Lenovo Moving ThinkPad Notebook Production In-house: Report

A heads up to Lenovo ThinkPad and IdeaPad partners: High-flying PC maker Lenovo will more than double its in-house notebook production to nearly 60 percent of units manufactured in 2014, according to a new report in Taiwan’s Digitimes.

The Chinese company now relies on Compal Electronics and Wistron for notebook production, which together currently handle about 75 percent of shipments. According to the report, which cites supply chain sources, Lenovo will pare Compal’s production load to 30 percent of units manufactured and Wistron’s will be cut to only 10 percent in 2014.

Digitimes reports that Lenovo’s ramped up in-house production is tied to a joint venture with Compal, and housed in Hefei, China. The collaboration already manufactures Lenovo’s enterprise class ThinkPads and will produce the vendor’s G series notebooks next year, the report said.

Lenovo, in a statement, confirmed it will ramp up in-house production but declined to provide details of the strategy.

“Over the past several years, Lenovo has been investing in our own production capabilities as part of a ‘hybrid’ supply-chain strategy that leverages a mix of both in-house resources and outsourcing partners,” said Mark Stanton, Lenovo analyst relations director.

Stanton suggested the move is a strategic play to gain more control over costs as price competition in the notebook market increases and margins continue to shrink.

“This strategy gives us better control over our end-to-end supply chain and enables us to accelerate time-to-market and better differentiate our products through innovation, while retaining strong financial flexibility,” he said.

Lenovo, which just churned out another strong quarter, posting a 23 percent year-over-year increase in earnings to $174 million on a 10 percent revenue bump to $8.8 billion for its Q1 FY 2014, generates some 52 percent of its worldwide sales, or about $4.5 billion, from laptops. In its most recent quarter, as the overall notebook market slid some 13 percent, Lenovo grew its laptop business by nearly 5 percent.

The PC maker is expected to rely on a newly opened manufacturing facility in Whitsett, N.C., to produce some convertible ultrabooks in addition to Think-branded desktops and tablets.

Chris Frey, Lenovo’s North America commercial channels vice president, recently told The VAR Guy the vendor now drives about 85 percent of its business in North America, amounting to $1 billion in sales, through channel partners.