Western Digital to Trim 950 More Jobs in Singapore
Western Digital Corp., the world’s No. 3 computer disk-drive maker, said it will cut 950 jobs, or 56% of its Singapore work force, as it moves its manufacturing operations to Malaysia to trim costs.
The job reductions and relocation of manufacturing operations are expected to be completed by the end of January and will result in a charge of $15 million in the quarter ending Dec. 31, the Irvine-based company said. It’s the second time in three months that Western Digital has cut jobs in Singapore to concentrate its business in Malaysia.
Western Digital needs to cut costs, analysts say, after losing money in the past eight quarters in an industry that has seen prices slump amid stiffer competition. Competitors such as No. 1 drive maker, Seagate Technology Inc., and Maxtor Corp. have cut costs to remain competitive.
“Fundamentally, our objective is to make ourselves the low-cost producer in the drive business,” said John Coyne, vice president of Western Digital’s Asian operations. “In looking at plant utilization, demand versus capacity, we determined that we could more efficiently satisfy the demand on one site.”
Western Digital’s stock rose 25 cents to $3.94 on the New York Stock Exchange. The shares have lost nearly 75% of their value this year.
The company said it will move equipment from its Singapore factory to an existing plant near Kuala Lumpur, Malaysia, and hire about the same number of workers there as it cut in Singapore, suggesting the Malaysian plant isn’t operating at full capacity.
In August, Western Digital said it would reduce its Singapore work force to 1,700 from 2,500 as it moved the manufacturing of lower-cost drives for desktop computers to Malaysia.
The latest move will bring the manufacturing of higher-end drives for business servers, bought by corporate customers, to Malaysia, Coyne said. Of the 750 workers left in Singapore, 700 will be in customer service, with the rest in areas such as design, Coyne said.
Western Digital’s production shift from Singapore is good news for Malaysia’s economy. Manufactured goods, largely electronic components including disk drives, make up 80% of the country’s exports. Increased factory output and exports this year helped pull Malaysia out of recession in the second quarter of this year.
It’s another blow, though, for Singapore, which churns out half of the world’s computer drives and dubs itself the global disk-drive capital. It may also make companies such as Seagate, Maxtor and other disk-drive makers reevaluate their operations and future investments on the island, analysts say.
Daiwa Institute of Research (Singapore) estimates Malaysia’s labor costs are about a third of Singapore’s annual $13,671 per worker. Factory space costs in the Malaysian capital, Kuala Lumpur, are from a quarter to half of those in Singapore.
Further job cuts at Singapore disk-drive facilities have been expected for some time, and come in the wake of losses after heavy price cuts in the industry. Prices for low-end disk drives have been slashed by half to about $75 a unit, analysts estimate.
