Lenovo will more than double its in-house notebook production from 25 percent to 60 percent by 2014, according to a report by the Digitimes tech site. The move is aimed at boosting profits and quality for the Chinese computer maker, and at the same time allowing it to be more price-competitive, experts say.
Digitimes, citing supply chain sources, reported Monday that the company is ramping up production of notebooks in its China-based factories, its production facilities in Whitsett, N.C., and in Brazil. Digitimes reported outsourcing to Compal Electronics will drop to only 30 percent from the previous 50 percent, and Wistron's share will fall to 10 percent from 20 percent.
Lenovo has confirmed much of what the Taiwanese website is reporting.
"Over the past several years, Lenovo has been investing in our own production capabilities as part of a 'hybrid' supply-chain strategy that leverages a mix of both in-house resources and outsourcing partners. This strategy gives us better control over our end-to-end supply chain and enables us to accelerate time-to-market and better differentiate our products through innovation, while retaining strong financial flexibility," Mark Stanton, director, analyst relations for Lenovo, wrote in a statement to CRN.
Stanton didn't confirm what the current production mix is, but said the percentage of systems built in-house is increasing and its goal was "to achieve a balance of about 50-50 across our entire PC line."
"It's a dog-eat-dog PC market out there, and controlling the soup-to-nuts production lines of notebook manufacturing lets you protect yourself from component price fluctuation," said Laura Didio, an analyst with Information Technology Intelligence Corp. Lenovo will procure components directly from China-based suppliers rather than through Taiwanese original design manufacturers (ODMs), Digitimes reports. That's a move that gives Lenovo a home-team advantage over Dell, HP or Samsung on Chinese component pricing, Didio said.
Digitimes reports Lenovo is following similar moves by archrival Samsung Electronics that also is raising its in-house production rates. Lenovo has already ramped up its own production of its ThinkCentre M29p, ThinkPad 2 tablet and ThinkPad Helix ultrabook in North Carolina, and its G series ThinkPads elsewhere, DigiTimes reports. Lenovo had no comment on specific models.
Done correctly this should lower Lenovo's costs and allow it to either lower prices or enjoy larger margins, wrote Rob Enderle, principal analyst at the Enderle Group, in an email interview. "Prices should either stay flat or decline when they remove the ODM profits from their costs."
Lenovo said since 2010, it has opened PC manufacturing lines in Chengdu, China, Hefei, China (through a joint venture with Compal Electronics), Itu, Brazil and North Carolina. Lenovo also has four PC factories in China, as well as India and Mexico, and dedicated contract manufacturing sites in Argentina and Hungary.
PUBLISHED AUG. 19, 2013