Read-Rite Closes Penang Plant, Lays Off 4,000 Workers

Posted on July 21, 1998 
Filed Under AsiaBizTech, Julian

By Julian Matthews

July 21, 1998 (KUALA LUMPUR) — Read-Rite Corp., a maker of disk drive components, is closing its Malaysian operations and dismissing more than 4,000 staff.

“It is a difficult and painful decision, but we have to do it,” said Randall Hollis, vice president and managing director of Read-Rite Malaysia Sdn Bhd.

Hollis said “tremendous restructuring within the data storage industry” had forced the company to consolidate its Asian manufacturing facilities. He cited low product demand, low production volume and escalating costs as other factors for the move.

Read-Rite’s operations in Thailand and Philippines will take over the work of the Malaysian plant.

Hollis said that the Penang plant is considered to be the least critical of its three manufacturing facilities in the region. “It was running at a lower capacity and had less capital-intensive operations than the plants in Bangkok and Manila,” he said.

Located in Prai, on the mainland part of Penang state, the 136,000-sq.-ft. plant was set up in 1991. Read-Rite has invested more than US$80 million in the facility since 1994.

The company is offering 32 million ringgit (about US$8 million) in benefits to the Malaysian employees, who were given immediate termination letters on July 16, Hollis said.

The benefits include four, six and eight weeks of wages in lieu of notice, 1.3 months for each year of completed service, pro-rated bonuses, and payments for all unearned medical leave. The company has already been approached by 19 companies to hire 1,500 of its staff to fill administrative, engineering, technical and production positions. A job placement seminar will be held at the plant from July 21 through July 24.

Hollis said 461 of the 4,128 affected staff will remain on the payroll until October to help close the operation.

He added that Read-Rite is considering offers from four companies to buy the plant. Based in Milpitas, Calif., Read-Rite Corp. is one of the world’s leading manufacturers of recording heads, head gimbal assemblies (HGAs) and head stack assemblies (HSAs) for disk drives and magnetoresistive heads for quarter- inch-cartridge tape drives.

The company reported a net loss of US$137.2 million, including a US$93.7 million restructuring charge, in the April-June quarter, and a loss of US$62.2 million in the January-March quarter.

Its worldwide employment level after the restructuring will stand at 18,000, down 28 percent from a high of more than 25,000 in December 1997.

Published in Asia BizTech, Jly 21, 1998

by Julian Matthews, Asia BizTech Correspondent

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