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Is it Possible to Manufacture HDDs in USA?
At the beginning of the HDD industry, all the drives were made in USA (Ampex,
Burroughs, Control Data, IBM, Memorex, Univac, STK), and then also in Europe
(Bull, Siemens) and Japan (Fujitsu, Hitachi). But they were high-priced
high-margin units for mainframes where the workforce to build them was a small
percentage of the global price.
There was a big change when PCs arrived
in a more price sensitive market. The first two storage companies to land in
Asia were probably Tandon and Micro Peripherals in 1981 to manufacture floppy
disk drives in Singapore.
But the real pioneer was Tom Mitchell, who
decided in 1982, or only three years after the birth of Seagate, to transfer all
production of 5.25-inch HDDs from Santa Cruz, CA, to Singapore. He was highly
unsatisfied by the "high cost, marginal quality and poor availability of
labor" in California. He also had the good fortune to fall upon a
remarkable local engineer, S.C. Tien, to help him in his efforts.
Seagate's success inspired many imitators in Singapore and then in other Asian
countries with lower salaries.
Today all HDDs are manufactured
in only six Asian countries by the remaining producers:
- Hitachi GST (acquired by WD) in China, Thailand and Singapore
- Seagate in China, South Korea (acquired Samsung HDD for a small
quantity) and Thailand
- Toshiba in China, Thailand and the Philippines
The manufacture of HDDs cannot be completely robotized and need huge number of
workers for assembling components and testing. WD has around 62,000 employees
and Seagate 53,000 worldwide, the huge majority in their manufacturing
facilities. And you have to pay them. That's why the HDD makers are hiring
people with salaries as low as possible and the gap continues to be enormous
between USA and these Asian countries.
For the IMF World Economic Outlook
Database, October 2010, the average minimum ANNUAL salary for workers was $1,500
in China, $2,053 in the Philippines, $2,293 in Thailand and $4,375 in Malaysia.
Per comparison, it's $729 per median WEEKLY earnings in USA according to the
United States Bureau of Labor (January 27, 2012) among full-time wage and salary
workers not union members. Result: between 9X and 25X more in the U.S.
That's why it's impossible to build plants in North America to be competitive in
the HDD industry.
But there is another reason. With few exceptions, all
the components into HDDs (disks, heads, motors, PCBs, enclosures, etc) are built
in Asia because their makers have installed their factories near HDD assembly
plants to offer a better service to their huge customers.
These two
reasons explain why we are not going to see any HDDs made in USA in the near
future. It's the same for PCs, notebooks, tablets, smart phones and the majority
of high-tech devices.
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