24 Apr Eau Claire Manufacturer Drives Your PC
Eau Claire, WI – Getting a tiny magnetic head to ride consistently on a cushion of air just 15 nanometers above a spinning hard drive is hard enough. But, try to do it profitably when the technology you thrive on starts to work against your bottom line.
This is the dilemma for Hutchinson Technology Inc., the Minnesota-based manufacturer of suspension assemblies for nearly three quarters of the world’s computer disk drives. But it’s just the type of challenge that a company that began in a converted chicken coop is used to.
Perhaps it should come as no surprise to those familiar with Hutchinson that it recently marked the most profitable first half-year in company history after sailing through some choppy financial waters.
This week the company reported that for the first half of its fiscal year, which ended March 30, that the company had net income of more than $32.7 million on net sales of more than $257.8 million. In the comparable period last year, Hutchinson reported net income of about $5.66 million on net sales of about $184.2 million.
“Two years ago, we were facing multimillion-dollar losses,” said Connie Pautz, communications director. “As a total company, we’ve had a remarkable turnaround.”
The turnaround has come because of (and despite) technological advances in Hutchinson’s core market. The company, which has no domestic competition to speak of, commands between 65 percent and 70 percent of the world’s suspension assembly market. About half of the 10 million assemblies the company cranks out weekly are manufactured in Eau Claire, the other half in Sioux Falls, South Dakota.
And all this takes place in Eau Claire, Wisconsin, which probably sounds like nothing more than a fancy pastry to Silicon Valley techies.
“I think most people shake their heads and wonder how we do that,” said Michael Richards, plant manager for component operations in Eau Claire.
Like so many tech-related companies, the 1990s were good to Hutchinson (see company timeline, http://www.htch.com/timeline.asp). But the end of the decade brought an enigma — huge leaps in areal density (number of bits of data that can be stored per inch per disk) made disk drives smaller and cheaper but reduced the number of components needed in a computer CPU.
The result: market constriction, slower demand, fewer workers needed. Hutchinson restructured in 1999, cutting its Eau Claire workforce from more than 2,400 workers to about 890 today.
“We saw a dramatic falloff in the number of components needed for each individual box sold,” Richards said.
However, Hutchinson also has benefited from technology in the downturn. The company, and especially the Eau Claire facilitiy, has had to do more with less – and they’ve done it.
“I think what you’ve seen in Eau Claire is record productivity,” Pautz said. “They’re producing significantly more product than a few years ago; that’s due mainly to technology and automation.”
Richards said the company’s use of plant technology keeps it atop a field where all the other major players are located in foreign markets such as Thailand, Hong Kong and Japan.
“You have fairly complicated automated processes,” Richards said. “It’s not masses of people we throw at this. These are very specialized, trained people we have doing this. We beat our competitors on technology, not might.”
In addition, the rate of increase in areal density is slowing, which means stabilization and perhaps even an increase in components business, Richards said.
“I’d say the future looks reasonably rosy,” he said. “I think we’re pretty happy right now.”
Nathan Warren, economic development specialist with the Eau Claire Area Economic Development Corp., says the talk he’s hearing points to growth in the near future for the region’s tech sector.
“It’s starting to come back a little bit,” said Warren, who noted the cyclical nature of the tech business would soon begin to swing toward growth as companies’ computer systems become older and need to be replaced.
Lincoln Brunner, is a Stevens Point, Wisconsin based freelance writer and a regular contributor to the Wisconsin Technology Network. He can be reached at Lincoln@wistechnology.com.