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JULY 2005

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Expanded Bonus Web Edition CHINA SPOTLIGHT



Go Ahead,
Sweat the Small Stuff
Hitachi's Chinese Arithmetic:
$500 million, 7,000 employees
   In June 2004, Hitachi Global Storage Technologies (HGST) announced it would invest $500 million in a "mega manufacturing center" in Shenzhen that would align disk drive assembly, already-existing component manufacturing and suppliers. As many as 7,000 people will work on the site, which will have as its centerpiece a 376,750-sq.-ft. (35,000-sq.-m.) manufacturing facility.
   "Hitachi is committed to being the pre-eminent supplier of disk drives to the consumer electronics marketplace. By expanding our manufacturing capability in China, we expect to continue delivering on that promise," said Glenn Larnerd, COO. "The new site will also give Hitachi a supply-chain management capability that is unmatched in the industry."
   HGST already employs 4,500 at its two Shenzhen component facilities. The one pictured above, which employs 1,100, makes sliders for hard drives, and has just been expanded to make hard drive media, making it the first disk manufacturing plant in China.

    Asked what he learned from the first Chinese JV that he applied to the second, Warmack says it's "not any one big issue, but a thousand small issues. China can erect a site very quickly. You can put up big light booms, throw people at a project and go 24 hours a day. Most of the isues are around planning, reaching an impasse between partners, and sitting there haggling about it. So planning and working with your partner, assuming you have one, are the two most important things. And working with your engineering and construction resoruces and equipment suppliers are secondary issues."
      Protection of intellectual property is an issue often raised in China. Asked if Eastman has had those concerns, Warmack says, "There were concerns, and there continue to be concerns — I would not say that they have lessened. Because of the capital intenstity of chemicals, it's harder to knock off a chemical plant than it is a handbag. But it is possible, and it has been done."
      Nevertheless, like so many companies in so many sectors, Eastman is going down the R&D path next.
      "We have begun the process, and will have a technical center in Shanghai opening in November of this year," says Warmack. "We have a site selected. We won't start off with hordes of people on this site. We're not doing it for show, we're doing it to get work done — [so] we'll follow a crawl-walk-run model. We probably have more space than we need to start out, but we'll fill it very fast as we make progress."

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