Wed, Sep 28, 2011 - Page 12 News List

Lenovo and Compal in new deal

PALS:The agreement is the latest in a series of recent investments by Lenovo and it will see Compal take a 49 percent share in the manufacturing venture

By Jason Tan  /  Staff Reporter

Compal Electronics Inc (仁寶電腦), the world’s second-largest contract notebook computer maker, yesterday said it is forming a new manufacturing venture in Hefei, China, with Lenovo Group Ltd (聯想) to produce computers and components for China’s PC giant.

The two companies will invest US$100 million in the initial phase, followed by an additional US$200 million over the next 18 months, according to a statement by Lenovo.

Lenovo will hold a 51 percent stake in the joint venture — called Lienpal (Hefei) Ltd (聯寶[合肥]) — while Compal will take the remaining 49 percent, the statement said.

“China, along with emerging markets, will be the two pillars of growth for the notebook industry next year. Compal has to seize the opportunity by tapping Lenovo,” Topology Research Institute (拓墣產業研究所) analyst Ryan Lee (李易聰) said yesterday.

While the growth of the netbook market has slowed, commercial PCs are on the rise and Compal is building a rapport with Lenovo and Dell Inc — two of its clients which are strong in the commercial PC sector, he said.

Through the move, Compal is also diversifying its customer portfolio and reducing risk, he said.

Compal has seen notebook shipments plunge this year because a major client, Acer Inc (宏碁), is undergoing organizational restructuring after booting out former CEO Gianfranco Lanci late in March.

Acer’s global PC ranking slid to No. 4 in the second quarter of this year from No. 3 in the first three months, while Lenovo moved up one notch to No. 3, according to market researcher IHS iSuppli.

Compal has lowered its whole-year notebook shipment target from 48 million units to 42 million units, and cut its target for tablet PCs from 3.8 million units to 3 million.

The Hefei facility is scheduled to begin manufacturing Lenovo computers, including notebooks and all-in-one PCs, as well as related components, by the end of next year.

“This joint venture will help us further optimize our manufacturing network, increase production capacity and satisfy rapidly growing demand for our offerings,” Lenovo CEO Yang Yuanqing (楊元慶) said in the statement.

“It will also help us provide innovative products to our customers in a faster and more efficient way, while enhancing our integrated innovation capability,” he added.

Lenovo, China’s top PC vendor, has quickly increased its market share while its rivals have seen a slump in sales.

IHS iSuppli said Lenovo posted the strongest growth among the top five PC makers in the second quarter, with shipments up 23 percent year-on-year.

Lenovo has embarked on a string of investments to fuel growth. This year it formed a joint venture with Japanese PC maker NEC Corp, a deal in which NEC received US$175 million in Lenovo shares.

In July, Lenovo acquired German PC maker Medion AG, for which it had said it would pay up to 465 million euros (US$637.5 million) in cash and stock, partly via a public offering.

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