Tuesday, September 12th 2023
HP to Move PC Production to Mexico, Thailand, and Vietnam
According to the latest report from Nikkei, HP, the world's second-largest PC manufacturer after Lenovo, is making strategic shifts in its laptop production bases. In a move that reflects broader trends among tech giants, HP is collaborating with various Electronic Manufacturing Service (EMS) providers to move a significant part of its laptop production out of China to other countries such as Thailand, Mexico, and eventually Vietnam. For 2023 alone, the production outside of China is expected to range from a few million units up to 5 million, a noteworthy figure given HP's total global PC shipments of 55.2 million units. Commercial notebooks are slated for production in Mexico, catering to HP's primary market, North America, with consumer laptops made in Thailand. Additionally, a shift to Vietnam is on the horizon for 2024. Thailand's mature PC supplier ecosystem is anticipated to facilitate a smoother transition for HP.
HP's reconfiguration of manufacturing locations aligns with similar initiatives by other tech giants. Dell, for example, is also reducing its reliance on Chinese-made chips and aims to manufacture at least 20% of its laptops in Vietnam this year. Apple has likewise commenced MacBook production in the same country. Several factors are driving these relocations, with rising manufacturing costs in China, including labor recruitment challenges and increased labor costs, being key among them. Geopolitical tensions between the U.S. and China also weigh in on these decisions, especially since the U.S. is a crucial market for both HP and Dell. Despite the diversification, HP reaffirms its commitment to continue operations in China, particularly in Chongqing, a significant laptop production hub since 2008.
Sources:
Nikkei Asia, via Tom's Hardware
HP's reconfiguration of manufacturing locations aligns with similar initiatives by other tech giants. Dell, for example, is also reducing its reliance on Chinese-made chips and aims to manufacture at least 20% of its laptops in Vietnam this year. Apple has likewise commenced MacBook production in the same country. Several factors are driving these relocations, with rising manufacturing costs in China, including labor recruitment challenges and increased labor costs, being key among them. Geopolitical tensions between the U.S. and China also weigh in on these decisions, especially since the U.S. is a crucial market for both HP and Dell. Despite the diversification, HP reaffirms its commitment to continue operations in China, particularly in Chongqing, a significant laptop production hub since 2008.
7 Comments on HP to Move PC Production to Mexico, Thailand, and Vietnam
I hope they do this while keeping in mind not to create an other single point of failure
P.S.
Incoming angry people.
indianexpress.com/article/technology/tech-news-technology/hp-starts-manufacturing-laptops-desktop-in-india-7685485/
- Cost of labor has been increasing in China for a long time now. Many other developing countries have a significant labor cost advantage. Wages do not need to be decreasing in other countries to make them competitive as you imply, they are already more than attractive in this regard.
- There's a labor shortage in China as the next generation of Chinese do not want to work in factories like their parents. Not only is this pushing up factory wages further but it's leaving businesses understaffed. This is why China is rushing to pursue high tech industries as it is natural for a country to transition from manufacturing to high-tech as the economy matures. The downside of this push is it means China is going to transition away from being the world's factory but it's hardly a sacrifice given how much better high tech is for the economy.
- China's regulatory environment discourage business. A number of companies moved at least some production out of China because they simply could not operate reliably under China's pandemic restrictions. Many businesses heavily consider this when deciding where to place future factories and investments as being able to produce goods is obviously important.
The only reason manufacturing has stayed in China is due to the expertise and excellent supply chains available. The pandemic was essentially a wake-up call for businesses that there are much greener pastures elsewhere. Wages cost was already very appealing in other developing countries but those were usually coupled with poor supply chains and low expertise. Few companies want to spend money and a lot of time cultivating those. The trigger may have been businesses fleeing Chinese pandemic restrictions where some companies were forced to bite the bullet anyways or it could have been that companies calculated that the burden of Chinese restrictions was greater than any advantages imparted.
In any case, now that companies are building out supply chains and expertise in other countries it's far more likely that an increasing amount of companies will either move or build new factories elsewhere. With the initial negatives fading alternative options only look increasingly favorable as compared to China. You should see the amount of investments that are flying into countries like India, Mexico, and vietnam. Mexico in particular went from 23.5 billion in exports to the US to 38.9 billion pre and post pandemic and this trend hasn't even hit full force. China went from 41.4B to 36.1B. A country like Mexico has a massive advantage over China aside from it's labor cost and that's it's proximity to China's largest trading partner, the US. The cost of shipping goods from Mexico to the US is going to be vastly cheaper and goods will arrive faster to boot.