Hitachi to invest up to $500 million in New China disk drive mega-manufacturing center

EDP Weekly's IT Monitor, June 21, 2004

New Facility to Meet Projected Disk Drive Growth in IT and ConsumerDevice Segments; Thousands of New Jobs Expected for China

Hitachi Global Storage Technologies (Hitachi GST) has announced its strategy to create a disk drive "mega manufacturing center" in Shenzhen, China. The new facility will represent an investment of up to $500 million when fully realized, and align disk drive final assembly with existing Shenzhen-based component manufacturing and an extensive supplier network. Hitachi expects the manufacturing center to employ nearly 7,000 people in its first phase to meet the growing demand for hard disk drives. The project, which initially includes construction of a 35,000-square-meter manufacturing facility, is expected to begin in Q4 2004.

The new facility is expected to start production of 3.5" disk drives in Q4 2005 and, ultimately, will be capable of producing disk drives of varying form factors, giving Hitachi GST the flexibility required to meet future demand in the traditional IT and consumer segments. It will employ state-of-the-art manufacturing processes that support the highly technical disk drive industry.

Dirk Thomas, who is vice president for Business Development and Strategy at Hitachi GST, will be named general manager of the new manufacturing facility. Thomas also will be named president of Greater China, a newly created position for Hitachi GST. In this position, he will lead Hitachi GST's Greater China operations, including its China-based manufacturing, and coordinate with Hitachi GST's customer service and support centers in Shanghai, Shenzhen and Taiwan.

"Today's announcement further demonstrates Hitachi's commitment to China and positions us to play a leading role in the rapid growth of its information technology and consumer electronic industries," said Jun Naruse, CEO, Hitachi Global Storage Technologies. "The new company represents a considerable investment in Shenzhen, in our relationship with customers, and in the development of our people in China. We appreciate the continued support of local government officials, who made Shenzhen an attractive location for the new manufacturing site."

Li Hongzhong, Mayor of Shenzhen, said that Shenzhen is striving to build itself into an international high-technology city, and South China into a modern logistical hub. Hitachi's continued investment and ongoing commitment to Shenzhen will help us achieve our objective, he added.

Hitachi employs approximately 4,500 people at its two existing Shenzhen manufacturing companies, which produce key disk drive components, such as magnetic recording heads and storage media. In addition to supporting a highly capable workforce, Shenzhen possesses a substantial concentration of precision component suppliers. These elements will combine to empower the new facility with the resources necessary to complete final hard disk drives.

Establishing the new manufacturing site in Shenzhen will strengthen Hitachi's global competitiveness, supply-chain efficiencies and vertically integrated business model. With its close proximity to Hong Kong's world-class logistics capabilities, Shenzhen serves as an ideal location from which to serve Hitachi's global customers.

Hitachi's strong growth prospects and widely forecasted double-digit industry growth are among the reasons that Hitachi is investing in additional disk drive and component-related manufacturing capacity.

One of the industry's most significant market trends is the rapid adoption of disk drive technology in consumer electronics applications. According to Trend Focus, an industry research firm based in Palo Alto, CA, consumer electronics applications could account for some 30 percent of hard disk drive unit shipments by 2006, up from five percent in 2002. Hitachi is the market leader in the shipment of 2.5-inch and

1-inch disk drives and recently introduced a 400GB 3.5-inch drive for use in audio/video applications, such as digital video recorders (DVRs).

"Hitachi is committed to being the preeminent supplier of disk drives to the consumer electronics marketplace. By expanding our manufacturing capability in China, we expect to continue delivering on that promise," said Glenn Larnerd, COO, Hitachi Global Storage Technologies. "The new site will also give Hitachi a supply-chain management capability that is unmatched in the industry."