While HP is making a move to withdraw over half of its PC production lines from China, according to a report from Economic Daily News, ODM such as Quanta and Inventec have already started setting up operations in Thailand to address their clients’ need to reduce geopolitical risks by shifting supply chain.

Reportedly, HP is planning to transfer its manufacturing base to Thailand, with the ultimate goal of having 70% of its laptops manufactured outside of China.

As early as July last year, it was rumored that HP intended to follow the example of brands like Dell and Apple in promoting supply chain diversification by moving PC production lines out of China to locations such as Thailand and Mexico.

Amid ongoing US-China tensions, ODMs have accelerated their expansion into the Southeast Asian market post-pandemic. Quanta established a plant in Thailand as early as 2019 to meet customers’ needs for diversified manufacturing sites. Currently, its Thailand facility produces servers, consumer electronics, and laptops.

Initially, Quanta’s Thailand plant primarily focused on manufacturing Chromebooks and other consumer products. However, due to lower-than-expected customer orders, Quanta expanded its server capacity and pursued laptop manufacturing orders.

With HP increasing its production in Thailand, Quanta aims to leverage its years of established presence in Thailand to secure more orders.

For the past two years, Quanta has reportedly accelerated its expansion of overseas capacity. This year, its capital expenditures are expected to increase to NTD 10 billion, up from NTD 8.8 billion last year, marking a 13.6% year-on-year increase and surpassing the 10 billion threshold. This investment will support expansion needs in Europe, the US, Thailand, and Mexico.

Inventec originally planned to assist HP with laptop production in Mexico, but with HP deciding to relocate its main production base to Thailand, Inventec has urgently rented local plant space to secure customer orders.

At the end of last year, Inventec announced a USD 152 million investment in a new plant in Thailand to produce laptops and servers. Server production line is expected to be completed by the end of this year, with operations beginning in the first quarter of next year, while laptop production line is also expected to be completed in the first quarter of next year.

Read more

• [News] NVIDIA Reportedly Facing Price Cut Pressure of H20 Chip in China Amid Competition with Huawei
• [News] NVIDIA’s China-Exclusive H20 to Begin Pre-sales Next Month

(Photo credit: HP)

TrendForce’s investigations finds that LG manufactured merely 30.6 million smartphones last year, which represented a 2.4% market share. The Korean company took ninth place in the global ranking of smartphone brands by production volume in 2020. At the start of this year, LG began to consider either selling or shuttering its mobile phone unit.

Around that same time, it also suspended the R&D of new smartphone models. On April 5, LG announced the decision to fold up the mobile phone unit as it was ultimately unable to offset consecutive years of financial losses it suffered in the smartphone market. Based on the company’s current plan, the mobile phone unit will wind down its operation by the end of July, while its smartphone manufacturing operations will cease by the end of 2Q21.

TrendForce therefore expects LG to occupy a lower than 1% share in the smartphone market this year. Incidentally, the conditions for survival for smartphone brands have further deteriorated on account of the increasingly fierce market competition as well as the recent and continuing hike in component prices. Taken altogether, these developments will reinforce the trend of the dominant brands having more and more market share in the future at the expense of the smaller brands.

Regarding LG’s performance in the smartphone market during the recent years, the company spared no effort in high-end R&D, with such results as the LG Wing with a rotating screen and the LG Rollable, which, as the name suggests, features a side-rolling display. The latter model remained a concept and did not enter mass production.

Despite its efforts, LG however continued to lag behind in sales when compared with the other major brands, such as Samsung and Apple. LG had a relatively weak position in the high-end segment of the smartphone market. As for the mid-range and entry-level segments, LG could not match Chinese brands in terms of pricing. To optimize its cost structure, LG expanded the share of device production going to ODMs. Nevertheless, this action was too late to turn things around.

Samsung, Lenovo, and Xiaomi are likely to benefit from LG’s exit from the North and Latin American markets

LG’s smartphone business has become unprofitable since 2Q15; and its financial losses were further exacerbated after it made a gradual exit from the Chinese market in 2016. As of 4Q20, LG’s smartphone business suffered 23 consecutive quarters of financial losses, which totaled about 5 trillion KRW. Despite LG’s limited market share, however, its exit from the various regional smartphone markets will still benefit its competitors in those markets, in particular, the mid-range segment in North America and Latin America.

With regards to North America, LG’s market share there will be split among its Android-based competitors, including Samsung, Lenovo (Motorola), and other in-house, private brands owned by domestic telecom operators. With regards to Latin America, on the other hand, LG’s exit will more noticeably benefit Lenovo (Motorola) and Xiaomi.

Looking ahead to the rest of 2021, as vaccinations begin to take place around the world, TrendForce expects the smartphone industry, which fulfills a basic living necessity, to make a gradual recovery as well. Thanks to the general public’s cyclical replacement demand, as well as growing demand from emerging markets, total smartphone production remains unaffected by LG’s exit. As a result, TrendForce maintains its smartphone production forecast of 1.36 billion units for 2021, a 9% increase YoY.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com