HP is looking to shift more than half of its personal computer production away from China and is setting up a “backup” design hub in Singapore in an attempt to reduce geopolitical risks around China and Taiwan, Nikkei Asia has learned.
The plans represent the most aggressive move yet by America’s leading PC maker to diversify its supply chains away from Asia’s biggest economy.
The company, which currently makes the bulk of its PCs in China, is in talks with suppliers about the move and aims to achieve its target in two to three years, multiple sources briefed on the matter said. One source said the company has even set an internal goal of eventually making up to 70% of its notebooks outside of China.
The scale of the shift varies between suppliers and depends on the complexity of the component they manufacture, the people said.
A major destination for the move is Thailand. At least five HP suppliers are building new manufacturing facilities or warehouse hubs in the country, and two have been increasing their capacity there since the beginning of the year at HP’s request, according to multiple people.
“It is certain that HP is betting big on building a production hub in Thailand,” one of the executive-level sources said. “We have other Southeast Asian facilities to support the client, but they said it is not efficient enough, so we’re building a new factory in Thailand now, as requested.”
An executive at another component and parts supplier welcomed the move. “We were worried about not having enough orders to fully use our Thailand facility, but since earlier this year, we’ve been receiving more requests from HP to build components locally. Our business in Thailand is quite busy now.”
HP is also hiring engineers and managers in Singapore to create a backup team for its flagship Taiwan Design Center, which is in charge of the heavy workload of development of new products and liaises with the supply chain, sources said.
“HP is hiring about two hundred additional engineering staff and professionals, including electrical and mechanical engineers and supply chain experts, to turn Singapore into an alternative design hub,” a source with direct knowledge of the matter told Nikkei Asia. “The move is a de-risking measure to avoid any radical scenarios involving a potential conflict between Taiwan and China.”
HP shipped some 52 million PCs in 2023, second only to Lenovo, according to data from research company IDC. Its accelerating supply chain shift marks a change from its decadeslong stance as a strong supporter of China-based manufacturing. The company and its suppliers built up an extensive network in the country, eventually turning the inland city of Chongqing into the world’s leading source of PC exports.
But years of U.S.-China tensions as well as disruptions from COVID have driven many big American tech companies to accelerate their supply chain diversification. Dell, Apple, Microsoft and others have already shifted a portion of their PC production to Southeast Asia and have allocated more marketing resources to explore local sales.
Sources said that in internal talks, several HP executives this year have been emphasizing the emerging business opportunities in Southeast Asia and the Middle East while flagging the geopolitical risks of keeping production centered in China.
“From our supply chain checks, we do find HP and Dell have become much more serious about diversification plans out of China,” said Jeff Lin, a tech analyst with Omdia who specializes in the PC industry. “For them, the idea of de-risking becomes very important in their supply chain strategy looking forward.”
Chiu Shih-fang, a supply chain analyst with the Taiwan Institute of Economic Research, said the tech industry has been reminded again of the importance of supply chain resilience this year.
“Apart from the ongoing U.S.-China tech war, the big quake in Japan [in January] disrupted supply continuity for many sectors for months,” Chiu told Nikkei Asia. “The upcoming U.S. election is another geopolitical uncertainty that many tech companies are taking into account.”
The veteran tech analyst said assembling AI-capable PCs in China could potentially be a supply chain continuity risk if Washington decides to further tighten export controls in high-powered chips. Intel, for example, is already barred from shipping its Core Ultra 9 chip for AI PCs to Huawei.
“AI PCs are every PC maker’s hope for stimulating the market, yet AI is also a hot battleground in U.S.-China tensions. It is wise to accelerate PC production shifts to mitigate the risk from any sudden escalation of export controls,” she said.
When asked for comment, HP directed Nikkei Asia to a July 2023 post on its website discussing the company’s evolving approach to supply chain management.
“We’ll continue investing in current sites where we have longtime operations, while sometimes shifting certain production to alternate locations to create flexibility and mitigate risk for our customers,” read the post by HP’s Chief Supply Chain Officer Ernest Nicolas. (Nikkei Asia)
