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Stability Through Technology

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DQI Bureau
New Update

Seagate

has constantly transformed over the years. Its manufacturing processes have been

increasingly automated resulting in drastic reduction in manpower. The

manufacturing plants of Seagate in Singapore are examples of how technology can

help organizations shed the extra bulge. In the first quarter of 1998, Seagate

had 106,822 employees on its rolls. By March 2000, the number had come down to

61,360.

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The automation of manufacturing processes is much evident in

Seagate plants in Singapore. "Fewer and fewer people are now required to

manufacture storage products," says Don E Kennedy, VP, Sales and Marketing,

Asia-Pacific. But this was not the case when Seagate set up its manufacturing

plant in Singapore in 1982, three years after the company was founded in

California. The Singapore facility was the company’s first ‘volume

manufacturing’ facility outside the US. Starting with the manufacturing of

components, the facility quickly progressed to disk drives. Within a year,

Seagate had started shipping 10MB disk drives produced in Singapore.



SeagatSeagate Fact Sheete Fact Sheet

1998 1999 2000
Revenue, in million $ 6,819 6,802 4,900
Customer mix OEM, in % 64 65 66
Distribution, in % 36 35 34
Drive units, in million 29,278 31,989 30,521
Employees 87,322 81,953 61,360
Financial year

beginning July
* Up to third

quarter

Seagate’s state-of-the-art, one million square feet

facility in Ang Mo Kio in Singapore is the company’s primary manufacturing

center for enterprise and desktop disk drives. It was designed with a long-term

perspective of not only producing technology-intensive hard disk drives of today

and but also to quickly make a transition to automated technologies of tomorrow.

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Presently, the facility produces Barracuda and Cheetah disk

drives with capacities as high as 50GB. "We are working on a product that

will have a 100GB capacity on a single disk, which should hit the market in

2002," says Michael Stears, Senior VP, Disk Drive Operations.

Seagate assembles all its disk drives within its nine Class

100 clean rooms, which have controlled environments. These have the capacity to

produce 50,000 disk drives every day. Seagate ensures quality of its disk drives

by sticking to extremely clean environments. Special measures are taken to

control electrostatic discharge. Assembled disk drives are then put through

rigorous tests before they are shipped to customers.

Recording media operations>>>

Recording media operations

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Seagate’s recording media manufacturing facility at

Singapore follows exactly the quality standards that are adhered to in case of

disk or tape drives. It is a Fortune 1000 business all by itself.

Seagate’s recording media operations (RMO) at Woodlands in

Singapore is the company’s first such facility outside North America, which

began operations in 1996. It is also Seagate’s largest media manufacturing

facility. Phillip J Maher, VP, RMO, Asia-Pacific, who was one of the first

employees to reach Woodlands, recalls that there was jungle all around when he

landed there.

Automation was a far cry. "We used to wash recording

media with cloth and buckets of water. Later we used paint brushes,"

recalls Maher. But now the robots do the entire job. The manufacturing time too

has been compressed from three days to 24 hours.

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Though Singapore’s RMO runs at over 100% of its production

capacity and produces over half of Seagate’s internal output, supply does not

match internal demand for media. As a result, Seagate opts for external

suppliers, mostly Japanese companies, creating competition from within. Points

out Maher, "Competition from external parties keeps us on our toes to

maintain quality and production schedules."

As the demand for greater storage capacities rises, media

manufacturers, including Seagate, are looking for alternatives to currently

available material. According to Maher, glass is being looked at as one of the

options. But whether glass or any other material, Seagate is keen to be in the

forefront. RMO facilities worldwide are a part of Seagate’s

vertically-integrated manufacturing strategy designed to take advantage of

complementary technical capabilities in heads, media, motors and semiconductors.

Internet drives storage

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Seagate is clear about the strategic trends in technology and

has taken to the internet in a big way. It has come out with the slogan,

"Internet is driving storage is driving the internet!" Seagate’s

immediate focus is on internet service providers and server products.

The company has been closely observing the shift that is

taking place in storage supplied by systems and solution providers, and is

adopting business strategies accordingly. At this juncture, Seagate is also

considering notebooks as a window of opportunity.

The company has begun marketing storage area network (SAN)

solutions. It is seriously looking at business opportunities in server

appliances and consumer solutions. Says Kennedy, "Our design and research

centers have come up with storage solutions for consumer products like personal

video recorders and home TV." According to Kennedy, India has been slow in

adapting to removable storage systems. He feels that the market needs to be

educated on this. He is planning to sign up as many business partners as he can

in India. Access to Seagate’s website for business purposes will soon be

provided to registered partners.

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The picture on the revenue side is not bright for Seagate.

Its revenue dipped marginally in 1999 compared to the previous year (see Seagate

Fact Sheet). At the same time, it holds cash worth $1.89 billion, which is a lot

of money. Things look good at the gross margin level as well, up 20.9% in the

third quarter of this financial year compared to the second quarter figure of

18.9%. This has contributed to an eighth consecutive profitable quarter. And

productivity per employee has shot up by 112% over the same period.

New products on the anvil

On the technology front, the company has demonstrated the

world’s highest disk drive area per density capacity of 45GB per two-inch

disk. Seagate will be the first to market products on a 15,000Rpm platform, with

ultra 160 SCSI and fiber channel versions, all manufactured in automated

environments. These are expected to be available in the market by September this

year.

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With processes being increasingly automated, another lot of

employees may lose their jobs. But that is not Seagate’s immediate concern.

Its priority right now is to consolidate its manufacturing facilities and

empower them with automation to push up the production of disk and tape drives.

These efforts are already yielding results in terms of disk drive production.

Seagate produced 10.47 million drives in the third quarter of the current

financial year (January-March), which is a record.

However, the high production levels may not yet help Seagate

to recoup its revenues completely because in the three quarters so far, it has

been able to notch up only $4.9 billion. To match last year’s revenue figures,

Seagate has to achieve $1.9 billion in the last quarter, which is next to

impossible considering the fact that the best first quarter revenue figure

stands at $1.65 billion.

Looking at the revenue figures from a long-term perspective,

one can be certain that the consolidation efforts, supported by greater

efficiency due to the high degree of automation, are bound to help Seagate

bounce back. From the marketing angle, Seagate wants to explore new

opportunities in core business and emerging markets as well as applications with

a focus on the internet. It continues to focus on key customers, including large

original equipment manufacturers like Compaq, while its balance sheet, assets

and technology prowess provide it the required stability.

Sylvester Lobo

in Singapore

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