HGST dumps US plant for China

Hitachi Global Storage Technologies Inc. (HGST) is winding its main 332-acre San Jose manufacturing plant site in the U.S. in preference to a state-of-the-art facility in China.

Some 900 staff are leaving the site as HGST spends US$250 million on a new HQ campus in Evergreen, San Jose and manufacturing ramps up in the new Shenzhen plant in China. About 183 acres of the original San Jose site at Cottle Road are being “re-zoned” into retail, transit and housing use with HGST saying it will sell the land off. The remaining acres will be consolidated into one site for manufacturing, development and support. The city of San Jose is supporting these moves.

Asked if part of its San Jose manufacturing is being made redundant, HGST answered: “Manufacturing is not redundant. The manufacturing mission in San Jose remains unchanged.” HGST is letting 400 U.S. staff go, the majority of them from Cottle Road, by lay-offs and early retirement. It expects that 40-50 per cent will take early retirement; the “balance will come from the involuntary program”, i.e. layoffs, starting in December.

Documents dealing with the real estate changes state that: “The property is… underutilized” and “cannot efficiently support modern office, research, development or manufacturing uses.”

HGST manufacturing operations

HGST said: “We have manufacturing in San Jose, Mexico, Odawara, Japan, Thailand, China, Singapore and the Philippines.” It inherited these plants from Hitachi and from IBM Corp. when HGST was set up just a few years ago.

China is at the end of much of efforts. The new Shenzhen site in China will have up to half a billion dollars spent on it and is intended to be a disk drive “mega manufacturing center” according to HGST. This contrasts with the lack of investment in the Cottle Road site and the US$250 million investment by HGST in the new Evergreen HQ campus.

HGST stated that it “continues to fine tune the integration of the Hitachi and IBM hard disk drive businesses,” and added, “Hitachi intends to maintain the HQ, research, development and manufacture of critical technology missions in San Jose.” Previously, it had said it planned to keep critically skilled media development and manufacturing pilot lines in San Jose and Odawara for innovative drive technology such as perpendicular recording.

Manufacturing rationalization

Rationalization of the manufacturing facilities is clearly a good way to improve efficiency and save on costs. A Cottle Road worker commented in July that: “Lately production has slowed to a trickle. Some employees have been sent home (because there are no parts to work with) so many times, they have applied for unemployment payments.” The worker fears jobs from Cottle Road are moving to Shenzhen as HGST outsources manufacturing from the U.S. to China.

In August last year, HGST announced a three-year initiative to relocate the majority of its media manufacturing operations from San Jose and Odawara, Japan to its Shenzhen facility. This was an essential element of HGST’s overall plan to integrate its operations. San Jose (Cottle Road) and Odawara will supply media until the end of 2005. In 2006, Shenzhen should be in full production and the status of media manufacturing at San Jose and Odawara will be re-examined at the end of 2005 to “determine if redeployment of personnel and other resource actions may be necessary”.

If they are then more jobs could be lost at the Cottle Road site. If HGST’s San Jose manufacturing site “cannot efficiently support… manufacturing” and HGST has not announced any investment to make that manufacturing more efficient, it appears logical that the site be being sold off. It could be progressively run down as manufacturing is transferred to more efficient HGST sites overseas, leaving a slimmed down development and support rump behind.

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