KUALA LUMPUR (May 23): JCY International Bhd has ceased the operation of its subsidiary in China, Foshan YK HDD Co Ltd (YK Foshan), with immediate effect in view of the sluggish demand on hard disk drive (HDD).

"The global demand for HDD products continues to face a very challenging global economic environment," the integrated HDD component maker told the stock exchange in a filing today.

It added that the total addressable market (TAM) remains weak in the coming quarters and its production facilities in YK Foshan has not been optimised meaningfully, while it has sufficient production facilities in other locations should the TAM recover in the near term.

"The board, taking cognisant of the above and after having reviewed and assessed the overall production facilities of the group, is of the view that it is more operationally efficient and cost effective to cease the operations in YK Foshan," it added.

JCY said there are no other liabilities to be assumed by the company from the cessation.

However, it noted there will be an estimated one-time cost impact arising from fixed assets impairment and/or fixed assets written down of RM12.6 million, being 1.7% of its net assets as at Sept 30, 2015.

Barring any unforeseen circumstances, JCY expects the cessation to be completed by Sept 30, 2016.

Shares in JCY fell 0.5 sen or 0.75% to settle at 66 sen today, for a market value of RM1.37 billion.