INDEPENDENT supplier of thin-film media for disk drives Komag Inc will build a third facility in Penang as part of its reinvestment plan for Malaysia.

The company’s chief executive officer Datuk T.H. Tan said the manufacturing facility at Batu Maung, which is adjacent to the Bayan Lepas Free Industrial Zone, will occupy 150,000 sq ft of manufacturing space with state-of-the-art equipment and machinery from the US and Japan.

“We plan to further expand capacity during 2006 at our current manufacturing sites in Malaysia, in an attempt to keep up with the growing demand for media,” he told a press conference in Penang yesterday.

Also present at the press conference were Penang Chief Minister Tan Sri Dr Koh Tsu Koon and the company board of directors from the US who are in Malaysia.

“This further additional capacity is expected to be available beginning in the second quarter of 2006 with total capacity of approximately 40 million disks per quarter by the end of 2006,” Tan added.

Tan said that based on very strong demand that currently exceeds Komag’s manufacturing capacity and expected continuing strong overall market growth, the company is expanding its capacity by about four million disks per quarter.

Last week, Tan announced that Komag would be re-investing more than RM1 billion at its four plants in Malaysia, owing to increased demand from its four major disk drive customers Maxtor, Global Storage Technologies, Seagate and Western Digital.

“All of the capacity expansion plans are based on strategic supply agreements with several of our customers,” he noted.

“As part of these agreements, Komag has made certain commitments to increase capacity and our customers have agreed to make certain pre-payments for media, to help mitigate the cash impact of the capital spending required for us to increase capacity.”

Total capital spending for Komag in Malaysia in 2005 alone is being projected to be approximately RM750 million, Tan said.

Komag’s investment in Malaysia for the past 12 years in Penang, Johor and Sarawak has been RM2.5 billion.

“In 2004, we invested US$60 million here and our conservative projection for next year is a minimum of US$60 million (US$1 = RM3.75) in investments,” Tan said.