Toshiba Heads to Hangzhou?

Toshiba Corporation, the world’s third largest notebook PC maker, has initiated a cost-cutting strategy to halt laptop manufacturing at its plant in the Philippines. The Japanese company is moving its notebook production equipment from the Philippines to Hangzhou, China, which is the capital of China’s eastern Zhejiang Province. Toshiba also shifted its Shanghai production to Hangzhou in January 2005.

Previously, the Philippines plant manufactured 100,000 notebooks per month and employed 6,500 people. Located in that nation’s Laguna province, the factory distributed its product to Southeast Asia, Europe, and the United States. Toshiba also maintained notebook production plants in Shanghai for distribution to the Chinese market and in Hangzhou for distribution to the European and American markets.

By consolidating this production capability at its Hangzhou plant, Toshiba makes the city its only overseas notebook manufacturing site.

The restructuring comes after a challenging business year for Toshiba’s PC and PC peripherals division, during which the firm reduced the division’s earnings estimate on three occasions. The company faced steep price slashing from its laptop competitors including HP and Dell Inc.

Filipino government officials claim that Toshiba will not shed jobs at its Laguna plant due to this restructuring process. Toshiba is instead reassigning the workers to its high-density drive (HDD) production lines. This shift comes at a time of large growth in the HDD market thanks to the technology’s increased use in non-PC products, such as digital electronics and cars.

Toshiba and the Philippines are no strangers to the HDD market. According to the Semiconductor and Electronic Industries in the Philippines, Inc., the top three manufacturers of 2.5-inch or smaller HDDs–Fujitsu, Hitachi Global Storage Technology, and Toshiba — All have their production plants in the Philippines. The Toshiba plant put out a million HDD units per month in the first half of 2004.

Toshiba plans to increase this production by 20 percent in the first quarter of 2005, to 1.2 million units per month, through the restructuring process. The firm estimates that its notebook PC production at the Hangzhou plant will double, increasing to 3 million units per year by the end of March 2006. In the last year, the Chinese plant exported 1.18 million notebook PCs and totaled US$2.266 billion in imports and exports.