Lenovo Group, the world's No. 3 supplier of PCs and Compal Electronics, one of the largest contract makers of consumer electronics, on Tuesday announced an agreement to form a joint-venture company that will build and operate a new manufacturing center in Hefei, China. Lenovo will add production capacity needed to sustain rapid growth.

“This joint venture will help us further optimize our manufacturing network, increase production capacity and satisfy rapidly growing demand for our offerings. Based on our deep understanding of customer requirements, it will also help us provide innovative products to our customers in a faster and more efficient way, while enhancing our integrated innovation capability," said Yang Yuanqing, chief executive officer of Lenovo. 

The two companies will invest $100 million initially, followed by an additional $200 million in the next 18 months subject to business conditions and capacity expansion, to start up the new company and construct the facility. Lenovo will hold a 51% stake in the joint venture and Compal 49%.

The Hefei facility is scheduled to begin full-scale manufacturing by the end of 2012, at which time it will produce a range of Lenovo laptop and “all-in-one” desktop PCs. The joint venture will operate as a stand-alone supplier, providing Lenovo exclusively with finished systems for sale around the world. It will integrate both companies’ advanced engineering and manufacturing expertise.  

The Hefei facility will extend Lenovo’s efficient global manufacturing network, which leverages a mix of in-house factories and outsourcing partners, including Compal. The joint venture will serve a portion of Lenovo’s expected future growth, while existing in-house facilities and outsourcing relationships also support expansion.

The agreement with Compal is the latest move by Lenovo to sustain the rapid growth that has enabled the company to outperform its top five industry rivals for nearly two years. Earlier this year, Lenovo began a PC joint venture with NEC in Japan and later acquired Medion, a major personal technology company based in Germany.

Tags: Lenovo, Compal, Business