Seagate Will Close Anaheim Plant, Cut Hundreds of Jobs
Seagate Technology Inc., the leading maker of disk drives for personal computers, said Thursday that it is closing its Anaheim manufacturing plant and dismissing nearly all of its 621 workers there.
The Scotts Valley company said the Anaheim plant, along with a facility in Mexicali, Mexico, with 591 employees, will be shut down this summer. The work will be consolidated at a Seagate plant in Limavady, Ireland, that will manufacture nearly all of its disk drives.
The closings do not affect Seagate’s Costa Mesa operation, where 365 marketing, sales, assembly and business employees work for the company’s removable data storage division.
The shutdowns signal further erosion of data-storage manufacturing in the United States.
Seagate’s rival, Western Digital Corp., based in Irvine, said this year that it would stop making hard drives for high-end computers and shut down the Minnesota plant that makes them. Western Digital is the world’s third-largest maker of computer disk drives.
For the past few years, disk-drive makers have been struggling with a price war and sluggish orders. But economists said Seagate’s move reflects a larger cycle typical in high-tech industries.
As products and the means to make them become standardized, companies increasingly are farming out the work to overseas factories, where lower labor and land costs help curtail overhead.
“Disk drives have become a commodity now,” said Anil Puri, a Cal State Fullerton economist. “So the manufacturing is moving to places that are cheaper.” Ireland has been particularly aggressive in courting manufacturing jobs, said Dennis Aigner, a UC Irvine economics professor.
“They have a good labor force and their tax rate is extremely low, almost zero,” compared to the nearly 40% in combined federal, state and local taxes that businesses face in Orange County, Aigner said.
For Orange County, Seagate’s departure is a jolt to the local high-tech industry. The number of high-technology manufacturing jobs in the county has declined by about 32% since 1986, according to the Chapman University Center for Economic Research.
The county lost almost half of the high-tech jobs between 1986 and 1995 as the defense and aerospace industry shrunk. The segment added about 8,000 jobs over the next three years, hitting 64,800 two years ago, but slipped a bit last year to 63,600 employees.
In the past few years, the county has gained manufacturing jobs in networking and communications, sectors where the technology is newer and being created locally, said Chapman University economist Raymond Sfeir.
The overall manufacturing sector, including non-technology jobs, still provides about 18% of the county’s jobs, but it is not keeping pace with the service sector in generating new positions, Puri said.
In Anaheim, city officials expressed concern for the Seagate employees who will lose their jobs, but said there still is a strong demand for labor and for manufacturing space in the city.
“We’re always sorry to see businesses leave Anaheim, but then again, we want successful businesses in Anaheim,” said Brad Hobson, the city’s deputy director for community development.
About 50,000 people are currently employed in Anaheim Canyon, the 2,600-acre area where Seagate’s plant is located, Hobson said. He estimates that the Seagate property, which contains two buildings, covers about three acres. Seagate bought the division in 1987.
Seagate is in the middle of a complex transaction that would make it a privately held company. Approval of the deal is pending before the U.S. Securities and Exchange Commission.
“They will need to cut costs,” said market analyst Wendy Abramowitz of Argus Research. “They will continue to do this type of thing once they’re private, so the investment firm that is buying them can increase earnings and then maybe take them public again at some point.”
Company spokesman Phil Montero said the firm evaluated several factors for months in deciding which of the three disk-drive manufacturing operations to close, including physical improvements needed and the cost of closing the plants.
“Instead of underutilizing three factories, we will fully utilize the one,” Montero said.
Seagate, undergoing a massive restructuring effort announced last September, cut nearly 10,000 jobs in the first three months this year, said Phil Montero. The company had 61,360 employees at the end of March.
