SyQuest to Shut Malaysian Plant, Retrench 1,000 Workers

Posted on November 12, 1998 
Filed Under AsiaBizTech, Julian

By Julian Matthews

November 12,1998 (KUALA LUMPUR) — Removable disk drive maker SyQuest Technology Inc. will shut its manufacturing plants in Penang and displace almost 1,000 workers by year’s end, a government source said.

“About half of the 968 workers are to be retrenched by the end of November, and another half by December,” he said.

The source said the company attributed the closure to a fall in product demand, heavy losses incurred over the past two years and the inability of its headquarters to raise new capital.

The Penang facility has left a recorded message on its main telephone line stating it has shut down temporarily from Nov. 2 to Nov. 15 and would resume operations on Nov 16. Sources said workers were told a new product line would be introduced when the plant was re-opened.

On Nov. 2, the troubled parent company SyQuest Technology Inc., based in Fremont, Calif., suspended operations and suggested it may file for Chapter 11 bankruptcy protection. The company stated that the move came after one of its lenders had cut its line of credit to US$10.8 million from US$30 million.

SyQuest’s stock plunged from a high of almost US$19 in August 1995 to 34 cents last Monday (Nov. 2) before trading was halted at the company’s request.

Founded by industry pioneer Syed Iftikar in 1982, SyQuest was the first company to come out with small-diameter removable storage devices for PCs. In August of this year, it reported third-quarter fiscal losses of US$42.5 million and said it would cease manufacturing in Fremont and cut its worldwide work force by half, or 950 jobs.

Subsequently, the factory located in Prai industrial area in Penang retrenched 779 workers and was immediately investigated for labor law violations. Employers undertaking any retrenchments in Malaysia are required by law to give labor authorities 30 days notice. SyQuest, in its defense, told authorities it had paid out 928,214 ringgit (about US$244,000) in retrenchment benefits to the affected workers. The government source said 146 of 779 workers have since found alternative employment.

SyQuest is the third disk drive manufacturer in Penang affected by the downturn in the disk drive industry in the last nine months.

In February, Seagate Technology Inc. laid off 1,791 Malaysian workers and 400 Indonesians from its plants in Penang and Perak, and discontinued head stacks and head gimbal assembly manufacturing.

Disk drive component maker Read-Rite Corp. stated in July that it was shutting down its seven-year-old Penang plant and dismissing 4,000 staff.

Both companies cited low demand and shortfalls in revenue for the restructuring.

Published in Asia BizTech, Nov 12, 1998

by Julian Matthews, Asia BizTech Correspondent

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