HP to Shift Over 50% of Computer Production from China Amid Geopolitical Risks

HP plans to relocate over half of its computer production from China to mitigate geopolitical risks. It will establish a "backup" design hub in Singapore and significantly increase production in Thailand.

HP Diversifies Supply Chain, Establishes Singapore Hub, and Shifts PC Production to Thailand

Nikkei Asia has discovered that HP is establishing a "backup" design center in Singapore and is attempting to relocate over half of its computer production from China to mitigate geopolitical risks near China and Taiwan.

The plans are the most aggressive action taken by the foremost PC manufacturer in the United States to diversify its supply chains away from Asia's largest economy.

The company, which presently manufactures most of its personal computers in China, is discussing the transition with suppliers. According to multiple sources who were informed of the situation, it intends to accomplish its objective within the next two to three years.

According to one source, the organization has established an internal objective to manufacture as many as 70% of its notebooks outside China.

These individuals stated that the magnitude of the shift differs among suppliers and is contingent upon the complexity of the component they produce.

Thailand is a significant destination for the relocation. According to multiple sources, at least five HP suppliers are currently constructing new manufacturing facilities or warehouse centers in the country, and two have been increasing their capacity there at HP's request since the beginning of the year.

"HP is certainly betting big on building a production hub in Thailand," one of the executive-level sources said. “We have other Southeast Asian facilities to support the client, but they said they are not efficient enough, so we're building a new factory in Thailand now, as requested."

An executive at another component and parts supplier welcomed the move. "We were worried about not having enough orders to fully use our Thailand facility, but since earlier this year, we've been receiving more requests from HP to build components locally. Our business in Thailand is quite busy now."

HP Expands Singapore Hub, Recruits Engineers to Mitigate Geopolitical Risks Between Taiwan and China

According to sources, HP is also recruiting engineers and managers in Singapore to establish a fallback team for its flagship Taiwan Design Center. It is responsible for the rigorous development of new products and maintains communication with the supply chain.

"HP is hiring about two hundred additional engineering staff and professionals, including electrical and mechanical engineers and supply chain experts, to turn Singapore into an alternative design hub," a source with direct knowledge of the matter told Nikkei Asia. "The move is a de-risking measure to avoid any radical scenarios involving a potential conflict between Taiwan and China."

In 2023, HP shipped approximately 52 million personal computers, ranking second only to Lenovo, according to data from the research firm IDC. From its decades-long position as a staunch advocate for manufacturing in China, its supply chain transition is rapidly proceeding. The inland city of Chongqing became the world's foremost source of PC exports due to the company and its suppliers establishing an extensive network there.

However, numerous major American technology companies have been compelled to expedite their supply chain diversification due to years of U.S.-China tensions and disruptions from COVID-19. Dell, Apple, Microsoft, and other companies have relocated some of their PC production to Southeast Asia and allocated additional marketing resources to investigate local sales.

HP Executives Emphasize Opportunities in Southeast Asia Amid Geopolitical Risks and Supply Chain Diversification

According to sources, several HP executives have highlighted the emerging business opportunities in Southeast Asia and the Middle East in internal discussions this year while warning of the geopolitical risks associated with maintaining production in China.

"From our supply chain checks, we do find HP and Dell have become much more serious about diversification plans out of China," said Jeff Lin, a tech analyst with Omdia who specializes in the PC industry. "For them, the idea of de-risking becomes very important in their supply chain strategy looking forward."

According to Chiu Shih-fang, a supply chain analyst at the Taiwan Institute of Economic Research, the tech industry has been further reminded of the significance of supply chain resilience this year.

"Apart from the ongoing U.S.-China tech war, the big quake in Japan [in January] disrupted supply continuity for many sectors for months," Chiu told Nikkei Asia. "The upcoming U.S. election is another geopolitical uncertainty that many tech companies are taking into account."

If Washington further tightens export controls on high-powered chips, the veteran tech analyst stated that assembling AI-capable PCs in China could conceivably be a supply chain continuity risk. For instance, Huawei has already been prohibited from receiving Intel's Core Ultra 9 chip for AI PCs.

"AI PCs are every PC maker's hope for stimulating the market, yet AI is also a hot battleground in U.S.-China tensions. It is wise to accelerate PC production shifts to mitigate the risk from any sudden escalation of export controls," she said.

HP directed Nikkei Asia to a July 2023 post on its website that discussed the company's evolving approach to supply chain management when asked for comment.

"We'll continue investing in current sites where we have longtime operations, while sometimes shifting certain production to alternate locations to create flexibility and mitigate risk for our customers," read the post by HP's Chief Supply Chain Officer Ernest Nicolas.