China's premier PC company, Lenovo, is moving some of its desktop, laptop, and tablet production to the U.S. I asked the company -- which Gartner says is now the largest PC maker on the planet -- to explain what making a product in the U.S. means exactly.
I spoke with Mark Stanton, director of global supply chain communications at Lenovo, about the company's plan to to make computing devices in North Carolina, including its ThinkPad Tablet 2 and ThinkPad laptops.
Q: What does "made in the U.S." mean in this case?
Stanton: The correct designation under U.S law would be "assembled in the U.S. with some foreign content." In the electronics business, parts are made all over the world.
Where's the factory?
Stanton: We're putting a manufacturing line into an existing facility outside of Greensboro [in North Carolina].
What is happening exactly inside the facility?
Stanton: Long conveyor belts, if you will, and kits moving from worker to worker with specific assembly tasks, starting with a basic chassis of the computer and plugging in the various components to the end of the line. Then there will be a testing station and then a boxing station.
Is that similar to what Lenovo does in China at its factories?
Stanton: It's not unlike the assembly work that's done in China, though some of the facilities in China may do a little bit more work on subsystem assembly. It's the same model we use at our facility in Monterrey, Mexico, which supports North America, and the same model we use in Europe. And we use it in India and Japan.
It's going to be a very flexible line capable of building diverse products. And the site can give us more flexibility in delivering orders in a shorter turnaround time than we would get from Monterrey or China.
What kind of volume are we talking about?
Stanton: It's not going to satisfy 100 percent of the U.S. demand by any stretch. We're not talking about millions [of units per year] but hundreds of thousands.
How does this give you a leg up on competitors like Apple and HP, which make most of their stuff in China and Asia?
Stanton: There are a lot benefits to having your own manufacturing capabilities versus working with [manufacturing] partners, like our competitors. Time to market. Being able to take your innovations quickly and put them in [the products], and benefits with control and responsiveness.
And the downside?
Stanton: Some of the challenges are more fixed cost and if the market takes a downturn, there's potentially more exposure. So what we're doing is looking to create more of a balance. We are increasing our investment in in-house manufacturing. We opened a couple of new plants in China -- one for PCs, one for smartphones. We just announced over the summer that we're building our own factory in Brazil. And now we're adding to the U.S. as well.
What about labor costs in the U.S.?
Stanton: Labor costs in general are higher [in the U.S.] but we believe customers are going to see value in getting the turnaround times that we can deliver. And there are customers who see value in the fact that products are assembled in the U.S.
And things are changing. The conventional wisdom was that you took these products to China and manufactured on the east coast, in places like Shenzhen. [But] the standard of living, costs, prices -- everything is rising there. The other economic component is fuel cost. When fuel costs rise, that changes the economics. Because the labor is actually a small percentage of the total cost. It's not as big a component as you might think.