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Lenovo eyes adding production outside China to skirt trade row

Chinese PC maker is confident it will not become the next Huawei

Lenovo is better positioned than other PC makers to avoid fallout from the US-China trade war thanks to a large manufacturing presence outside China. (Photo by Akira Kodaka)

HONG KONG -- Lenovo Group, the world's biggest personal computer maker, is considering increasing capacity at its factories outside China to lessen the impact of further U.S. tariff hikes, according to executives of the Chinese company.

In an interview with the Nikkei Asian Review on Thursday, Yang Yuanqing, CEO of the Beijing-based company, said it will adjust its global supply chain in accordance with the moves of rivals if the escalating trade war results in higher tariffs for Lenovo products in the U.S.

"Both our Mexico and U.S. production bases can increase production capacities," Yang said. "If our rivals move production to places where tariffs do not apply, we may adjust accordingly."

But any moves will increase production costs for Lenovo, as Yang noted that exporting from factories in China is the most cost-effective way to access the U.S. market, compared with other overseas bases such as Mexico.

Currently, more than half of Lenovo products sold in the U.S. are manufactured in mainland China.

While U.S. President Donald Trump ratcheted up the trade war with fresh tariffs on Chinese goods worth $200 billion early this month, PCs and related components remain largely unaffected.

But the next round of tariffs threatened by Trump against other Chinese imports worth $300 billion would likely hit PCs.

North America currently accounts for about 20% of group sales, according to Yang. But he believes Lenovo has more flexibility in adjusting its global supply chain as it has more self-owned factories and a bigger manufacturing presence outside China than other makers.

Besides Mexico and the U.S., Lenovo manufactures in India, Japan, Europe and Brazil.

"Frankly speaking, our manufacturing footprint is already bigger than most of our competitors," said Gianfranco Lanci, Lenovo's president and chief operating officer, in a separate interview with Nikkei. "[If tariffs rise], of course we will move production, and we can leverage the footprint we have to see what is the best setup," he said.

Lanci also said the company is looking into increasing production capacities in Asia to cope with tariffs.

Despite growing distrust in Washington over Chinese tech companies, Yang shrugs off concerns that Lenovo is facing the same risks as Huawei Technologies.

"We believe it will not happen," said Yang, in response as to whether Lenovo is concerned about being put on the U.S. trade blacklist.

According to observers, Trump may expand his blacklist of Chinese companies that rely on U.S. suppliers, among them surveillance equipment maker Hikivision, which trades as Hangzhou Hikvision Digital Technology Co., and DJI, the world's biggest drone maker.

But Yang stressed that Lenovo has always complied with local laws in all markets where it operates. "We have never had any compliance issues or faced security related problems," he said. "I believe Lenovo is a global company that can be trusted and respected."

Yang also noted that Huawei is an important buyer of Lenovo PCs, and that his company will continue conducting business with Huawei "on the basis of compliance with local laws".

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