Lenovo to Begin Server Production in India for Global Exports

Lenovo intends to initiate local production of servers to bolster its data center operations, utilizing the Production-Linked Incentive (PLI) scheme for IT hardware. With India being a primary focus for international expansion, the company aims to establish it as a manufacturing center for exporting PCs and smartphones to global markets. Additionally, Lenovo plans to leverage India's pool of IT talent to export solution-oriented services while considering it a pivotal hub for its operations.

"We have 35 manufacturing sites around nine countries in the world, India being one of them. We are constantly looking at ways to swizzle that dynamic, whether it's for economic reasons, logistics reasons, or sustainability reasons, to try to ensure that we're building products closest to customers", Matthew Zielinski, President of International Markets at Lenovo, said at the sidelines of the company's annual tech event in New Delhi.

Vladimir Rozanovich, President of the Infrastructure Solutions Group at Lenovo, said the company aims to double its $10 billion data centre business growth globally. "India becomes a very important partner for us from a manufacturing standpoint when we look at the entire Asian market". Rozanovich said that it is currently exploring options between using existing facilities or forming a new manufacturing partnership to start the local production of its servers.

As of November 1, 2023, India has introduced an import management system for IT hardware items, granting companies the freedom to import products like laptops, tablets, all-in-one personal computers, and servers without constraints for a duration of one year. However, starting November 1, 2024, importations will be gradually limited each year. This framework aims to offer companies lacking local manufacturing capabilities for these products ample time to cultivate such capabilities.

Lenovo is a part of India’s revised PLI scheme for IT hardware. The company is also ramping up its "localization" efforts by sourcing components for PCs and smartphones from local vendors. Amar Babu, President of Asia Pacific at Lenovo, said that the company has a "clear plan" to double the localization content for its smartphones in the next couple of years. "We are also looking at working with the industry bodies and the government to see how we can develop the ecosystem, especially for PCs". Babu said that the component ecosystem for PCs and laptops has yet to develop in India, but more component companies are looking to start local manufacturing. "We want to be participating here; we will have to look at all of these as part of our manufacturing strategy in India."

Lenovo has now adhered to India's Preferential Market Access (PMA) guidelines and recently introduced its desktops that comply with PMA regulations. To qualify for government procurement, 50 percent of the components must originate locally. Over the past two years, India's contribution to the global PC market has surged. With an annual PC market size ranging from 14 to 15 million units, India's market now surpasses Japan's in terms of total addressable market, according to Shailendra Katyal, Lenovo's Managing Director in India. Katyal also noted that increasing home penetration, currently at 10-12 percent, is poised to propel PC sales in the future.

According to IDC data, Lenovo secured the position of the second-largest PC manufacturer in the July-September 2023 period, boasting a market share of 17 percent. HP Inc. led the market with a share of 29.4 percent. Lenovo anticipates that Artificial Intelligence (AI)-enabled PCs will be instrumental in driving its global sales, including in India. Shailendra Katyal highlighted that AI is poised to stimulate demand in India's commercial and gaming PC sectors. The company is currently engaged in discussions with independent software developers and major organizations in the retail and manufacturing sectors to develop tailored AI-based solutions for the Indian market. Katyal emphasized that enterprises are eagerly awaiting the maturation of AI technology, which has resulted in a slowdown in PC adoption.