Iomega Shifts All US Manufacturing to Penang

Posted on March 1, 1997 
Filed Under Julian, Nikkei Electronics Asia

By Julian Matthews

Leading US removable disk drive maker Iomega Corp announced plans to shift production of its entire family of products from the US to Malaysia by the middle of 1997.

The shift to the US$30 million manufacturing facility in Penang will result in a cut of between 500 and 700 employees at the company’s headquarters in Roy, Utah.

Iomega (M) Sdn Bhd managing director K H Teh said the Penang facility will be in volume production of the company’s entire line of Jaz, Ditto and Zip drives and disks by the end of 1997.

Teh said the staff headcount is expected to go up to between 2,500 and 3,000 by the end of 1997, when it will be operating at full capacity.

“We are currently producing at 40% capacity and have about 900 workers, including about 100 engineers and technical staff,” he said.

Teh said the company began the transition of the production of its popular 1-Gbyte capacity Jaz drives and Ditto tape drives in August last year.

Iomega recently purchased the 35,000 square meter facility from Quantum Corp.

Teh, the former managing director of Quantum Storage (M) Sdn Bhd, was hired along with 350 other employees under the previous management.

“The ramp-up to volume production was very quick,” said Teh. The Penang plant began producing Zip drives in October and is currently in the process of incorporating the manufacture of the cartridges for the Jaz drives.

Earlier, Iomega’s Penang plant was projected to contribute about 60% of total worldwide sales for the company by the first quarter of 1997. “By the end of 1997 we expect to be contributing significantly more than 60%,” Teh said.

1996 Sales Breach US$1B

Iomega Corp’s fortunes soared after new management began turning the company around in 1994. With its new line of disk drives introduced in 1995, it captured a niche in the portable storage solutions market and sales have risen dramatically since.

The company grew from US$141.4 million worth of sales in 1994 to US$326 million in 1995. For the first half of 1996, sales rocketed to US$500 million and reached US$800 million by the third quarter. Analysts have projected that worldwide sales for the company will rise beyond the US$1 billion mark in 1996.

Analysts say the move to Penang is seen as a means to keep costs down and prices low for consumers in the competitive disk drive market.

The factory would also be able to save money on materials, handling and shipping inventory by sourcing from key component suppliers located in Malaysia.

Initially, the Penang plant was to serve as an additional high-volume manufacturing facility together with plants in the Philippines, Taiwan and Singapore to help cope with the sudden rise in demand.

But the Penang plant came onstream faster than expected, mainly because it already had a skilled labor force and equipment including a 3,350 square meter cleanroom in place. The decision was then made to enlarge the Penang plant’s role and broaden its product base.

Published in Nikkei Electronics Asia, Mar 01, 1997

by Julian Matthews, Malaysian correspondent

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