HP will move more than half of PC production outside of China

HP plans to move more than half of its personal computer production out of China and is setting up a backup design center in Singapore in an attempt to reduce geopolitical risks around China and Taiwan. This is a very aggressive move by the leading US PC manufacturer to diversify its supply chains.

HP, which currently makes most of its PCs in China, is in talks with suppliers to move its production and aims to achieve this within two to three years, people familiar with the matter said. The company is said to have set an internal goal to eventually manufacture up to 70% of its laptops outside of China. The extent of the moves discussed varies from supplier to supplier depending on the complexity of the components they produce.

The main destination for the relocation of production is Thailand. Since the beginning of the year, at least five HP suppliers are rumored to be building new or expanding existing manufacturing facilities or warehouse centers in Thailand at HP’s request.

«HP is undoubtedly making a big bet on building a manufacturing center in Thailand, said a manager at one of the companies. “We have other facilities in Southeast Asia to support the customer, but […] they are not efficient enough, so we are now building a new plant in Thailand, as requested.”

The head of another HP supplier agreed: “We were worried that we wouldn’t have enough orders to fully utilize our facility in Thailand, but since the beginning of this year we have received more requests from HP to produce components locally. Our business in Thailand is quite busy at the moment.”

In Singapore, HP has begun hiring engineers and managers, forming a “reserve team” for its flagship Taiwan Design Center, which is responsible for developing new products and interacting with the supply chain. “HP is hiring about two hundred additional engineers and specialists, including engineers and supply chain experts, to transform Singapore into an alternative design hub,” said a source with knowledge of the matter. “This step is a risk mitigation measure to avoid any drastic scenarios associated with a potential conflict between Taiwan and China.”

HP shipped about 52 million PCs in 2023, second only to Lenovo. The accelerating change in the supply chain marks a reversal of the company’s longstanding position as a strong proponent of manufacturing in China. The company and its suppliers have established an extensive manufacturing network in the country, turning Chongqing into the world’s leading PC exporter.

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However, years of tension between the US and China, as well as disruptions due to COVID, have forced many large US tech companies to accelerate diversification of their supply chain. Dell, Apple, Microsoft and others have already moved some of their PC production to Southeast Asia and devoted more marketing resources to exploring local sales.

In internal discussions this year, several HP executives have emphasized business opportunities in Southeast Asia and the Middle East while noting the geopolitical risks of keeping production in China, the sources said. The company’s management decisions were also influenced by the major January earthquake in Japan, which disrupted the continuity of supplies for many sectors for several months.

Another factor introducing geopolitical uncertainty is the upcoming presidential elections in the United States. Analysts believe that assembling AI-enabled PCs in China could potentially pose a risk to supply chain continuity if Washington decides to further tighten export controls on high-power chips. For example, Intel has already received a ban on Huawei supplying its Core Ultra 9 chip for PCs with artificial intelligence.

«We will continue to invest in current sites where we have long-term operations, sometimes moving certain production to alternative locations to provide flexibility and reduce risk for our customers,” HP Supply Chain Director Ernest Nicolas commented.