T61 assembly now being out-sourced!!!

I've sighted this in a previous post but thought it merited a seperate thread.

T61's are being delayed according to Lenovo because: "Because of a data entry error, the bezel – the frame that surrounds the LCD panel – was omitted from the bill of materials for certain T61 & R61 14.1” widescreen orders"

I wondered HOW could this happen. I did some digging and found out that starting in the last half of 2006, Lenovo begun phasing in the out-sourcing of their Thinkpad production to a company called "Compal" and away from their in-house production in Osaka Japan.

I am very familiar with Compal (a real notebook powerhouse operating as a OEM provider to many notebook nameplates. So I wondered what impact this Lenovo business had on Compal.

Here's the raw data:

In the month, Shipment of NB PCs was 1,650 thousand, with 101% year over year (820 thousand in May 2006); and of 190 thousand for display products.

That's a 101% increase in unit shipments over last year. That kind of explosive growth equates to all kinds of issues relative to qualified employees, resources, logistics, pressure to meet deadlines etc. I think you get the picture.

Therein lies the issue with Lenovo today. They are inexperienced at out-sourcing Thinkpad production and coupled with Compal's explosive growth = logistics issues.

Given this information, I see real trouble/reliability issues ahead for any latop coming out of Compal. Not even the most experienced comapny can handle that kind of explosive growth without problems.


Here are the articles that I referenced:

Compal obtains orders from NEC and Lenovo
Apr 13, 2006

Following the acquisition of orders for business notebook personal computers from Dell Computer Inc., Compal Electronics Inc. - one of Taiwan's leading contract manufacturers of PCs - will also add new clients including NEC Corp. and Lenovo Group. in the second quarter of this year.

An institutional investor noted Compal would see shipments top three million NBs in the second quarter of this year to hit an all-time high record.

At a recent presentation to institutional investors, Compal president J.T. Chen hinted his company would add two new clients from Asia, including a Japanese firm. Market watchers speculated that the two new clients are Japan-based NEC and the Lenovo Group, which has acquired the PC unit of IBM Corp. It is expected Compal would contact manufacture ThinkPad-series NBs for Lenovo and begin shipments sometime in the second quarter of this year.

Compal spokesman C.H. Lu said his company has signed secrecy agreements with all clients and cannot comment on the rumored new orders.

Over the past few months, NEC has been releasing contract orders on the ODM (original design manufacturer) basis to increase its competitiveness. Its contract manufacturers in Taiwan include Quanta Computer Inc., First International Computer Inc., and Asustek Computer Inc.

Compal has been making NBs for NEC on a trial basis since last year, with a shipment of 60,000 units of NBs for NEC. Since the beginning of this year, Compal has formally become one of NEC's contract manufacturers.

In the past, Lenovo mainly produced ThinkPad-series NBs in Osaka, Japan, while only a small portion of NB production, especially the lower-tier models, was outsourced. Recently, Lenovo has been thinking of increasing its competitiveness by releasing ODM orders.

The acquisition of orders for the ThinkPad-series NBs showed Compal has won Lenovo's approval for its strong competitiveness and quality.

Compal said it shipped 2.64 million NBs in the fourth quarter of last year, hitting a historic high for quarterly shipments. An institutional investor predicted Compal would see shipments in the first quarter of this year maintain the same level as the fourth quarter of last year.

Thanks to the influx of new orders from NEC and Lenovo, Compal is expected to see shipments of NBs grow 15% sequentially to reach three million units in the second quarter of this year, hitting another record high.

source & copyright: CENS



Compal Sales Report – May 2007

Issued on: June 07, 2007

Taipei, Taiwan, ROC

Compal Electronics, Inc. (the “Company”) (2324.TW/2324 TT) today posted unaudited revenue of NT$ 30.9bn for the month of May 2007 (up 86% YoY). Consolidated revenue (excluding Compal Communications’ sales) was NT$ 31.4bn.


In the month, Shipment of NB PCs was 1,650 thousand, with 101% year over year (820 thousand in May 2006); and of 190 thousand for display products.

Compal Sales Report (Unconsolidated)

(Unit: NT$ Million)

Net Sales
2007
2006
Change (%)

May
30,901
16,606
Up 86.1%

January to May
159,572
97,677
Up 63.4%


Note 1: Year 2007 figures have not been audited.

Compal Electronics, Inc.
Senior Vice President, CFO and Spokesman
Gary LU
Tele: (02) 8797-8588
[email protected]

 

Wow, sounds like the the stock to buy!!

 

so long....
and what's your point?

 

Uhhh. A major notebook manufacturer forgot to order the LCD bezels for their recently introduced premium, product line of notebooks. That's a reason for concern don't you thank?

 

lol u read my mind.
too bad they dont have stocks option in the U.S. -_-
lenovo sales is crazy i bet Compal makes hella money.....

 

At least it's an ODM deal. It's not like OEM with Lenovo asking Compal to design the things themselves and slap a ThinkPad sticker on them.

Still, I'm far from happy.

 

I wouldn't worry too much really.

You guys would be surprised how many of your prized name brand things are made ODM (about 99% of them) and how the quality is far better than the OEM equivalent from the same manufacture who makes both. As long as Lenovo gives them a good design, it will come out a good design.

 

That's the whole idea behind contract manufacturing. Factories are far from cheap and the production process is beyond many companies. Plus, being a dedicated manufacturer, there's processes that are developed - processes which would take both a lot of time and money for each notebook seller to acquire.

So yeah, it's sort of win-win. Dell, Lenovo, Toshiba, etc get the laptops they designed at possibly a lower price than they could have produced in-house and Compal, Quanta, Winstron, etc get paid for producing them.

 

I hear ya on this point. However, IBM/Lenovo has out sourced various product offerings over the years but the sacred T-series was always done in house. Surely there was a reason for this and I believe it was the sacred market position the T Series Thinkpad held in the marketplace as the very best built laptop in the world.

Having complete control over the assembly process on your turf is a far better position to be in than competing with 5 - 10 other manufacturers for the exact same resources.

The only ODM I believe that even has a chance of comparing to IBM-Japan is Quanta and Lenovo just pulled the contract from them on some other products. Quanta also assembles the Latitude for Dell while Compal handles the Inspiron.

I don't believe that all ODM's are the same. Like any industry some are better than others and Compals position has always been the lower tier product lines of the various NB marketers.

I think Compal outbid Quanta and I believe that IBM is once and for all through with Thinkpad involvement. I believe both of thse conditions are detrimental to Lenovo and they're playing with fire.

 

So, does that mean that ThinkPad orders of the same model, currently in processing, will have a good chance to get partially outsourced?
Is there an easy way to tell where any particular unit has been put together?

 

I am not sure how much of an outsourcing setup it is. Compal makes the entire 3000 line for lenovo, so it would go in line that Compal might make a few of the parts on the Thinkpad line.

 

I would somewhat agree.

Also remember that these ODMs will put huge resources towards building for larger other companies (Dell, Lenovo, etc.) and thus can totally change their production ways in that sector for said company. Of course there will be difference in how good each ODM is, but usually the company they are producing for is quite strict and puts them under said guidelines.

For example, I know one of the Sony TV ODMs and they actually put up a huge security wall with gaurds around the Sony TV production areas. They have a totally different workforce in that area that is meant for building Sony TVs only and no info or resources are directly shared between that area and the rest of the company for security and meeting sony's needs.

 

It would appear my T61 is being shipped out of China, from the UPS tracking info.

GUANGZHOU,
CN 06/08/2007 ADVERSE WEATHER CONDITIONS CAUSED THIS DELAY
LOUISVILLE,
KY, US 06/07/2007 THE SHIPMENT IS BEING HELD BY BROKERAGE FOR REASONS BEYOND UPS' CONTROL
SHENZHEN,
CN 06/06/2007 ORIGIN SCAN

:-(

 

If you look at this web link http://www.pc.ibm.com/ca/about_lenovo/locations.html you'll note that Lenovo's lists only 6 assembly facilities in the world. 5 of which are in China and 1 in India. Not only is Japan out off the list but so is Taiwan. Lenovo is truly taking the T61 mainstream and willing to give up some of that aura that IBM created with the Thinkpad line. To IBM, the Thinkpad was a sacred product that deserved its special and full attention. I think we can all testify to the quality that resulted from that attention. Clearly, Lenovo has other ideas for the Thinkpad line.

As I had stated, Compal is mostly the 2nd & 3rd tier assembler for various OEM's (Original Equipment Marketers) with Quanta handling many of the top tier line of products.

IBM had the T Series in house with the X and G series at Quanta in Taiwan. Quanta held the X series through 2006 before being dumped in favor of Compal.

I don't know what all of this really means but my experience indicates that Lenovo is attempting to expand their marketshare and to do so, feel they must cut costs to compete with Dell's Latitude line. However, Lenovo is now playing in Dell's backyard where they have many more years of experieince in China and with Compal in particular. I doubt Dell is going to let Lenovo have the the cream of the crop of Compal's resources.

Can you imagine if Mercedes, BMW, Porsche all competed for the same workers, use of facilities, etc in assembling their cars? Not a fair comparison but you can imagine the intrigue and fighting for resources that must be going on. I give Dell the huge advantage in this arena - at least for the near future.

This situation has played out so many times before. Macy's took the chain into a mainstream battle and really got clobbered when they lost their market position in the eyes of the consumer. I fear Lenovo is headed that way. Dell and HP will not Lenovo in the door very easily with these Chinese ODM's.

What I do know is that the Thinkpad of old is becoming more mainstream. Whether that means better or more typical reliability only time will tell.

 

That said that a lot of TPs came from Osaka Japan. If that's the case why is it when I turn my T60p over it says made in China.

 

umm...i don't see the inspiron vs thinkpad argument....
there's a reason why lenovo has the 3000 series and the thinkpad series. there's also a reason why dell has an inspiron series and a latitude series.
outsourcing is an inevitability for anything that is/will become a commodity. i know everyone hates it, but that's the way things are. any company that doesn't follow the trend will fail to be competitive, with the exception of a few RARE cases.
what made the thinkpad great was the level of r&d. of course, the build of the product itself played a large role, but from my limited knowledge of the manufacturing/sourcing process, almost all the critical parts are made by the same people anyways.
cpu/motherboard = intel/amd
hd = hitachi, seagate, toshiba, fujitsu, samsung
optical = samsung, toshiba, sony, etc
etc
etc
compal is a competant manufacturer, and lenovo seems to have put a lot of money into the r&d, so i'm really not too worried myself.

 

I'm sure Compal didn't reach its number 2 position (20% market share versus Quanta's 23%) in the industry by making crappy laptops for everyone.

 

Isnt it Lenovo WAS the ODM manufacturer of the thinkpad line? And now this outsource company tries to 'outsource' whatever they usually made?

I remember my thinkpad motherboard is stated to be made by Legend Computer (later to become Lenovo).

 

Quanta > Compal. Has been for a long time. The fact that Compal is handling Thinkpads leaves me more than a little unsettled.

 

Because it was assembled in China - 1 of the 5 assembly plants. Lenovo began using Compal-China to assemble the T series in late 2006/2007.

 

I'm not saying that they do. However, the complaints (build quality/reliability)against Dell's Inspiron line are legendary. Ditto for Compaq and many others. Thinkpads have been unique in this area.

Compal has been the "value line" notebook assembler. That's their market position first and foremost. Quanta in reverse by handling the higher product line offerings and assembling in Taiwan not China. Quanta has 40% market share so they obviously handle 2nd & 3rd tier offerings as well, but in general, they haven't been as competitive as Compal on the low end stuff.

That's it. Lenovo management is handling the Thinkpads differently than IBM's approach. Maybe for the better and maybe not. IBM wanted their quality image in the business community to remain on top. Therefore, things remained pretty tight to the chest with the Thinkpads.

IBM removing their name from the Thinkpad was the final seperation and the point at which things turned towards China and away from Japan and Taiwan.

Lenovo is not as well known in the business community and therefore, doesn't have the same affinity for the business community. They are going mainstream and hopefully they can pull it off.

 

Lenovo IS a mainland China based computer manufacturer. When Lenovo was the ODM for IBM all those years ago, Lenovo was making Thinkpads in its factories in mainland China.

IBM sold the Thinkpad line because their personal computer division was bleeding IBM's profits dry. I don't understand this antagonism towards Lenovo's takeover of the Thinkpad line. Had IBM kept the Thinkpad line, it is more than likely that their personal computer division would have bankrupted itself, and there wouldn't be anymore Thinkpads. Lenovo in having taken over IBM's personal computer division saved the Thinkpad line.

 

Lenovo was assembling IBM personal computers for the Chinese mainland but not export. That was handled by IBM-Japan and Quanta-Taiwan.

 

I don't know where you're getting your information.

Quanta manufactures notebooks in China. All the big notebook manufacturers do, not in Taiwan. Additionally, Quanta has no where near 40% market share. It's 23%.

http://online.wsj.com/public/article/SB111825761813954442-d4x_lQnm5A2GOO1NR6Wi_DBAyys_20050709.html

Soon you're not going to buy anything if you won't buy 'made in China'.

 

Great article. My number came from Reuters who was reporting that this year Quanta will assemble 30 million units on a market of 95 million. So it looks more like around 30 - 35 percent. Compal is at 23% so I think WSJ might have flipped the number on that one.

My most recent info had the Dell Latitude line asembled in Taiwan.

Look, management direction means a lot. Stephen Ward, the IBM executive who became Lenovo's first chief executive after the takeover, resigned in December after a year on the job. Lenovo replaced Ward with Dell's No.3 executive, William Amelio, who has extensive experience in Asia. Amelio played a critical role in getting Dell established in China and you can expect a Dell look like in Lenovo going forward if Amelio remains.

I would guess that IBM's Ward didn't like the direction Lenovo wanted to take the company.

I think what the general community is saying is that IBM's approach with the Thinkpad was old guard and not competitive. We'll see if the new Thinkpad of approach of acting more like Dell helps or hurts their position.

 

My rig is said "made in china" in its box. Sisoft Sandra reports that the motherboard was made by Legend Computer (Lenovo). I think for some type they do export it.