History 2003: HGST Banks More and More on China

After Singapore, Malaysia, Thailand, the Philippines and Indonesia, HDD manufacturers are now turning one by one towards China.

This is, obviously, to take advantage of markedly cheaper labor market, even if many company’s claim that the workforce is only a tiny part of a drive’s final cost, but also in order to get a foothold in what they dream will become a colossal market.

HGST is thus pursuing IBM’s policy of local subcontracting, and plans to shift most of its disk media production to China.

Between Shenzhen ExcelStor Technology and IBM, the history dates back to 1997, with Hitachi maintaining the productive relationship after acquiring Big Blue’s HDD division, which it merged with its own HDD activities under the name HGST back in January 2003.

In 1997, IBM founded a joint venture to manufacture HGAs in China with Great Wall Technology, which also manufactured PCs for the computer giant. Great Wall created a subsidiary in 2000, ExcelStor to assemble its own drives, thanks to the acquisition of the Longmont CO-based R&D team of defunct Conner Technology, a team that is still together and numbers some 40 people.

In December 2001, the first agreement was signed between IBM and ExcelStor to assemble drives not only for Big Blue as well as under the ExcelStor brand name. This same deal was renewed through 2007 with HGST last month.

Currently, ExcelStor produces 2 lines of 3.5-inch desktop products:

• the Gemini line of very low-cost 40GB and 60GB 5,400rpm devices based on its own technology,
• the Jupiter line, 7,200rpm with 80GB per platter and only one disk designed by HGST (Deskstar line 7K250) also sold WW under its own brand name (the same drives are also assembled by HGST in Thailand).

For these drives’ components, ExcelStor relies on another joint venture between Great Wall and HGST, Shenzhen Hailiang Storage Products for sliders and heads, as well as on 2 other Great Wall subsidiaries, Beijing GKI Electronics for PCBs, Shenzhen Kaifa Magnetics Recording for disk substrates and Shenzhen Kaifa Technology for HSAs. The motors are acquired from Nidec.

According to L.Y. Chan, formerly with Conner Peripherals, Maxtor, Miniscribe, and Seagate, now ExcelStor’s VP marketing and sales, current production of the 1,000-employee, 12,000 square feet Shenzhen plant, with a class-10 cleanroom, is close to one million drives per month.

Among its OEMs are parent company and PC maker Great Wall, as well as 2 large Korean PC manufacturers. One of the largest distributors is a $400 million German company that secured European exclusivity, MCE, which, according to Paul Mehl, director of sales, is the largest distributor of IBM products and now HGST drives in the world. He indicates a figure of 3 million drives sold in 2002. ExcelStor plans to enter in 2.5-inch HDD in 2005.

We also learned recently that the firm signed another agreement to assemble the drives and cartridges of Iomega’s RRD (Removable Rigid Drive) to be launched next year.

HGST’s China policy was further confirmed by the announcement of its decision to shift most of its hard disk media manufacturing operations away from San Jose, CA, and Odawara, Japan, where 800 people worked, to China within the next 3 years. Initial media production is expected to begin in Shenzhen in 2004 with full operation in 2H06.

This article is an abstract of news published on issue 188 on September 2003 from the former paper version of Computer Data Storage Newsletter.