Lenovo to establish major PC and server factory in Saudi Arabia with $2 billion investment

What just happened? Lenovo Group has announced plans to establish a major PC and server assembly factory in Saudi Arabia. This decision marks a notable expansion of the company’s production capacity outside of China and into the Middle East, a region experiencing rapid technological growth.

The project, backed by a $2 billion investment from Alat, a subsidiary of Saudi Arabia’s Public Investment Fund, is expected to go into operation by 2026. Once operational, the facility is expected to employ thousands of workers and produce millions of PCs annually, positioning it as one of the largest high-tech manufacturing plants in the region and a significant player in the global computer production landscape.

“Through this powerful strategic collaboration and investment, Lenovo will have significant resources and financial flexibility to further accelerate our transformation and grow our business by capitalizing on the incredible growth momentum in KSA and the wider MEA region,” said Yuanqing Yang, Chairman and CEO of Lenovo.

This factory is an opportunity for Lenovo to strengthen its foothold in the rapidly expanding Middle East and African markets. The firm plans to set up a regional headquarters in Riyadh, further cementing its commitment to the area. Additionally, by manufacturing servers in Saudi Arabia, Lenovo can potentially circumvent US restrictions on supplying high-performance hardware for AI and HPC applications to China, as well as diversify its production capabilities beyond Asia.

From Saudi Arabia’s perspective, a world-class manufacturing facility specializing in cutting-edge technology dovetails perfectly with its Vision 2030 initiative, aimed at diversifying the country’s economy beyond oil while fostering modernization.

Lenovo’s plans extend beyond mere assembly. The company intends to establish local research and development operations, potentially tailoring products to meet regional market needs.

The scale of this venture is noteworthy. A $2 billion investment in a computer assembly factory suggests a facility of considerable size and capacity. Industry experts anticipate that this will be one of the most extensive high-tech facilities in the region and a major player in global computer manufacturing.

Lenovo’s move is part of a broader trend among leading PC makers to reduce their reliance on manufacturing in China. By adding Saudi Arabia to its list of production locations, which already includes Argentina, Brazil, China, Germany, Hungary, India, Japan, Mexico, and the US, Lenovo further diversifies its global manufacturing footprint.

Other tech firms are increasingly looking to Saudi Arabia for similar reasons. Huawei, for example, received a 100% investment license in Saudi Arabia for developing telecommunications infrastructure supporting the country’s 5G rollout. In partnership with local entities, Alibaba Cloud created a presence in Riyadh to deliver high-capacity cloud services. SoftBank Group has formed a strategic alliance with Saudi Arabia to develop next-generation industrial robots, and in 2023, Human Horizons, a Chinese EV maker, signed a $5.6 billion deal to establish a research, development, and manufacturing joint venture in the Middle-Eastern nation. Similarly, Enovate, another Chinese EV start-up, entered into a joint venture with Saudi Sumou Holding to set up a $500 million manufacturing plant in the Kingdom.

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