Lenovo looking for a European manufacturing site

8 Nov 2007

The Chinese technology giant Lenovo, which recently bought IBM’s PC division, has revealed that it is going to start actively targeting the consumer market and is in the process of deciding on a location for a new European manufacturing hub that could create thousands of new jobs.

Such news would be of vital importance to state agency IDA Ireland, especially since, according to Eurostat, one third of all PCs sold in Europe are manufactured in Ireland, where seven out of 10 of the world’s leading ICT companies are based.

IT giant Dell, for example, employs over 4,000 people at its PC manufacturing plant in Limerick and Apple employs over 1,000 people in Cork. Other major players such as Intel employs almost 5,000 people and Hewlett-Packard employs over 4,000 people in Leixlip.

But Lenovo may also be on the look-out for locations in eastern Europe such as Poland, where Dell for example has established significant operations, and Hungary, where Lenovo already works with a local contract electronics manufacturer.

“We have manufacturing plants in China, India and Mexico and we are looking at radically decentralising further under a plan we call ‘world sourcing’ and are about to announce a new manufacturing plant in Europe,” Lenovo vice-president for EMEA Milko van Duijl explained during a conference call with press yesterday.

Van Duijl said the aim is to boost the company’s desktop supply chain as part of its intention to take on the consumer electronics market. “We will soon make a final announcement as to owning our own manufacturing operation in Europe so we can have full end-to-end control of our own value chain.

“At present we are choosing between two specific locations and the process shouldn’t take too long,” van Duijl said.

As traditional PC vendors struggle with saturated, developed world markets, Lenovo is bucking the trend thanks in particular to growth in developing world markets. “We are seeing major structural shifts in world demographics. In terms of GDP, for example, China will soon outpace the US. Emerging economies like the Middle East, Russia and Brazil are demonstrating fast growth.

Worldwide Lenovo recently reported 38pc revenue growth in its second quarter, with notebook sales growing 35pc on the year. In the Europe, Middle East and Africa (EMEA) region Lenovo’s revenues grew 42pc.

“In the context of world sourcing, we are transforming our overall structure on a global basis. World-sourced companies are capable of performing 24×7 following the sun. We will be boosting our brand awareness out there and while the phrase ‘think global, act local’ is not new it is consistent with world sourcing in terms of new thinking and activity.

“Therefore we will be Irish in Ireland, Nigerian in Nigeria and Indian in India. We will have customer service hubs serve as centres of excellence in different places,” van Duijl added.

In terms of Lenovo’s move from a pure business computing focus to include a consumer focus, the company will be in talks with computer retailers across Europe in the year ahead about putting Lenovo desktops and laptops into the high street.

“The consumer segment is incredibly important to us and we are committed to it. We have launched a separate business unit that will focus on retail partners. We will introduce consumer products and will drive the marketing to go with that. Our objective is to capture market share and gain increased revenue.

“We have just began in France and South Africa and we will roll out to additional countries in the calendar year 2008. These are signature changes for Lenovo.”

The signature changes don’t stop there. Lenovo will be removing the IBM badge from all Lenovo computers – earlier than anticipated – but has the rights to retain the ThinkPad logo for infinity.

“We have removed the IBM brand much earlier because customers were more confused than they were helped by the branding,” van Duijl said.

By John Kennedy