Hitachi outlines Chinese plans to the INQ

LAST WEEK, we had an informal dinner with Dirk Thomas, the president of Hitachi Global Storage Technologies (Hitachi GST) and president, Greater China. He leads Hitachi GST's Greater China operations, including three manufacturing sites, and customer service, support and application development centres in Beijing, Shanghai, Hong Kong, Shenzhen, and Taipei.

Dirk is an American who has been in the storage business almost since punch cards and paper tape. OK, that's a stretch, but he has been in the business for most of the magnetic recording era in computing.

We asked Dirk some questions about Hitachi's operations in China, and hope you find his answers a little bit interesting. You can at least see that people that live and work here (like your correspondent) don't really eat babies and run slave labour shops. China is just a place. But a place that is growing at 11 per cent or more each year.

Inq: You are the Greater China President of a Japanese company, and you are an American. How did this come about?

Dirk: I was formerly vice president of corporate strategy and business development working at headquarters in San Jose. As Hitachi made the strategic decision to invest heavily in manufacturing in Shenzhen and to grow its presence in China, I was deployed to oversee the entire operations. I had more than 15 years of business and market development experience throughout the Asia Pacific region, particularly in China, and extensive cross border M&A (mergers and acquisitions) and business partnership experience.

Inq: How big is Hitachi China?

Dirk: China is a key element in Hitachi GST's growth strategy both as a manufacturing centre and as a market opportunity. In China, Hitachi GST employs more than 10,100 local staff, and has three manufacturing facilities in Shenzhen; Shenzhen Hailiang Storage Products Co., Ltd (HSPC), Hitachi Global Storage Technologies (Shenzhen) Co., Ltd, and Hitachi Global Storage Products (Shenzhen) Co., Ltd.

The company also operates 14 hub services provided by forwarders to meet customers' needs. Today we have customer and service support located in five cities.

Inq: What products are manufactured by Hitachi in China and what is your present manufacturing volume?

Dirk: First, we manufacture 3.5-inch hard disk drives for desktop computer and consumer electronics applications for the global market. These are produced in Hitachi GST's mega-manufacturing centre in Shenzhen--an investment of up to US$500 million--making Hitachi GST the largest hard disk drive industry investor in the region. The first hard disk drive shipped from the centre in early 2006. In February 2007, we celebrated the facility's first anniversary and announced it had achieved production capacity of 1 million units per month. The facility continues to ramp manufacturing, adding more production lines and employees.

Inq: Where is Hitachi headed in China?

Dirk: Since the company's formation in 2003, Hitachi GST has continuously demonstrated its strong commitment to China. Revenues have grown more than 60% per year since 2004, and 68% year-on-year growth between 2006 and 2007. Not only have revenues for the region tripled over the past few years, our leadership team has also actively promoted Shenzhen's business and social environment to Hitachi GST's business partners, encouraging other companies to relocate to China. In addition, we have helped to introduce advanced technologies to the Chinese hard disk drive industry, to develop local talent and promote our social responsibility to China and its people.

Inq: Many Westerners have a perception of China as just a place to get cheap labour to assemble products. What are your thoughts on this view?

Dirk: Hitachi GST is committed to the Chinese market. In general, we view China as the fastest growing IT and consumer electronics market where hard disk drives are a key contributor to that growth.

Inq: How would you describe Hitachi's relationship with the Chinese government?

Excellent. They have been very supportive in our manufacturing expansion efforts.

Inq: 2009 may be a key year for many foreign operations in China. Many things are coming together then. What are your thoughts about China, 2009, and Hitachi?

Dirk: Some of the top-of-mind issues for international companies doing business in China will include:

* Market dynamics and demographics including: emergence of the mass market, rapid development in tier 2-5 cities, income/age trends and behaviour regarding brands and price opportunity

* Competing with local companies: many are closing operational efficiency gaps, are willing to accept lower margins and thus posing ever greater challenges to international firms in China; also, how important are corporate social responsibility (CSR) programs in influencing local relationships

* It's not just about making the sale: increasingly, MNCs need to consider pre- and post-sales value added services, refining and developing channels and routes to market, and developing local design and procurement strategies in order to realize their growth potential in China

* Talent development: attracting and retaining the best talent in China is an ongoing issue and one that demands a thorough strategic plan

* External factors to name a few include: for example, currency appreciation, invested capacity and new legislation

Inq: Has Hitachi invested in R&D in China, or is it all just cheap manufacturing?

Dirk: In 2005, we opened Hitachi Design Studios in Shenzhen and Taipei to support customers in integrating hard drives into consumer electronic (CE) devices. The Studios provide value-added assistance to Asia-based device manufacturers looking for innovative storage solutions.

Inq: Finally, is there anything new and interesting coming from Hitachi that we should keep our eye on?

Dirk: "We are announcing a new trio of enterprise-class HDDs including our first small form factor (SFF) enterprise hard drive, the 10K RPM Ultrastar C10K147. These new enterprise products, built for performance, reliability and capacity, will help Hitachi secure a stronger foothold in the enterprise hard drive market segment. The products target a broad range of enterprise storage systems, from mission-critical and lower duty cycle storage applications to servers.

Also, don't forget to look out for our 1TB drive, the industry's first one terabyte hard drive, the Hitachi Deskstar 7K1000, as it arrives in the market. µ