Ian - Here's the real story behing Komag's announcement. HDD industry is expected to continue to expand at 20% a year. KMAG is consolidating two "older" factories in California to improve efficiency, and is moving offshore to fully equip its Malaysian plant to utilize cheaper production sources and reduce costs - and the Malaysian facilities also happen to be closer to some of their main customers.
As you know, in a worldwide industry doing business in California or the U.S. can be very expensive compared to the cheap labor and reduced or non-existant regulatory costs that exist in some parts of the world.
I think the HDD industry and SFLX looks just fine right now, Komag is just re-positioning their production.
If you disagree please let me know, since any storm warnings regarding HDD demand problems would be of interest.
Thanks - Joe
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Copyright 1997 Asia Pulse Pte Limited
ASIA PULSE
August 21, 1997
KOMAG PLANS TO FULLY EQUIP MALAYSIAN PLANT
KUALA LUMPUR, Aug 21
Komag Inc, the world's largest independent supplier of thin-film media for computer hard disk drives, will fully equip its plant in northern Penang state and close down two older factories in Milpitas, California under a restructuring programme. The company will also consolidate its two new U.S. manufacturing operations at San Jose in California.
Komag said in a statement that it believed that when fully equipped, its manufacturing facilities in San Jose and Penang would have the capacity to manufacture approximately 115 million disks a year.
"Over time our Malaysian manufacturing operations will account for an increasing portion of our production output. These facilities are closer to customers' disk drive assembly plants in Southeast Asia and enjoy certain cost and tax advantages over our U.S. manufacturing plants," it said.
In 1996, Komag's U.S. and Malaysian factories shipped 49 million disks into an industry that used 340 million disks. In the second quarter of fiscal 1997 Komag produced 14.8 million disks.
Industry analysts expect the disk drive industry will consume approximately 430 million disks in 1997 and grow at a compound annual growth rate in excess of 20 percent over the next several years.
The smaller of the two Milpitas factories will close next month and the second factory is scheduled to close by the end of the second quarter of 1998. Upon the closure of the second Milpitas plant the company plans to redeploy employees from this facility to its manufacturing and R&D facilities in San Jose.
"An evaluation of the size and location of our existing production capacity relative to our short-term demand outlook has led to the difficult decision to restructure our manufacturing operations. . . " said Stephen C. Johnson, President and Chief Executive Officer of Komag Incorporated.
The closure of the company's first Milpitas facility and a refocused direction at the company's substrate plant in Santa Rosa, California, will reduce Komag's U.S. employee base by approximately 350 people. After this reduction the company will employ approximately 4,600 people worldwide. |
