Acer to shift 90% notebook production to Chongqing, China

Acer recently decided to increase the percentage of notebook production in Chongqing, China to 90%, beginning in the second quarter of 2013, according to industry sources. Due to increasing production in Chongqing, as well as Chengdu (both being in western China), local supply of labor and components is expected to be tight.

As growth of the notebook industry slows down, ODM firms have been more sensitive to production cost changes. While scattered manufacturing plants mean higher production costs, the ODMs have been working towards centralizing their production. Nevertheless, brand clients have been more eager to diversify risks by issuing orders to plants in different locations. But the ODMs have managed to have Acer agree to shifting most of its production to western China.

HP has shifted production for most of its notebooks to Chongqing while Dell and Lenovo's production mainly takes place in Chengdu. As for Acer, its major ODM partners Quanta Computer and Wistron have moved 100% of their notebook production capacity to Chongqing while Compal Electronics, which maintained 50% of capacity in Kunshan and 50% in Chongqing in 2012, will increase the proportion of capacity in Chongqing to 90% in 2013, the sources said, adding Compal will start moving its equipment in the second quarter.

With the exception of Apple products, Quanta's notebook production for other brands will be moved to Chongqing, the sources said. To meet clients' demand, Compal continues to have notebook production in Kunshan, Chengdu, Chongqing and Hefei. However, Compal's Hefei plant is a joint venture with Lenovo and due to its location, production costs have been rising, and hence company president Ray Chen has disclosed plans to centralize capacity by moving production to the western regions in China. Compal's Chengdu plant is predicted to ship more than 500,000 units per month in the second quarter and the Chongqing plant is expected to achieve the same figure starting in March and April.

The sources revealed that while notebook production will be concentrated in Chongqing and Chengdu, the ODMs will keep their tablet and server production lines in Shanghai, Songjiang, and Kunshan. Take Inventec for example, the firm plans to shift production focus at its Shanghai plant from notebooks to servers and all-in-one (AIO) PCs.

The centralization of notebook capacity in Chongqing and Chengdu has prompted component providers to consider moving production to the western regions of China as well.

The sources said the labor cost in inland China is relatively low compared to coastal regions but the transportation cost remains high. So far the cost difference in transportation has been subsidized by the local government but no one knows when the subsidy might end, the sources added.

According to statistics provided by the city government of Chongqing, export processing trade value increased 150% in 2012, reaching US$15.364 billion. Notebook exports reached 35.44 million units, an on-year growth of 130% with an export value of US$12.541 billion. Notebook export value accounted for almost 30% of total 2012 export value of Chongqing.