Japan's Hitachi Global Storage Technologies will move all production of its 3.5-inch hard disk drives to Shenzhen within the next two years as the company seeks to tap growing demand for products such as digital video recorders and television set-top boxes.
At present, the Shenzhen plant mainly makes 3.5-inch drives for its traditional market: desktop computers. Higher-end drives for consumer applications are made in Thailand.
However, this will change by 2008, when Hitachi expects Shenzhen to account for 50 per cent of its hard disk drive output, or 70 million devices annually. Of that, 50 million units will be 3.5-inch drives.
'For this year, the majority of China output will go into traditional [information technology] products,' Greater China president Dirk Thomas said. 'We have to get the plant qualified. Then in 2007, we will begin the transition into higher-end products.'
Hitachi has invested US$100 million in Shenzhen to date and plans to use US$500 million in total. The increase in 3.5-inch manufacturing capacity comes as Hitachi aims to double its global market share of the segment to 18 per cent by 2008.
Thailand will continue to play an important role for Hitachi, especially in the manufacture of 2.5-inch drives for laptop computers, Mr Thomas said.
'You're going to see two large manufacturing plants, with China leading the way because of the supply chain,' he said.
Labour costs were near equal in both countries, he said, although its China operation was closer to notebook and desktop makers.
Although computers are the main market for 3.5-inch drives, Hitachi saw the most growth coming from applications such as personal video recorders, drives embedded into televisions or home entertainment media hubs.
Yesterday, the company announced a new line of hard drives for video with capacities up to 500 gigabytes. Those products will initially be made in Thailand, shifting to Shenzhen later.
'Much of the incremental growth will occur in the consumer space,' Mr Thomas said.