Exclusive: Lenovo in European production move
Ex-IBM x86 exec reveals Lenovo's plan to move server, storage and networking production to Europe in 2016
A top Lenovo executive who joined the vendor as a result of last year's IBM x86 acquisition has broken cover over plans to "bring back manufacturing into Europe".
Speaking to CRN at VMworld Europe this week, Wilfredo Sotolongo, Lenovo's EMEA vice president of enterprise group sales, said the Chinese giant is planning to move some hardware manufacturing to Europe to improve speed of delivery and cost for local customers.
Lenovo's 2014 acquisition of IBM's x86 business saw it assume control of 7,500 IBM staff, including those at major locations such as Raleigh, Shanghai, Shenzhen and Taipei.
Sotolongo said the integration of the business in Europe has largely been completed but hinted that some manufacturing functions could now be moved to the region - possibly eastern Europe - to improve time to market and cut freight costs.
"We are now making our changes to enhance our capabilities in the market. For example, we are going to bring back manufacturing into Europe," he said. "This is something our customers and partners will love... As we go into Lenovo and we integrate, this is probably one of the most visible changes."
The decision was taken "about a month ago" and will involve servers, storage and networking gear, with European production set to start ramping up in early 2016, Sotolongo said.
When asked where in Europe, Sotolongo said: "[We] can't say yet, because we haven't inked the deal. Most of the manufacturing footprints are in eastern Europe, because of the cost of labour, so that's what I can say."
When asked why Lenovo is making this European move, Sotolongo said: "It's fascinating, lower cost - I didn't expect it. And better service for our clients; it's a lot faster to get something from eastern Europe to western Europe, than from China to western Europe.
"The partners will receive a better, lower-cost product in a faster time; the same thing that our end users will receive."
His comments come at a time when analysts are noting rising production costs in China.
"Everybody knows that the costs in China are beginning to go up; that's a given," said Jeremy Davies, co-founder of analyst Context.
"Therefore the advantages of production there are lessening," he said. "The problem is, of course, transport; the lead times from China to Europe are long. For eastern Europe, the costs aren't too high, proximity is perfect and the quality of workers is extremely high. Maybe when they looked at their books they realised the marginal costs of moving to eastern Europe weren't that much higher and in terms of getting products to market when needed, it was worth it."
Paul Barlow, managing director of Lenovo partner Servium, said the news would be positive for the channel, if it comes to fruition.
"If it reduces the prices and makes Lenovo even more competitive, while also reducing the lead times of enterprise products for Lenovo, then that's really positive. Anything that makes that better for customers has to be applauded, and if that's what they are doing then I think it's good news.
"It's a demonstration that Lenovo are very serious about the enterprise market. It's a demonstration that they are serious about the EMEA market and it's good to see vendors making significant investment in the region."