The drives are commonly found in desktop computers in capacities of up to 160 gigabytes, but are making inroads into personal video recorders and enterprise storage products as well.

The Shenzhen plant would also be capable of manufacturing smaller drives that go into laptops, digital music players, video cameras and other consumer electronics devices.

'The facility design is one of flexibility. We have the capacity to do 2.5-inch and even 1.8-inch drives,' Mr Healy said.

To date, Hitachi has deployed US$100 million of its planned investment. This has created 1,000 new, mostly low-skilled jobs in Shenzhen, although this number is expected to climb to 7,000 once the first phase is completed and could reach 14,000 upon the completion of the second phase.

Hitachi already employs 5,500 workers in head and disk assembly production in Shenzhen.

The company hopes locating its factories near its mainland customers will shorten lead times and bring greater efficiency to supply chains.

China produces computers for major brand names such as Dell, Hewlett-Packard and Lenovo/IBM.

The investment is already having a knock-on effect, Mr Healy said, with mainland companies investing in Shenzhen to supply components such as spindle motors, flex cables and base castings.

'We have 75 per cent of content localised already,' he said.

Hitachi would not provide a timetable for the remaining investment, adding this would be left up to market conditions.

The company's one-inch drives suffered a setback after Apple discontinued its popular iPod Mini in favour of the iPod Nano, which uses flash memory.

Mr Healy said there remained strong demand for one-inch drives in digital music players and other products.

'There's still a lot of interest in cell phones and converged devices,' he said.