Two Penang HDD parts makers re-investing this year

Monday June 14, 2010 By DAVID TAN davidtan@thestar.com.my

GEORGE TOWN: Two Penang-based hard-disk drive (HDD) component makers, Eng Teknologi Holdings Bhd and Dufu Technology Corp Bhd, are re-investing this year.

Their move comes as Seagate and Western Digital, the two major producers of HDD products, are allocating US$750mil each for capital expenditure (capex) this year. The amount represents an increase of 15.4% and 36.4% respectively for the two companies.

According to a recent broker report, both Seagate and Western Digital are increasing capex to support demand, “as inventory levels at their original equipment and distribution customers remained at nearly all-time lows across all geographic regions and product offerings.”

The global demand for HDD products is also expected to hit over 671million units this year compared with over 557 million in 2009.

Eng Teknologi is allocating about RM100mil to expand its operations in Malaysia, Thailand, and China this year and next.
Dufu Technology Corp Bhd, on the other hand, is pumping RM12mil to increase production of HDD components, such as clamps and spacers, at its plant in Bayan Lepas Industrial Estate.

Eng Teknologi group chief executive officer Datuk Y.K. Teh told StarBiz that the expansion would increase the group’s production capacity of HDD components, comprising base-plates, separators and actuators, to 154.7 million pieces this year compared with 96.7 million in 2009.

“In 2011, the group’s production of HDD components would go up to 201.4 million pieces.

“The world’s shipment of HDD is likely to surpass 600 million drives for 2010, compared with about 557 million in 2009. In 2011, shipments are likely to hit 742.7 million,” he said.

Teh said over 50% of the group’s HDD components were supplied to Western Digital, which recently announced it would invest about US$1.2bil in Penang.

He said the group had planned for its industrial product business to contribute about 30% to revenue by 2014, as the segment was less volatile.

For the first quarter ended March 2010, the group posted net profit of RM18.3mil on a revenue of RM153mil, compared with RM71mil and RM100mil respectively a year earlier.

Dufu chief executive officer P. Y. Yong told StarBiz that the expansion exercise would enable the group to increase annual production by 10% over last year’s 150 million pieces of clamps and spacers.

For its fiscal first quarter ended March 2010, sales of HDD components brought in RM26mil in revenue and accounted for 80% of total revenue of RM33mil. In the same period last year, it made RM20mil from the sale of HDD components.

“The market is coming mainly from China, Thailand, and Singapore, where about 80% of the group’s sales are generated,” he said.

Yong said the market for HDD products had reached a peak somewhat due to the crisis in Europe.

“We do not expect production of HDD products in the third quarter 2010 to exceed very much that of last year’s third quarter,” he said.

The group supplies HDD components to Western Digital, Seagate and Hitachi.