Vietnam emerges as a prime destination for HP"s PC production diversification
Aiming to shift laptop manufacturing operations to Thailand, Mexico, and Vietnam, signaling Vietnam's rising prominence as an attractive investment hub.
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HP, the renowned US-headquartered computer company, is undertaking a significant endeavor to personify its supply chain for personal computers (PCs) by shifting the manufacturing operations of millions of consumer and commercial laptops to Thailand and Mexico this year, as reported by Nikkei Asia.
This move represents HP's first major initiative to expand its PC production activities outside the territorial boundaries of China, aiming to reduce its reliance on a single manufacturing base.
As the second-largest PC manufacturer globally in terms of shipment volume (following China's Lenovo), HP is planning to relocate a portion of its commercial laptop production to Mexico, while some of its consumer laptop manufacturing will be shifted to Thailand.
HP is also considering Vietnam as a potential destination for relocating laptop production, with plans set to commence next year, according to sources from HP's suppliers.
These suppliers suggest that HP's production output outside of China for this year is estimated to range between 2-5 million units – HP delivered a remarkable 55.2 million PCs worldwide last year.
Benefitting from an existing presence of PC suppliers, Thailand offers new advantages for HP's operational transition. Similarly, relocating a fraction of the commercial laptop production to Mexico would enhance HP's market penetration in North America.
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| Vietnam emerges as a prime destination for HP"s PC production diversification. |
Vietnam, which is gradually emerging as an attractive investment destination for prominent global companies, has also drawn the attention of HP.
By expanding its operations to Vietnam and Thailand, HP would contribute to the establishment of a robust PC supply chain ecosystem in Southeast Asia, providing an appealing alternative for computer manufacturers seeking to personify their production beyond China.
The decision by HP follows a proactive move by its fellow American competitor, Dell, which launched an ambitious campaign to eliminate Made-in-China chips from its product lines.
Dell, having personified its supply chain much earlier than HP, aims to produce at least 20 per cent of its laptops in Vietnam this year. It is projected that Dell will achieve complete independence from Chinese chips at the component level by the end of 2024.
Apple also commenced MacBook production in Vietnam this year, marking a significant milestone as it personifies its manufacturing away from China.
HP's strategic initiatives further bolster Vietnam and Thailand's burgeoning positions in establishing a comprehensive PC supply chain ecosystem, making Southeast Asia an increasingly alluring choice for computer manufacturers seeking production alternatives beyond China.
While HP's effort to personify its production away from China has progressed at a relatively measured pace compared to other US firms, it has been engaging in supplier negotiations since 2019 to assess potential manufacturing locations.
HP has been a stalwart supporter of China's electronics manufacturing industry for many decades. The city of Chongqing, where HP established a laptop production hub in 2008, exemplifies this commitment.
Following HP's lead, other PC manufacturers, including Acer and Asus, requested that their suppliers shift production to Chongqing.
Presently, Chongqing has emerged as a prominent PC export hub in China, hosting a multitude of HP's suppliers such as Quanta Computer, Inventec, and Foxconn, cited Nikkei Asia.
However, this reliance on China for its laptop supply chain presents a notable challenge for HP. Many industry experts and analysts assert that achieving complete separation from the country is a formidable task.
According to data from Canalys, a monitoring platform, the US remains the largest PC market for both HP and Dell. In the first quarter of 2023, the US market accounted for approximately 31 per cent and 40 per cent of the total shipments for HP and Dell respectively.
Conversely, China's contribution to HP and Dell's shipment volumes during the same period amounted to merely 7.5 per cent and 8 per cent. In China, the domestic brands Lenovo and Huawei have dominantly captured the PC market during the initial three months of this year.
The primary objective behind personifying the supply chain is to mitigate risks associated with US-China trade tensions while capitalizing on the opportunities presented by emerging manufacturing hubs in Vietnam and other Southeast Asian countries.
Vietnam continues to establish itself as an attractive destination for global factories and high-tech manufacturers looking to relocate their operations. Recent developments, such as the granting of investment certificates by the Quang Ninh People's Committee, exemplify this trend.
Two Foxconn projects with a combined investment value exceeding 246 million USD have been approved in the Song Khoai Industrial Zone and the Quang Yen Economic Zone. These initiatives highlight Vietnam's growing appeal as a strategic choice for companies seeking to leverage its favorable business environment and skilled workforce.
(Source: VIR)
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