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 newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags business issuesWindows desktopsWindows laptopshardware systemsdesktop pcsLenovolaptopsinvestmentsCompal

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

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Kurt Hegetschweiler

Brother PocketJet PJ-773 A4 Portable Thermal Printer

It’s perfect for mobile workers. Just take it out — it’s small enough to sit anywhere — turn it on, load a sheet of paper, and start printing.

Matthew Stivala

HP OfficeJet 250 Mobile Printer

The HP OfficeJet 250 Mobile Printer is a great device that fits perfectly into my fast paced and mobile lifestyle. My first impression of the printer itself was how incredibly compact and sleek the device was.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?