Western Digital Corporation’s incredible growth and strong confidence in Thailand will continue after the quick recovery from the country’s recent flood crisis. The company has been extremely successful with its Thailand operations and plans to carry on leveraging the advantages that it found here 10 years ago, according to President and CEO John Coyne.
Prior to 2001, the California-based hard disk drive (HDD) manufacturer had zero production activity in Thailand. By 2011, a whopping 60% of Western Digital’s global output was coming from the country. “That speaks volumes for the environment here that supported our success,” Coyne said.
Thailand’s attractive investment environment has helped Western Digital rise to become the world’s biggest maker of HDDs. This includes capable labor, tax incentives, consistent government support, advanced logistics infrastructure, and HDD cluster development that promotes efficiency. During a January 2012 visit to the company’s local factories, Coyne encouraged the Thai government to carry on with that successful matrix to “underpin confidence in what is demonstrated to be a winning environment for our industry to operate.” Despite downtime and losses suffered from the flooding in Q4 2011, the company still sees Thailand as a prime investment location. “Thailand has been a great home for Western Digital for over a decade. Our outlook here remains the same,” Coyne said.
Since Western Digital first set foot in the country, it has enjoyed a CAGR of 35%. During those 10 years, it has invested over US$1.5 billion in Thailand. Of its 38,000 employees in the country, 12% are technical staff. In fact, all of Western Digital’s R&D work on the slider and magnetic recording head components of its HDDs is conducted in Thailand.
A winner of the Thai Prime Minister’s Best Industry Award in 2011, Western Digital has a total of 650,000 square feet of production space at its two huge factories near Bangkok. But the effect on the local industry and economy goes far beyond that. Coyne pointed out that the company’s operations in Thailand also support a component supply network that engages over 200,000 people domestically.
Progress a Hallmark of the Company
Founded in 1970, Western Digital entered the hard drive industry in 1988 when there were over 20 competitors. Today there are only four, with Western Digital’s explosive growth taking it from revenue of US$5 billion to US$10 billion in the past five years and placing the company ahead of Seagate, Hitachi and Toshiba for market share. Progress is a hallmark of Western Digital. In fact, it is the industry’s only company to post a profit in every quarter over the past 10 years, including during the 2008 recession. Expansion continues with Western Digital expected to finalize its acquisition of Hitachi by the second quarter of 2012.
The CEO attributes Western Digital’s glowing success to its so- called PAPPII values: passion, action, productivity, perseverance, innovation and integrity. “These are the key values and behaviors of the people who drive our success,” Coyne said.
As virtually every walk of life depends on the use of digital data, the global hard drives industry continues to see soaring demand. “Data creation is expected to grow by 44 times in the next decade. But storage capacity for that will increase by about 30 times. This gap adds up to a very significant demand for digital storage,” emphasized Coyne.
Because of their combined benefits of performance, capacity and effective cost, hard drives most likely will remain in the forefront as the largest repository for the storage of digital content. Currently, HDDs are well out in front of optical disk drives, tape and other kinds of storage products when comparing cost per bit and ease of data transfer. Reflecting such lopsided popularity, in 2010 the HDD industry worldwide reached US$36 billion in sales versus US$15 billion for solid-state flash.
Going Forward after the Flood
With all four of the world’s HDD manufacturers operating factories in Thailand, the country produces between 40% and 45% of the global supply in the line. As such, last year’s unprecedented flooding had a significant but temporary impact on the availability of HDDs worldwide when many of Thailand’s hard drive and component factories were affected by the flood. In the third quarter of 2011 before the crisis, global sales totaled 176 million drives. Sales fell to 119 million units during flood-hit Q4. For the global hard drives industry as a whole, capacity is expected to return to pre-flood levels after July this year.
Western Digital’s Bang Pa-in factory in Ayutthaya Province resumed production on 30 November 2011 just 46 days after it was inundated and the company’s Navanakorn plant in Pathum Thani Province is expected to restart in March this year. “We came back so quickly because of an extraordinary effort by the combined forces of our own people, contract support, and the support of the Thai government agencies,” Coyne said.
This team effort included deploying Royal Thai Navy divers who used maps in the dark flooded confines to unbolt and pull out production equipment on floatation devices. The equipment was moved to temporary facilities 100 miles away for bacterial decontamination, reconditioning and requalifying. After the waters receded and the big factory cleanup by local staff, an international company that specializes in such recoveries was brought in to ensure that buildings were fit.
Coyne gave special praise to the Western Digital staffers who worked diligently to restore the facilities, most of whom had homes that were also affected during Thailand’s worst flooding in more than 50 years. “One of Western Digital’s strengths is the commitment from our people to a high level of action orientation,” he said. Over 2,800 people worked on emergency activities in the inundation period, with more than 36,000 meals delivered on pontoons to feed them.
As product availability is the fundamental guarantee of a company to its customers, Coyne said Western Digital is ready to work with the Thai government on plans to prevent any recurrence of flooding. “We must build confidence that restored activity and restored production is sustainable,” he said.