Putting the Seagate Singapore plant closure into perspective

Seagate closes hard disk production plant in Singapore, lays off 2,000

Seagate closes hard disk production plant in Singapore, lays off 2,000 -photo source EDB

Yesterday, hard disk maker Seagate announced that it would be laying off 2,000 workers from Singapore (4% of their global workforce) out of its 8,000-strong Singapore operation, and relocate its Ang Mo Kio hard disk drive plant out of Singapore by the end of 2010.  Not every article provided the same amount of detail, so I did some digging around to consolidate all the facts that I could find.

Facts & Figures

  • 2,000 to be laid off out of 4,000 employees at the existing Ang Mo Kio plant; remainder to be relocated within its other Singapore operations
  • Total restructuring charges of US$80 million will be incurred
    • US$60 million would be for severance pay
    • US$10 million for relocation of manufacturing equipment
  • Shutdown to yield savings of US$40 million per year, or break-even on restructuring costs in 2 years
  • Manufacturing capacity to be absorbed by Seagate’s other lower-cost operations in Asia, such as Malaysia, Thailand and China.
  • Seagate’s over-90,000 sq m Ang Mo Kio plant contained advanced automation production lines and test systems, and was responsible for production and assembly of Seagate’s hard disks for mission-critical applications.
  • Seagate Asia headquarters to remain in Singapore, along with its product development and design centre and Recording Media Operations (RMO) media manufacturing facility at Woodlands.
  • This announcement came after Seagate said in May it had initiated a restructuring plan that called for a cut of about 1,100 employees (2.5% of workforce).

Back in September 2006, EDB announced that Seagate would be building its third RMO production facility with an estimated size of 54,000 sq m over the next 4 years.  In that press release, Jerry Glembocki, Senior Vice President of Recording Heads and Media Operations of Seagate, was quoted:

“Media manufacturing is a tremendously complex technology,” points out Jerry Glembocki, senior vice president, recording heads and media operations, Seagate. “It takes many, many years to train an engineer or technician to be fully functional. We have that talent here, so the reason we’re announcing this expansion is that we’d like to leverage that and take advantage of it.”

“The new facilities will make Seagate in Singapore the world’s single largest producer of recording media,”

“Singapore is a highly efficient and cost-effective manufacturing site for Seagate recording media operations, thanks to a number of factors,” says Glembocki. Among these, he cites the country’s “availability of utilities, favourable logistics infrastructure and a collaborative partnership in terms of local governance and regulations.”

“The Singapore Government, through the Singapore Economic Development Board, has played a very proactive role in creating these advantages and continues to ensure that Singapore remains a location of choice for manufacturers like Seagate,” highlights Glembocki.

If a tree falls in a forest and no one is around to hear it, does it make a sound?

Without further info, I’m guessing the employees laid off would most probably be older-aged staff who lack the skills and expertise needed at Seagate’s RMO Woodlands facility.  With the global economy appearing to be on the mend, and with what appears to be a generous severance package (ala US$60 million of US$80 million for severance pay) from Seagate, those unfortunate 2,000 staff should have enough breathing room to hunt for their next gig, or simply retire.

What I’m more worried about is the knock-on effects on the local suppliers that has kept Seagate’s Ang Mo Kio facility humming along for the past decade.  Singapore’s export-oriented push and MNC attraction and investment promotion has hurled us out of third-world and into the first in a single generation, and in so doing has brought our nation and people untold benefits.  Yet, many MNCs have since exited Singapore’s manufacturing sector, and in the process, displaced countless factory workers.  Not all have the propensity to retrain for another industry or another process, and become economically displaced.  I quote George Berkeley; alas, such is the cost of economic progress and our nation’s continuing efforts at socio-economic re-engineering.

Seagate and Singapore go way back to 1982, when Seagate opened its first volume manufacturing site outside the United States with its Disc Drive Operations in Singapore.  Those operations were subsequently relocated to its current Ang Mo Kio facility, and the shutdown of such a symbolic site has probably sounded the death knell on Singapore’s once-dominant position in hard disk drive production.  I’m just surprised it took them so long to make the move, given how quickly other lower-cost manufacturing hotspots have been improving the quality of their production lines.  Besides, almost everything’s Made-in-China these days; it’s only a matter of time before China’s first-tier cities start appearing on the radar screens of companies seeking high-tech production capabilities.

When that day comes, no amount of long-standing relationships between city-state and enterprises will be able to stand in the way of mounting pressures for greater shareholder value.  In the meanwhile, let’s hope the nation’s strategic thrust in Interactive Digital Media (IDM) pans out.

Alfred Siew, Technology Correspondent at The Straits Times wrote a superb paper on the relocation of Singapore’s manufacturing base and our nation’s new focus on digital media for the Hawaii-based East-West Center’s Jefferson Fellowship when he was on the programme in 2007).  It’s a recommended read to set the plant shutdown in the right perspective vis-a-viz the macroeconomy.

Update: ChannelNewsAsia reported that Manpower Minister Gan Kim Yong said the tripartite partners are working together to help the laid-off workers seek redeployment within Seagate, failing which retraining opportunities will be provided to them to equip them with new skills to gun for the reported 25,000 jobs still available in the market.

About James Chan

James Chan is an entrepreneur, investor, geek, photographer and husband/father based out of Singapore. Apart from frequent travels to Vietnam, Myanmar and Indonesia for work, James can also be found online via his trusty 15" Retina MacBook Pro or iPhone 6+.