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Hitachi bets $500 million in China

Although soothsayers predict market gloom, the company will splurge millions of dollars on a new hard-drive production plant.

Hitachi on Monday announced an investment of up to $500 million in a new hard-drive facility in China, notwithstanding gloomy market projections.

The plant in Shenzhen, a Chinese city close to Hong Kong, will make drives for desktops, notebooks and consumer devices.

Hard-drive companies are passing through a bad patch of late, as overproduction and cutthroat pricing are putting considerable pressure on profit margins. A market report from Credit Suisse First Boston has already projected a difficult second quarter for hard-drive makers.

Hitachi said the new facility could allow it to cut costs, as it already has a component unit as well as a robust supplier network in that part of China. This is particularly important as its main rival Seagate Technology has declared plans to boost capacity across the board.

The new Hitachi plant will commence operations in the fourth quarter of 2005 with the production of 3.5-inch disk drives. It should eventually employ 7,000 people in the initial phase.

The hard-drive maker named its current vice president for business development, Dirk Thomas, as general manager of the new facility. Thomas will also double as president for the Greater China region.