SGI factory expansion signals growth plans

Expanded Wisconsin facility lets the company better meet agency needs

Silicon Graphics Inc. officials expanded the capacity of their manufacturing plant last year to enable them to build the second-fastest supercomputer in the world for NASA.

Now that the permanent changes to SGI's factory are in place, company officials say the expansion will let them build all of their hardware faster and cheaper than before.

The factory, in Chippewa Falls, Wis., employs about 15 percent of SGI's total workforce, according to the company's vice president of engineering. Company officials closed other manufacturing facilities in Europe and Asia several years ago, making Chippewa Falls the sole facility.

The company spent about $600,000 in 2004 to expand the plant to accommodate NASA's Columbia project. The space agency uses the 10,240-processor supercomputer for simulation and research in earth science, space operations and space exploration aeronautics. With a peak measured speed of 51.87 teraflops — 51.87 trillion operations a second — the NASA machine is the second-fastest supercomputer in the world.

"We had to increase our capacity to test large systems simultaneously," said Dick Harkness, vice president of manufacturing operations. "Before we embarked on the Columbia project, we could only have two 512-processor machines on the floor at any one time. To finish Columbia for [NASA's Ames Research Center] within the time frames required, we had to have the ability to test six at one time. We now have the power and cooling infrastructure to do seven at one time."

The expanded factory will support what Anthony Robbins, president of SGI's federal government division, hopes will be increasing demand for the company's Altix line of servers.

SGI is one of a few players in the high-end market. IBM, Hewlett-Packard, Sun Microsystems, Cray and a few others offer high-end servers and supercomputers.

The Altix servers, based on Linux software, could give SGI a piece of a new market. "The cost of our systems comes down significantly," Robbins said, because the operating systems software is open source. "The availability goes up dramatically, so what Silicon Graphics has for the first time in years is a product that appeals both to the high end of the marketplace and the volume buyers, where we really haven't played."

About 70 percent of spending on servers and processors goes to the high-volume transactions that SGI has previously missed out on, he said, citing IDC market research.

Capitalizing on Linux and Intel's Itanium processor is a smart strategy, said Gordon Haff, a technology analyst at Illuminata. SGI has been struggling recently, he said, but there are signs that the company's fortunes are improving.

"Given their revenue uptick last quarter, their volumes are certainly increasing, and they'll need to ramp up manufacturing to meet the demand," Haff said. "That said, SGI isn't now and never will be a low-cost producer a la Dell. They sell premium products at premium prices. They just need to keep the premium from getting too large and [need to] deliver appropriate value for the extra that they charge."

During the 10 weeks it took to expand the plant, workers doubled its floor space, added capacity to the heating and cooling systems, doubled the power supply capacity and reorganized the layout for more efficiency, Harkness said.

"We believe that behind the Columbia project, there are similar deals that SGI could be in line for," he said. "The investments we made in the infrastructure are going to pay off. Eventually, we were going to have to make those modifications in our facility as our product line was going to evolve. The Columbia project just accelerated it."

Made in USA

Commerce Department officials gave Silicon Graphics Inc. an award last year for exporting American-made products. The Export Achievement Certificate commemorates the company's decision to consolidate its manufacturing operations into a single facility in Chippewa Falls, Wis.

"Consolidating into a single plant structure and a single enterprise resource planning system has allowed SGI to get tighter control over its supply chain, its work in progress and its global inventories," said Warren Pratt, an executive vice president of and chief operating officer at SGI.

Commerce officials said they give out fewer than 100 such awards each year. SGI made sales in China, India, Denmark and Canada during the period of time that Commerce officials evaluated.

— Michael Hardy

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