and Malaysia, price increases implemented by a major computer disk-drive manufacturer may give exports a boost.
Maxtor Corp. of the U.S., the world's No. 6 disk-drive maker, this week said it raised prices for some of its lower-cost products, marking the first price increase in the industry for two years. That's a welcome boost for the economies in Singapore and Malaysia, where about 80 percent of the world's disk drives are made.
''Export value will go up marginally,'' said Song Seng Wun, regional economist at G.K. Goh Research. ''At the very least, they'll hold steady.''
Improvement in disk drive prices, which slumped as much as 20 percent each quarter the past two years, could stem the tide of job losses that's plagued both economies.
In September, Singapore's disk-drive exports fell 10 percent from the year-earlier total to S$1.6 billion ($960 million), a second straight month of decline.
Exports slumped as Western Digital Corp. of the U.S., the No. 3 disk-drive maker, fired 2,500 workers or 60 percent of its Singapore workforce, turning to cheaper locations such as Malaysia.
Malaysia, though, has also suffered from the impact of pricing pressure in the industry.
Seagate Technology Inc. of the U.S., the world's biggest disk-drive maker, in September said it would reduce its workforce by 10 percent, or 8,000 employees, over the next nine months. The company made significant job cuts in Asia, including Malaysia and Singapore.
Optimistic Outlook
For now, other drive manufacturers appear sanguine that the price cuts which have driven some of them into the red may be over.
''We've seen a very cut throat year quarter-to-quarter but now we've gone through several weeks without any price declines,'' said David Rawcliffe, Asia Pacific marketing director for Quantum Corp. ''I wouldn't say this will be a long-term trend but we're cautiously optimistic for the next two quarters.''
Irvine, California-based Western Digital in September warned of a wider-than-expected fiscal first-quarter loss because of tough competition.
Milpitas, California-based Maxtor has had two straight quarters of losses. Quantum, the No. 2 disk-drive maker and also based in Milpitas, reported a fiscal second-quarter loss last month, hurt by steep price cuts.
Price pressure on some disk drives has eased since a decision in September by Western Digital to recall some hard disk drives that may contain a defective computer chip.
The company said testing revealed hard drives containing the chip could fail to start up after six months to a year of use, prompting the recall. That's helped the supply-demand balance and contributed to Maxtor's decision to increase prices.
Some analysts said the trend to raise prices may not last long, as some computer makers are stocking up on supplies of disk drives in case there's a shortage of components at year-end.
That's in case substantial numbers of older computers, which only read the last two digits of dates, fail to differentiate the year 2000 from 1900 and malfunction.
Demand for disk drives could slow in the three months ending Dec. 31 if companies delay computer purchases because of that concern.
''There's a danger of these (computer) manufacturers releasing some of their excess purchases they've made in the year 2000,'' said Eddy Tan, an electronics analyst at Vickers Ballas Investment Research in Singapore. ''For now, there's apparently some shortage but the question is how long is this price going to hold.'' |
