After Apple And Dell, HP Is Now Moving Production Away From China

HP is working with suppliers to shift production of millions of consumer and commercial laptops to Thailand and Mexico this year.

This is the top United States computer maker's first substantial move to diversify its personal computer (PC) supply chain beyond China, as reported by Asia Nikkei.

The world's second PC-maker by shipments, after China's Lenovo, HP is planning to shift some commercial notebook computer production to Mexico, while a portion of its consumer laptop production will go to Thailand, sources briefed on the matter told Nikkei Asia.

HP is also planning to shift some laptop production to Vietnam, starting next year, one of the suppliers said.

The output outside of China this year will be a couple of million to 5 million units, they said. HP shipped 55.2 million PCs worldwide last year.

Thailand already has a number of PC suppliers, which could facilitate HP's shift, while production in Mexico would help the company better serve its primary North American market.

HP's plan comes after its compatriot Dell launched a more radical campaign to exclude "made in China" chips from its products and significantly reduce its overall use of electronic components produced in the country.

Dell, which launched its diversification plan much earlier than HP, will make at least 20 per cent of all of its laptops in Vietnam this year. On the component level, it will take Dell until around the end of 2024 to complete its planned shift away from "made in China" chips.

Apple, meanwhile, began making MacBooks in Vietnam this year, the first time its laptops were made outside China.

HP's move would further help Vietnam and Thailand build up a supply chain ecosystem for PCs, making Southeast Asia an even more attractive option for computer makers looking for production options outside China, amid geopolitical uncertainties.

The company has been relatively slow to shift production out of China compared to other American tech-companies, despite having been in talks with suppliers to evaluate such an option since 2019.

The top PC maker has been a strong supporter of electronics manufacturing in China for decades. Perhaps the best example of this is the inland Chinese city of Chongqing, which HP began developing as a hub for laptop production in 2008.

Acer and Asus followed in HP's footsteps and asked suppliers to move production to the city on the banks of the Yangtze River, which is now also home to numerous HP suppliers, from Quanta Computer, Inventec to Foxconn. Today Chongqing is the top city in China for PC exports.

The flip side of this support is that the supply chain for notebook computers is now so deeply rooted in China that many industry experts and analysts see it as difficult to shift away.

The US is the biggest single PC market for both HP and Dell, accounting for about 31 per cent and 40 per cent of their shipments, respectively, in the first quarter of this year, data from Canalys showed.

The Chinese market, on the other hand, only accounted for 7.5 per cent and 8 per cent, respectively over the same period. China's Lenovo and Huawei together dominated the Chinese PC market in the first three quarters of this year.

Dell has a strong political incentive to diversify its production away from China, as the company controls about 73 per cent of the market for US government-use PCs.

The primary purpose of supply chain diversification is to mitigate risk factors related to US-China tensions, and to take advantage of emerging production hubs in Vietnam and other Southeast Asian countries.