Lenovo forms JV with Compal to build new PC factory

The companies will invest a total of $300 million in the joint venture

PC vendor Lenovo has formed a joint venture with laptop contract manufacturer Compal Electronics to build and operate a new factory in China, as part of a move to keep up with product sales, Lenovo announced Tuesday.

Lenovo and Compal are investing a total of US$300 million over the next 18 months to start the new company and construct the factory. Lenovo will hold a 51 percent stake in the joint venture, while Compal will hold the remaining 49 percent.

The new factory will be built in Hefei, China and is slated to start full-scale manufacturing by the end of next year. The factory will manufacture various Lenovo laptops and all-in-one desktop PCs, for sale around the world.

Lenovo said the joint venture is meant to add production capacity needed to sustain its growth: it is currently the fastest-growing of the world's top five PC vendors.

In the second quarter, the Chinese company rose to become the world's third largest PC vendor with a 12.2 percent share, according to research firm IDC. The company's PC sales for that quarter had increased 22.9 percent compared to a year earlier.

Lenovo's growth has been so fast, the company expects to surpass Dell by the end of this year. Dell had a 12.9 percent market share in the second quarter, and saw PC sales increase by only 2.8 percent year-on-year.

But Lenovo's joint venture with Taiwan's Compal Electronics may actually be an effort to improve profit margins on PC sales, said Tracy Tsai, an analyst with research firm Gartner.

Other PC vendors, including Acer, Dell and Hewlett-Packard, have all tapped Compal to develop and manufacture laptop computers. Forming a joint venture with Compal would help Lenovo streamline its manufacturing supply chain and lower transaction costs, Tsai said. This comes as profit margins for PC sales are declining due to increases in labor and material costs, she added.

"Lenovo definitely wants to consolidate and make its supply chain more cost effective," Tsai said.

The joint venture will operate as a stand-alone Lenovo product supplier. It will also rely on both companies' engineering and manufacturing expertise.

Join the Good Gear Guide newsletter!

Error: Please check your email address.

Tags business issuesWindows desktopsWindows laptopshardware systemsdesktop pcsLenovolaptopsinvestmentsCompal

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Michael Kan

IDG News Service
Show Comments

Essentials

Microsoft L5V-00027 Sculpt Ergonomic Keyboard Desktop

Learn more >

Lexar® JumpDrive® S57 USB 3.0 flash drive

Learn more >

Mobile

Lexar® JumpDrive® S45 USB 3.0 flash drive 

Learn more >

Exec

Audio-Technica ATH-ANC70 Noise Cancelling Headphones

Learn more >

Lexar® Professional 1800x microSDHC™/microSDXC™ UHS-II cards 

Learn more >

Lexar® JumpDrive® C20c USB Type-C flash drive 

Learn more >

HD Pan/Tilt Wi-Fi Camera with Night Vision NC450

Learn more >

Budget

Back To Business Guide

Click for more ›

Most Popular Reviews

Latest News Articles

Resources

PCW Evaluation Team

Michael Hargreaves

Windows 10 for Business / Dell XPS

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Kathy Cassidy

STYLISTIC Q702

First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni

STYLISTIC Q572

For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?