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U.S. Plant Closes Local Operations, Blames Demand

Disk drive component supplier Applied Magnetics Corp shut down its Malaysian plant in January leaving more than 2,000 employees unprepared.

The employees returned from a two-week forced leave to discover their plant in the Bayan Lepas Free Industrial Zone in Penang was shuttered. A notice posted outside stated they had been retrenched and the company had ceased operations.

The shutdown of the plant which manufactured magnetic recording heads and head stack assemblies, came in the wake of its troubled parent company filing for bankruptcy protection in Santa Barbara, California. Operations in Goleta, California and its Korea facilities had also been discontinued and most of the employees laid off, the company said in a statement.

The company had earlier stated that it expected to continue limited operations in Malaysia and Korea to fulfil existing orders and continue to seek new financing, but added there was no assurance its efforts would be successful.

Chairman and chief executive Craig Crisman was quoted as saying, "In the past two years, magnetic recording head manufacturers have suffered from excess capacity and slowing demand from the hard disk drive industry. These market conditions have severely hampered the company's efforts in qualifying its giant magnetoresistive (GMR) technology on new products and have prevented the company from achieving its planned sales volume."

HDD Market Still Suffering

Although some analysts have prematurely declared that the worst is over for the disk drive industry, recent moves suggest the industry is still in the midst of restructuring; brought on by lack of demand and intense pricing pressures.

Asian-based American offshore plants have been hit hardest by the mass lay-offs in the past two years. Low-cost electronics manufacturing center Penang, and disk drive hub Singapore have bore the brunt of downsizing in the disk drive industry which began in 1998.

The world's largest manufacturer Seagate Technology Inc is reducing headcount by 8,000 mostly from its Asian operations by June, and announced it would shutdown its printed circuit board plant in Singapore, displacing 2,000 staff. Western Digital Corp also cut 2,500 staff from its Singapore plant in December 1999.

In Penang, over a year ago removable disk drive maker SyQuest Technology Inc, in a similar move to Applied Magnetics', asked its workers to go on forced vacation only to have them return to find their plant had been shuttered. The California company had also filed for bankruptcy protection. Almost 1,000 workers were affected and a group of disgruntled workers have since filed action in a local court to claim back their dues and severance.

(Julian Matthews, Kuala Lumpur: March 2000 Issue, Nikkei Electronics Asia)

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