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Technology Stocks : Disk Drive Sector Discussion Forum -- Ignore unavailable to you. Want to Upgrade?

To: Mark Oliver who wrote (2201)	1/12/1998 5:28:00 PM
From: Don Earl	Read Replies (1) \| Respond to of 9256

Hi Mark, I've been playing with the numbers using APM for an example and assuming similar operations for most DDs. Some of the things that I've had to make educated guesses at are the number of hours worked by factory employees. In the US factory workers work an average 44 hours per week. I've heard stories that sweat shops in Asia sometimes see 80 hour work weeks. For the sake of argument I've been using 52 hours per week figuring 6-8 hour days (5 plus 1 at overtime). At times of peak production and a tight labor market the numbers could be a lot higher. In the wake of cut backs and slower production it would probably be lower, although cutting hours would reduce labor costs by more than devaluation would. The bottom line is that 52 hours is pure guess work on my part but I needed to use something. The other part I had to guess at is hourly wages. The best numbers I could find was a 1996 report that gave around $8.50 per hour for an average factory worker in Korea including all taxes, benefits, etc. APMs Korean workers are represented by a union so that number is probably higher than the average. I couldn't find any similar figures for Maylasia but I know they are not represented by a union so it probably is lower. I closed my eyes and picked $8 per hour for an average wage. The numbers I can verify are that APM employs about 7000 workers in Asia and that average total costs of running the business over the last 4 quarters is $99.5 million. What I came up with is 52 hours, times 13 weeks in a quarter, times $8 per hour, times 7000 workers; or about $38 million per quarter for labor. That would come to 38%. It almost seems high to me, but it isn't that outrageous when you consider that costs were running around $78 million in 1996 with 5000 Asian workers and lower production volumes. Some other factors to consider are that I don't know what percentage of Asian workers are employeed in China. No devaluation savings to speak of. APM also contracts excess production and labor needs to outside agencies. 100% savings if they are in a position to say we don't need your services this month. If anyone has some documentable numbers I'd love to see them. I'd happily abandon my wild assed guesses for something more concrete. Even contrasting wild assed guesses based on similar research would be worth looking at. Regards, Don