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AI component hikes force the world's largest PC makers to return manufacturing capacity to China — brands to seek lower production costs and efficiency in established supply chain Smaller Chinese contractors are raking in orders as traditional suppliers focus on AI servers. HP, Asus, and Acer have reportedly moved some of their manufacturing capacity back into China as increasing component costs — driven by AI — bite into their margins. According to Nikkei Asia, increasing bill-of-materials costs have made China’s experienced workforce, relatively lower prices, and established supply chain ecosystem a more attractive option. However, they are not going back to traditional suppliers like Foxconn, who have focused their production capacity on AI data centers. Instead, they’re signing contracts with smaller Chinese contract manufacturers, like Luxshare, Huaqin Technology, and Longcheer Technology, that are trying to establish themselves in PC manufacturing. Many PC brands slowly moved out of China in 2024 and 2025 as the U.S.’s sanctions and tariffs on China have increased prices and forced them to find friendlier nations. While these nations do not have established supply chains and expertise like China, it at least spreads the risk as manufacturers avoid getting caught up in geopolitical tensions. However, it seems that rising component prices have forced them to move back some of their capacity into China. The biggest culprit is the AI-induced memory and storage chip shortage, which has caused memory prices to climb an unprecedented 500% in 12 months. More than that, other parts like PCBs and fiberglass cloth used in motherboard manufacturing are seeing increasing prices, which Acer chairperson and CEO Jason Chen bemoaned as suppliers hyping shortage fears to protect margins. While tech companies aren’t abandoning their “China+1” diversification strategy, the mature industry in China is helping offset increased component costs. Aside from that, the Chinese contract manufacturers often have better access to memory chips from domestic manufacturers like CXMT. "These Chinese contract manufacturers have been telling potential clients and computer makers that working with them could be a good option for securing better access to Chinese-made memory chips," a supply chain manager in the computer ecosystem told Nikkei Asia. "They are marketing themselves as a good alternative to even help sort out the supply chain." Moving back some manufacturing capacity into China is easing some of PC manufacturers’ cost concerns, but it’s also negatively impacting the newly established supply chains in Southeast Asia. "We built two new production lines in Thailand for the PC clients, and now they are moving substantial orders back to China,” one manager at a PC component supplier told the publication. “Those two lines have not yet turned profitable, and I don't know when they will add the orders back." Unfortunately, building an entire supply chain for PC manufacturing is slow and expensive. The U.S. has been trying to accomplish this for years, and, so far, only Anduril has attempted to build laptops with 90% of its component costs coming from the U.S. and other allied countries. Even then, it expects its devices to be around 20% more expensive than the competition, which it could afford by offering them mostly to critical industries that demand supply chain security, like the government and the military. But if you’re a PC manufacturer vying for customers in the consumer market, you’re likely incentivized to find the lowest possible costs to be able to compete in pricing. Follow Tom's Hardware on Google News, or add us as a preferred source, to get our latest news, analysis, & reviews in your feeds. Get Tom's Hardware's best news and in-depth reviews, straight to your inbox. Jowi Morales is a tech enthusiast with years of experience working in the industry. He’s been writing with several tech publications since 2021, where he’s been interested in tech hardware and consumer electronics.
document fetched 2026-10-29 03:00 · canonical https://tomshardware.com/tech-industry/manufacturing/ai-component-hikes-force-the-worlds-largest-pc-makers-to-return-manufacturing-capacity-to-china-brands-to-seek-lower-production-costs-and-efficiency-in-established-supply-chain