Lenovo to build plant in Anhui with Compal

PUBLISHED : Wednesday, 28 September, 2011, 12:00am
UPDATED : Wednesday, 28 September, 2011, 12:00am


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Lenovo Group, the world's third-largest supplier of personal computers, has formed a US$300-million joint venture with Taiwanese firm Compal Electronics that will build and operate a new manufacturing centre in Anhui province.

'This joint venture will help us further optimise our manufacturing network, increase production capacity, and satisfy rapidly growing demand for our offerings,' Lenovo chief executive Yang Yuanqing said.

Lenovo and Compal, the world's No 2 contract manufacturer for laptops behind Quanta Computer, have agreed to initially invest US$100 million to start up their new venture's operations and construct the facility in Hefei, the capital of Anhui.

That will be followed by an additional US$200 million investment in the next 18 months, subject to business conditions and capacity-expansion requirements.

Lenovo will hold a 51 per cent stake in the joint venture and Compal 49 per cent, according to the mainland company's filing with the Hong Kong stock exchange yesterday.

Compal is also a contract manufacturer of select laptop models for Hewlett-Packard, Dell and Acer.

The initiative marks Lenovo's latest effort to buttress its manufacturing resources, as the company competes with global market leaders HP and Dell.

Yang recently said Lenovo was poised to unseat United States-based Dell as the second-largest personal computer supplier by the end of this year. That would be the highest industry ranking for Lenovo since it acquired the personal computer division of International Business Machines for US$1.75 billion in 2005.

Lenovo, which posted record global revenue of US$5.919 billion in the quarter to June, expanded its activities in South America last month through a new laptop factory run by Newsan Group, a consumer electronics and household appliances maker in Argentina. It also acquired control of German consumer electronics maker Medion to expand in Western Europe. In July, Lenovo and NEC launched their joint venture in Japan to become that country's top personal computer supplier.

The mainland computer giant's new manufacturing centre in Hefei is scheduled to begin full-scale production by the end of next year. It will make a range of Lenovo-branded laptops and space-saving, 'all-in-one' desktop personal computers for sale around the world.

Compal estimated that the Hefei facility would have a production capacity of about 10 million units by 2013 or 2014, a report by Taiwan's Central News Agency said.

'We anticipate continued growth momentum for Lenovo in the [global] notebook market with a 16 per cent compound annual growth rate in units from fiscal years 2011 to 2016,' Alberto Moel, Bernstein Research senior analyst, wrote in a report. Lenovo's laptop shipments are forecast to reach 17.9 million units in its fiscal year to March and 22.7 million units the following year.

Shares in Lenovo rose 11.21 per cent to close at HK$4.96 yesterday.