The 800,000-square-foot plant, to be located in Suzhou Industrial Park in Suzhou province, will be completed by the second half of next year and is Maxtor's first plant in China.
Maxtor said it aims to invest $200 million in the new facility over the next five years.
The plant will specialize in making desktop hard drives for both the Chinese and foreign markets.
"This decision is prompted by several factors," said Paul, Maxtor's president and chief executive officer. "Cost-competitiveness is obviously an important consideration in our industry as margins are razor-thin, but access to new markets and the availability of labor were among other concerns."
While the Milpitas, Calif.-based company's foray into China will lower production costs, this gain is likely to be won at some expense to its 8,000-strong Singapore work force.
Currently, all of Maxtor's desktop hard drives are produced by its two production facilities in the city-state.
"While there is no immediate impact on Singapore over the next two years, we anticipate some reduction in 2005 when the China plant comes on stream," said K.H. Teh, Maxtor's executive vice president of worldwide manufacturing, who also heads the company's Singapore operations.
"The exact impact can't be confirmed at this point, as it is dependent on factors such as the level of factor-efficiency and the demand for our products," Teh added.
Maxtor said its Singapore plants will soon be retooled to make high-capacity desktop and server drives instead of desktop hard disks.
These products are now contracted out to the company's Japanese partner Matsushita-Kotobuki Electronics, but Teh declined to comment on how the Singapore retooling will affect the relationship.
"This is a strategic move to provide us with a low-cost option to accommodate future growth," said Tufano.
Competitive pricing is important to Maxtor, he noted, as the company is seeing new applications andfor hard drives in the price-sensitive consumer-electronics market.
In addition to conventional storage products for notebooks and servers, Maxtor manufactures hard drives that enable consumers to record, store and play back digital audio and video on personal video recorders, set-top boxes, game consoles and broadband appliances.