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[ISN] 82.6% of Laptops Made in China


July 26, 2006

Factories in or near Shanghai make nearly 83 percent of the world’s 
portable computers, and that figure is expected to increase within a 
couple of years.

Jeffrey Wu, an analyst from research firm iSuppli, said on Wednesday the 
number of notebooks made in that region of China will increase from 82.6 
percent in 2005 to more than 90 percent by 2008.

In addition, global laptop shipments will grow to 141.4 million units in 
2010 from 61.9 million in 2005. That means 51.13 million portable 
computers shipped in 2005 came out of China, and 127.26 million in 2010 
will have been made there.

That fact that the vast majority of notebooks, a much faster-growing 
market than desktops, are made by Chinese manufacturers shows how 
important economic relations are between China and the West, particularly 
for such U.S. companies as Dell and Hewlett-Packard.  Those relations 
could be more important than, say, national security concerns regarding 
Chinese espionage (see PC Spy Threat Alarms US Group [1]).

"China and the United States have been becoming more and more mutually 
dependent on each other. For example, U.S. computer companies rely on 
cheap Chinese labor to drive costs down, which in turn keeps consumers 
happy with low prices," Mr. Wu said. "I think in the future this tie will 
be even closer."

Mr. Wu said that the percentage of China-made portables will increase 
thanks to vendor focus and standardization.

"Dell and HP aren't really interested in manufacturing anymore," Mr.  Wu 
said. "The Wintel PC platform is already standard," so it makes sense to 
outsource manufacturing to cheaper countries.

However, economics could take a back seat to some countries' nationalistic 

Spy Concerns

For example, earlier this year a U.S. congressional committee expressed 
worries that computers bought from Chinese company Lenovo could be used to 
spy on the U.S. government offices where the machines were to be used.

"If you're a foreign intelligence service and you know that a [U.S.] 
federal agency is buying your company [products], wouldn't you look into 
the possibility that you could do something about that?" Larry Wortzel, 
head of the U.S.-China Economic and Security Review Commission, said at 
the time.

But others - including Lenovo as well as U.S.-based analysts - countered 
that most computers are already made in China, no matter what their brand 
(see Lenovo, Chinese Lash Out [2]).

"Almost any PC you can name has Chinese content," said Roger Kay, 
president of research firm Endpoint Technologies.

And despite criticisms that U.S. companies take advantage of workers in 
developing nations, Mr. Wu pointed out that in Shanghai, employers suffer 
turnover rates of 10 percent or more as skilled workers jump from company 
to company in order to make as much money as possible.

But partnerships between Western and Chinese companies could help China's 
economy in the long run, elevating wealth and living standards.

"There are already a few companies that are... going further inland,"  
where people are much poorer than along the coast, Mr. Wu said. Wages may 
be lower inland, but still represent riches to workers there.


Contact the writer: ECubarrubia [at] RedHerring [dot] com

[1] http://www.redherring.com/Article.aspx?a=16328&hed=PC+Spy+Threat+Alarms+US+Group
[2] http://www.redherring.com/Article.aspx?a=17039&hed=Lenovo%2c+Chinese+Lash+Out

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