Komag relocates manufacturing ops to Malaysia

Komag Inc., an independent producer of media for disk drives, will relocate 100 percent of its U.S.-based production capacity to Malaysia to achieve low manufacturing costs.

Komag Inc., an independent producer of media for disk drives, will relocate 100 percent of its U.S.-based production capacity to Malaysia to achieve low manufacturing costs.

KUALA LUMPUR--The company ceased manufacturing at its facilities located in Fremont and Santa Rosa, California and Eugene, Oregon within the last 10 days.

These closures were ahead of schedule, accelerating the timing of expected cost savings. The three production lines that have been moved to Malaysia are already fully qualified and are producing disks at high yields, Komag said in a statement.

"Now that all of our production comes from our Malaysian facilities, our U.S. presence will be focused on research and development. Our R&D team in San Jose will continue to develop finished media and substrate development efforts will remain in Santa Rosa," said T.H. Tan, Komag chief executive officer.

By shifting all manufacturing offshore to Malaysia, Komag expects to significantly reduce the cost of production.

The company anticipates that fixed manufacturing costs, including employee, factory and equipment expenses, will be around US$35 million per quarter compared with US$52 million in the first quarter of 2001. The variable cost of producing a disk is approximately US$2.70 to US$2.80 per disk.

"Our low cost structure is a significant competitive advantage and will be instrumental in returning the company to profitability. We are moving Komag to the next phase. In spite of the current weakness in demand, closing our U.S. manufacturing ahead of schedule places us on track for a much healthier business in the second half of this year," Tan said.

Founded in 1983, Komag--after its merger with HMT Technology in October last year--claims to be the largest independent supplier of thin-film disks, the primary high-capacity storage medium for digital data in computers and consumer appliances.