Hitachi Tightens Hard Drive Belt

Hitachi Global Storage Technologies (HGST) today said it would close its manufacturing plant in Mexico by mid 2008, a move that will eliminate 4,500 jobs, or 11 percent of the company's workforce.

The hard disk drive (HDD) maker, facing stiff competition from rivals Toshiba, Fujitsu and Seagate, as well as the ascendance of Flash memory, hopes closing the Guadalajara plant and streamlining other operations will help the company save $300 million over the next five years.

HGST, the HDD arm of Hitachi , will create so-called competency centers that produce sliders, head-gimbal assemblies (HGA) and media, three core components in the manufacturing of HDDs.

In HDDs, the head-gimbal assembly carries the slider, which in turn holds the read/write head. The media is the disk upon which data is written.

HGST will move the slider manufacturing operations from the Mexico plant, to Laguna, Philippines. Moreover, HGST will move its media manufacturing operation in Odawara, Japan, to its Shenzhen, China, facility. Shenzhen will also become the center of competency for HGA manufacturing.

Ultimately, Odawara will become the headquarters for slider development, while HGST's San Jose, Calif., plant will become the main center for media development.

HGST said in a statement that Odawara and San Jose, along with the company's HDD assembly plants in Thailand and China, will place the manufacturing supply chain in a central hub to shorten cycle times and decrease shipping costs, which have taken their toll on HGST's business.

"Manufacturing and development consolidation is one of the top three initiatives we are undertaking to achieve long-term business health and to underscore Hitachi's commitment to the hard drive business," said Hiroaki Nakanishi, CEO of HGST, in a statement.

HGST was forged in 2003 through a merger of Hitachi's and IBM's hard disk drive businesses.

The company aimed to challenge Toshiba, Fujitsu, Seagate and others in the market for making disk drives that store data for desktop computers, laptops and consumer devices.

But the challenge has proven to be great; HGST registered an operating loss of $371.3 million for 2006.

Part of this may be attributed to NAND Flash memory . While relegated to smaller devices such as MP3 players , digital cameras and USB drives, Flash is still gaining enough traction to put pressure on the HDD makers that have powered consumer devices for so long.