Taiwan-based notebook components makers hesitate about working with Lenovo-Compal joint venture in eastern China

Aaron Lee, Taipei; Adam Hwang, DIGITIMES [Monday 4 February 2013]

LCFC (Hefei) Electronics Technology, a joint venture established by China-based Lenovo and Taiwan-based Compal Electronics in Hefei, northern China, is speeding up notebook production with target shipments of 12-13 million units in 2013, but Taiwan-based component makers have been conservative about setting up factories there to become its suppliers.

Profitability is more important than order volumes, and profitability is thinning as notebook ASP (average selling price) keeps falling, sources with the components makers said.

Compal expects to hike notebook production capacity utilization at its factory in Chongqing, western China, from 30% to 100%, the sources said. Toshiba will set up annual production capacity for five million notebooks in Chongqing, and the Chongqing government expects notebook shipments from the city to increase to 100 million units in 2015, accounting for over 30% of global total.

Some Taiwan-based components makers have already set up production facilities in Chongqing, but others remain reluctant, citing labor shortages and high manpower management costs in the western city than in eastern ones.

Some component makers will begin production in western China in 2013 because their clients (notebook ODMs/vendors) have asked them to do so and otherwise will shift orders to others, the sources said, adding these makers will use rented facilities to minimize risks.