History (1997): Imation Prestige Customer of Megamedia

Megamedia, a 12-year old Taiwanese company, is virtually unknown in the storage industry, even though it is probably the top FD maker in Taiwan, and also in the worldwide top 10 for FD manufacturing.

The reason for its anonymity: Megamedia does not sell its products under its own name, but instead manufactures them, from first step to last, including the packaging and logos, for other companies.

Megamedia’s OEMs are an impressive group. Nearly 30% of the 40 million diskettes it produced monthly in 1996 carry 3M’s (now Imation) trademark. The contract between the 2 companies was renewed 7 years ago, which means that Megamedia is 3M/Imation’s top subcontractor for diskettes.

Other customers are no less reputed: BASF, Kao, Memorex and Polaroid.

At first glance, the firm’s 3.5-inch diskette would seem to be its biggest product, product, given that the firm is essentially dedicated to storage media.

But the company also makes QIC cartridges, and is now embarking towards Zip disks as a subcontracting manufacturer, having passed an accord with Iomega in 1996.

Megamedia still makes a few 5.25-inch FDs, “less than one million per month“, said Henry Hsu, VP of the company and in charge of the Malaysian activity. “It’s only a supplementary service that we provide to our old cutomers.”

The company owns 4 factories: 2 in Taiwan (in Kelung and Yang Mei), in Sacramento, CA (named Intermag), and finally the one we visited in Bayan Lepas, Penand, Malaysia, known as the Mega High-Tech Corp. and by far the largest.

Megamedia was established in Penang in 1991. Why there?

Hsu replied during an interview over the deafening noise of aircraft passing ober the factories: “At the time, we compared Malaysia with China. Here the infrastructure is good, labor cost is low, people speak English and there are a lot of Chinese. We have a tax exemption for 5 years on imports and exports, renewable for 5 more years.”

What the firm didn’t anticipate at the outset, unfortunately, was that the European Community would impose an antidumping tax 12.8% on all the Mega High Tech products headed for Europe. Other Malaysian enterprises were taxed even more heavily: at 24 25, 40 and 50%.

“The EC reviews our selling prices in Japan and USA“, recalls Hsu. “Three of four EC officials come here one year ago, going into our account, our invoices, everything.“

The Bayan Lepas factory boasts 700 people, some 350 of which are operators, along with monthly production of 10 to 12 million FDs.

All elements of a diskette are manufactured by Megamedia with the exception of the cookie or the magnetic media itself, purchased through various sources throughout the world, and the entire production goes to 3 rigoureous stages of qualification.

More specifically, there are 15 injection molding units in the Penang factory, completely geared for making plastic diskette protectors.

“We have engineers for the machine, technicians for the maintenance. The operator’s job is to make sure that the robots are fully loaded.”

Work is organized in small cells of people who operate around the automations, which in turn are designed and made by Megamedia, and are one of the company’s strongest points.

“Training humans and the machines are both important to improve the efficiency,” observed Hsu.

The diskette market is currently stagnating, and prices have fallen.

According to our host, “Average prices are between 17-18 and 20 cents per diskette in high volume, while in China one can find low quality products for 15 cents. Our selling price is not the lowest because we sell quality product. We have to do cost reduction every day and night on order to be competitive on the world market.”

According to a sampling method, 300 diskettes are selected fo testing out of a lot of 10,000.

“Yield is 96 to 97%,” we were told.

This article is an abstract of news published on the former paper version of Computer Data Storage Newsletter on issue 111, published on April 1997.