Windfall of benefits for some, but uncertainties for others

PENANG - Disk drive giant Seagate Technology Inc's decision to shut down its recording head plant in Ipoh, and slash potentially 6,000 jobs from its 11,000 payroll in Malaysia has brought mixed reactions from affected staff.

Several staff, when contacted by ZDNet Asia, said the move was "not unexpected" and was only a question of "when, how many and how much (benefits)".

"The writing was already on the wall, and some already had jobs in hand," said one engineer at the Ipoh plant, who declined to be identified. "The atmosphere here is mixed, some are ecstatic about the relocation and retrenchment packages being offered, but others with families are sad about uncertainties in the long-run," he said.

Established in 1995, the Ipoh plant was a prime employer in the state of Perak and at its peak employed more than 4,000 staff. An estimated 2,000 may be affected by the current cuts.

Seagate has effected a series of retrenchments in the last two years after the global personal storage business tanked. Malaysia and Singapore have been receiving the brunt of the cuts, despite the region contributing an average quarterly revenue of between 23 to 26 percent of worldwide sales.

Chief financial officer Charles Pope has repeatedly said in teleconferences with local and regional media that the company would not shut down or relocate plants in Malaysia and Singapore, but has not lived up to his word.

In January this year, Pope said the company had no immediate plans for shutting down plants in Singapore, China, Indonesia, Malaysia and Thailand. But barely a week later it shuttered its Senoko plant in Singapore and relocated the printed circuit board assembly operations to Ang Mo Kio and Senai, in Malaysia, affecting 2,000 staff.

Today's announcement comes after Pope again made no indication of the impending cuts in an Oct 11 conference with Asian journalists on the company's July-Sept earnings.

Seagate's Penang operations spokesperson Audrey Cheah said the voluntary retrenchment package will be offered beginning this month and extended to February 2001 for staff in Ipoh and Penang.

"We will offer the scheme to up 6,000 staff but that doesn't mean all of them will apply," she said.

Cheah added that Seagate had improved areal density for its core products, requiring fewer heads per drive, and less equipment and fewer facilities to make them. "Therefore, the logical course of action is to consolidate head manufacturing operations rather than operate multiple under-utilized facilities."

To its credit, Seagate's has unveiled an attractive retrenchment package with the minimum of 4.25 months salary for a junior employee, and about 10.25 months salary for a staff with five years experience, including severance, bonuses and other incentives and benefits.

Cheah said that it had also prepared a "very attractive" relocation package to those shifting to Penang from Ipoh, but declined to disclose figures.

O.K. Lee, chairman of the northern branch of the Federation of Malaysian Manufacturers, said the consolidation efforts were signs of how competitive the storage business had become globally. Several smaller US-based players like removable disk drive pioneer SyQuest Technology Inc and component supplier Read-Rite Corp have previously closed down plants in Penang.

"I don't think this will be a precursor to more job cuts. The labor market is still tight and job-hopping still rampant, so those displaced workers won't have problems finding jobs here, but in Ipoh things might be tougher," said Lee.

Lee said Penang is still a competitive manufacturing hub for the electronics industry compared to Japan, Korea or Taiwan, although China is an upcoming threat. "Major brands such as Intel, AMD and Motorola and various smaller manufacturers are thriving here," said Lee whose organization represents over 300 member companies. "In US dollar terms, wages haven't really risen back to pre-crisis levels, but the margins have thinned for some products forcing manufacturers to switch to higher margin products."