As a part of its cost-cutting efforts, Seagate has decided to shut down its HDD manufacturing plant in Suzhou, China. The factory is one of the company’s largest production assets and its closure will significantly reduce the company’s HDD output. Seagate intends to lay off ~2200 employees, but it is unclear what it intends to do with the facility, which it owns.

The factory in Suzhou, China, assemblies hard drives and performs their final testing before shipping. The plant does not produce HDD subassemblies and thus is not vertically integrated, but at 1.1 million square feet (102 thousand square meters), this is one of Seagate’s largest manufacturing assets and the largest drive assembly facility. The company got the factory from Maxtor, when it acquired it in 2006. According to a media report, the plant no longer makes products and the last employees will be laid off on January 18, 2017.

“As part of our continual optimization of operational efficiencies, Seagate has made the difficult decision to shut down its factory in Suzhou, China,” an alleged statement by Seagate reads. “We regret that our Suzhou employees will be affected by this action, which reflects our ongoing commitment to reduce Seagate’s global manufacturing footprint and better align the business with current and expected demand trends.”

Last year Seagate announced intentions to optimize its manufacturing capacities from around 55-60 million drives per quarter to approximately 35-40 million drives per quarter. In 2016, the company already fired about 8,000 employees from different locations, but that was only a part of the strategy. With the plan to shut down the plant in Suzhou, the company actually reduces its ability to produce the drives.

After Seagate shuts down its plant in Suzhou, China, it will have two vertically integrated HDD production facilities in Wuxi, China, and Korat, Thailand. Both factories product drive subassemblies and actual HDDs, hence, by using only these two plants the company optimizes logistics (as it no longer has to transport drive subassemblies to Suzhou) and cuts its per drive manufacturing costs. Meanwhile, it remains to be seen what happens to Seagate’s factories that only produce drive subassemblies (sliders and HGAs).

Seagate's Manufacturing, Development, Marketing and Administrative Facilities
Location Primary Use Approximate Area Ownership
USA California Product Development

Marketing

Administrative
842,000 ft² Owned/Leased
Colorado Product Development 664,000 ft²
Minnesota Product Development

Production of Recording Heads
1,144,000 ft²
Northern Ireland Springtown Production of Recording Heads 479,000 ft² Owned
China Suzhou Production of Drives 1,103,000 ft²
Wuxi Production of Drives and Drive Subassemblies (Head Stack Assembly) 704,000 ft² Leased
Malaysia Johor Production of Substrates 631,000 ft² Owned
Penang Production of Drive Subassemblies
(Sliders)
402,000 ft²
Seremban Production of Test Equipment and Systems 299,000 ft² Owned/Leased
Singapore Woodlands Production of Media 1,504,000 ft²
Science Park Product Development 410,000 ft²
Ang Mo Kio Marketing

Administrative
225,000 ft² Leased
Thailand Korat Production of Drives and Drive Subassemblies
(Sliders, Heads Gimbal Assembly, Head Stack Assembly)
1,767,000 ft² Owned/Leased
Teparuk Production of Drive Subassemblies
(Heads Gimbal Assembly)
362,000 ft²
Korea Suwon Product Development 220,000 ft² Owned

It is important to note that while Seagate cuts down HDD assembly capacities, it does nothing to plants that produce heads, media and substrates. Over the past few years, unit shipments of HDDs have declined, but their average capacities increased (especially capacities of HDDs for datacenters) due to strong demand for high-capacity SKUs. Therefore Seagate may not need to produce a lot of drives, but it needs to pack about the same amount of heads and platters into fewer HDDs. Moreover, in the coming years, the company will need more heads because of new manufacturing technologies (TDMR, HAMR, etc.) and more media because it can now pack more platters into high-end helium-filled drives.

What remains to be seen is what Seagate plans to do with its manufacturing assets from the Suzhou facility. The fab is so large that it does not seem that all of its equipment could be relocated to other facilities. Moreover, the building itself is huge and it is unclear what will happen to it.

Related Reading:

Sources: Seagate, BestChinaNews, Reuters, The Register.

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  • Nagorak - Sunday, January 15, 2017 - link

    Don't delude yourself, it's a company with an eroding market. Yeah, it's cutting, but only because it has to. Reply
  • baka_toroi - Friday, January 13, 2017 - link

    The last HDD factory will close in 2028. I'm placing my bet. Reply
  • Michael Bay - Saturday, January 14, 2017 - link

    Seagate or in the world? Reply
  • CaedenV - Friday, January 13, 2017 - link

    So... this is pretty much SSDs eating into the small drive market right?
    What happens when the mythical 15+TB 3.5" SAS drives start shipping later this year? That's going to be hard to compete with...

    Personally, I would like to just find some cheap 3TB drives again. I bought a bunch 2 years ago at $55-65 each, and now they all seem to be $85+. Rather annoyed that the price has gone up instead of down!
    Reply
  • DanNeely - Friday, January 13, 2017 - link

    Prices that low for a 3.5" drive were probably excess inventory being dumped at a loss. HDD makers spent a few years in denial about SSDs starting to gut the consumer segment of their market and dragged their feet hard on reducing production to match the new reality. Reply
  • StrangerGuy - Friday, January 13, 2017 - link

    Not really, because everybody is emulating Apple's "screw marketshare" pricing strategy these days: better to sell less units at a decent margin than selling a lot of units but barely breaking even on each. Reply
  • HomeworldFound - Friday, January 13, 2017 - link

    If there's one company that shouldn't be cutting costs, it's Seagate. Reply
  • ImSpartacus - Saturday, January 14, 2017 - link

    I love the detailed table about Seagate's production facilities. Very cool! Reply
  • name99 - Saturday, January 14, 2017 - link

    Isn't it obvious?
    They've sold the facility to a Chinese company but, in the brave new world of Trump-driven China-hating, they're being as quiet as they possibly can about it.
    Regardless of the actual details, there's at least a 50% chance, if a Trumpeter hears about it, that Seagate will be shamed on national Twitter and accused of selling essential national secrets to foreigners. (One constant characteristic of the bully is to accuse everyone else of his own sins.)
    Reply
  • TheJian - Saturday, January 14, 2017 - link

    This has ZERO to do with trump. SSD's are eating HDD low end. It's as simple as that. I am planning to swap out all the family's HDD's inside our PC's next year or later this year. HDD's still get all my external money (3 5TB drives at xmas, this year) but they are losing all the inside the PC money. It's happening in laptops too for better battery life and more reliability.

    Aww, your candidate lost I guess...LOL. "The whole world is going to burn, we're all gonna die, Trump got elected"...ROFL. The bullies are all on twitter talking about shutting down or burning businesses for not wanting to bake a cake or pizza for a gay wedding...ROFL. I'm more worried about someone with a noh8 t-shirt than anything that comes out of Trumps mouth.

    Nothing wrong with balancing trade & stopping currency manipulation (while they steal us blind BTW), but shouting death threats on twitter/facebook etc because someone won't bake a cake etc is stupid and dangerous. The most intolerant people are the one's shouting tolerance. ;)

    Don't be sad though, we may actually get a balanced budget and an economy that grows more than 3% for the first time in 8yrs. Maybe this president won't spend more than ALL OTHER PRESIDENTS COMBINED (10trillion in 8yrs) that came before him. Who knows how to run a business more? A lifetime politician who has never ran anything (aside from running for office for decades), worse a community organizer, or a BILLIONAIRE businessman who has proven time and again he knows how to make profits and good deals? 500 businesses and 4 bankrupt ones. I'll take that batting avg everyday. If he really dumps on regulations and drops taxes I'll be willing to risk re-opening my business (and I'm not alone). That wasn't even a thought process for me during the last decade. Now I'm making plans...LOL. We were losing small businesses faster than creating them, but I think that's about to change. That is good no matter who you voted for in USA.
    Reply

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