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Lenovo expands manufacturing network outside China, anticipates 80% AI PC share by 2027

The world's largest PC manufacturer, Lenovo, reported strong second-quarter results and also announced expansion plans for global factories. As geopolitics continue to rise in uncertainty, Lenovo is looking for ways to make its supply chain more diversified, moving from producing all its products in China. Yang Yuanqing, Chairman and CEO of Lenovo stated, “Lenovo will further diversify its supply chain and plans to open more manufacturing facilities outside China amid global geopolitical uncertainty.”

According to Reuters, Yang stated, that Lenovo's expanded network is an effort to offset vulnerabilities associated with concentrated manufacturing. Particularly, as the new US administration, headed by President Donald Trump threatens 60% tariffs on Chinese imports. Although most of Lenovo's facilities are in China, it operates more than 30 factories across nine markets.

Yang said Lenovo benefits from having multiple production sites and diversified revenues, which could help balance risks from supply chains. By extension, the company has just announced it is setting up a new manufacturing facility in Saudi Arabia, following an investment deal with Saudi Arabia's Public Investment Fund.

Lenovo's revenue for the fiscal second quarter jumped 24% to $17.9 billion, outgrowing analysts' expectations of $16 billion projected by LSEG. Profits came in at $359 million, above the $331.7 million that analysts had forecasted. It shows Lenovo succeeded in responding to the growing demand for AI-capable PCs.

The demand for powerful computers to handle AI workloads is driving growth in the PC market. On the other hand, manufacturers are adding specialized chips to meet AI application needs. Lenovo's first AI-powered PCs debuted in China in May, with a global rollout planned for September. Yang thinks AI PCs will account for 25% of Lenovo's shipments by 2025, and up to 80% by 2027.

Lenovo has positioned itself for the absorption of AI in terms of its enhanced capabilities concerning the AI server and software. Lenovo's Infrastructure Solutions Group, which consists of its IT solutions like servers, reported its revenue to have surged above 60% compared to the previous year on account of a growth in demand for AI workload servers in data centres.

While, its Solutions and Services Group, selling cloud-based software to its enterprise clients, recorded revenue of $2.2 billion, compared with $1.9 billion from the previous year. Lenovo, with its diversified strategy and emphasis on AI capabilities, is prepared to maintain its industry momentum in this transforming global marketplace.