Operations
Lenovo's principal facilities are in Beijing, Morrisville, North Carolina and Singapore, with research centers in those locations, as well as Shanghai, Shenzhen, Xiamen, and Chengdu in China, and Yamato in Kanagawa Prefecture, Japan. Lenovo operates factories in Chengdu and Hefei in China, Japan, and as of December 2011 has plans to start production in Argentina.
Lenovo's manufacturing operations are a departure from the usual industry practice of outsourcing to contract manufacturers. Lenovo instead focuses on vertical integration in order to avoid excessive reliance on original equipment manufacturers and to keep down costs. Speaking on this topic, Yang Yuanqing said, "Selling PCs is like selling fresh fruit. The speed of innovation is very fast, so you must know how to keep up with the pace, control inventory, to match supply with demand and handle very fast turnover." Lenovo benefited from its vertical integration after flooding affected hard-drive manufacturers in Thailand in 2011, as the company could continue manufacturing operations by shifting production towards products for which hard drives were still available.
Lenovo began to accentuate vertical integration after a meeting in 2009 in which Yang Yuanqing, and the head of Lenovo's supply chain, analyzed the costs versus the benefits of in-house manufacturing, and decided to make at least 50% of Lenovo's manufacturing in-house. Lenovo Chief Technology Officer George He said that vertical integration is having an important role in product development. He stated, "If you look at the industry trends, most innovations for" PCs, smartphones, tablets and smart TVs are related to innovation of key components—display, battery and storage. Differentiation of key parts is so important. So we started investing more…and working very closely with key parts suppliers."
In 2012, Lenovo partially moved production of its ThinkPad line of computers to Japan. ThinkPads will be produced by NEC in Yamagata Prefecture. Akaemi Watanabe, president of Lenovo Japan, said, "As a Japanese, I am glad to see the return to domestic production and the goal is to realize full-scale production as this will improve our image and make the products more acceptable to Japanese customers.”
In October of 2012, Lenovo announced that it would start manufacturing computers in Whitsett, North Carolina. The initial investment in the facility of $2 million is expected to create 115 jobs.
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