Lenovo opens Mexico plant amid global push

PUBLISHED : Monday, 23 February, 2009, 12:00am
UPDATED : Monday, 23 February, 2009, 12:00am

While it has vowed to pursue further growth at home, mainland computer giant Lenovo Group continues to push its overseas expansion forward with the opening of a manufacturing plant in Mexico.

The world's fourth-largest personal computer supplier has spent about US$40 million to build the 24,155 square metre facility, which was launched last week and represented the company's largest manufacturing investment outside the mainland.

Chief executive Yang Yuanqing said the challenge for Lenovo amid the economic downturn was 'to focus on the execution of our growth strategy' in Greater China and for its commercial sector sales, its biggest exposure of which is in the Americas.

'These will continue to be the core of our business, so we have to protect these areas and maximise profits from them,' Mr Yang said.

That is why Lenovo was keen on boosting its in-house manufacturing capabilities, especially in the firm's key geographical markets, while keeping its options open to tapping third-party contract manufacturers when needed.

'We want to have flexibility and ensure that we deliver the best-quality products we have designed to our customers quickly,' Mr Yang said.

Mexican President Felipe Calderon Hinojosa described Lenovo's decision to build its new plant in Mexico as 'a clear demonstration of the confidence that investors, in this case of China, have in our country' and the market's competitive advantage in the global economy.

The factory is in the town of Apodaca in in the state of Nuevo Leon. The plant has an annual production capacity of 5 million personal computers and employs more than 1,000 workers.

The plant will supply computers throughout the Americas geographical market of Lenovo. The company's other plants are in Beijing, Huiyang, Shanghai, Shenzhen; Pondicherry and Baddi in India, and in North Carolina in the United States.

'As one of the first Chinese companies to invest in Mexico, we hope the opening of our personal computer plant will encourage more Chinese enterprises to join us [in investing in the country],' Mr Yang said.

He described the Americas as 'extremely important to Lenovo', noting it remained the computer industry's largest geographical market.

But for its third financial quarter to December, Lenovo's sales in the Americas region dropped 21.5 per cent year on year because of continued weakness in the commercial market and greater demand for low-priced laptop computers.

Still, chief financial officer Wong Wai-ming noted that the company remained strong in Canada and gained market shares in countries across South America.

JP Morgan analyst Charles Guo said Lenovo's insistence on keeping personal computer production in-house puts it at a disadvantage against more nimble competitors, which use original design manufacturers (ODMs) to release new products faster to their target markets.

'A case in point is the netbook market, where Lenovo was late to bring products last year,' he said.

'Its competitors - including Acer, Asustek Computer, Hewlett-Packard and Dell - are already updating their earlier releases.'

Simon Ye of research firm Gartner disagreed with that view, noting Lenovo 'can manage operating costs better through in-house manufacturing'.

He said firms such as Dell and Hewlett-Packard operated in mature economies where outsourcing production to ODMs made more sense. 'Lenovo has compared their cost savings, so it has relied more on internal manufacturing than outsourcing.'