HP removes most production from China

HP plans to move more than half of its PC production away from China. In the past, the manufacturer built a huge China-focused PC supply chain but now wants to become less dependent on Asia’s largest economy. The company is now focusing mainly on expanding its business in Thailand.

The plans of America’s largest PC manufacturer to diversify its supply chains are the most sweeping yet. It is mainly an attempt to reduce geopolitical risks around China and Taiwan, Japanese media outlet Nikkei Asia reports. According to the magazine, HP, which still makes most of its PCs in China, wants to achieve its goal within two to three years.

Capacity in Thailand expanded

Thailand is said to be in the picture as the main alternative to manufacturing in China. At least five HP suppliers are now building new production facilities or storage hubs in the country, and two have expanded their capacity there since the beginning of the year at HP’s request, states Nikkei Asia.

‘We were worried that we would not have enough orders to fully utilize our factory in Thailand, but since the beginning of this year, we have been getting more requests from HP to build parts locally. Our operations in Thailand are now quite busy,’ says an executive at a parts supplier.

HP is also hiring engineers and managers in Singapore to create a backup team for its flagship Taiwan Design Centre, which oversees new product development. This would involve about 200 additional technical staff and professionals.

The importance of a resilient supply chain

According to Supply Chain Analyst Chiu Shih-fang of the Taiwan Institute of Economic Research, the tech industry was again reminded of the importance of a resilient supply chain this year. ‘Besides the ongoing tech war between China and the US, the major earthquake in Japan (in January, Ed.) disrupted supply security for many sectors for months. The upcoming US elections are another geopolitical uncertainty that many tech companies are taking into account.’

Chiu Shih-fang also reports that assembling AI-capable PCs in China may pose a risk to supply chain continuity if Washington decides to further tighten export controls on high-performance chips. Intel, for example, is already banned from supplying its Core Ultra 9 chip for AI PCs to Huawei.

‘AI PCs are every PC maker’s hope to boost the market, but AI is also a hot issue in the tensions between China and the US. It makes sense to accelerate shifts in PC production to mitigate the risk of a sudden escalation of export controls,’ said the tech expert.

Creating flexibility and mitigating risks

Asked for comment, HP referred Nikkei Asia to a post on its July 2023 website discussing its changing approach to supply chain management. ‘We will continue to invest in the current locations where we have been operating for a long time, while sometimes moving some production to other locations to create flexibility and reduce risks for our customers,’ HP Chief Supply Chain Officer Ernest Nicolas reported in that article.