HP has joined Asus and Acer in moving some manufacturing capacity back to China, partially reversing its planned ‘China+1’ diversification strategy, as surging AI demand for memory chips drives component costs sharply higher, according to reports.
The US-based PC maker, which had planned to shift more than half of its production out of China to spread geopolitical risk, is now returning some manufacturing to offset the rising bill-of-materials costs driven by an AI-induced shortage of memory and storage chips, Nikkei Asia reported. The move follows similar steps by Asus and Acer, which have also moved capacity back to China.
The biggest cost driver is an unprecedented 500% surge in memory prices over the past 12 months, caused by an AI-induced shortage of memory and storage chips. Other components, such as PCBs and fiberglass cloth used in motherboard manufacturing, are also rising in price. Acer chairperson and CEO Jason Chen complained that suppliers are hyping shortage fears to protect margins, according to Tom’s Hardware.
Rather than returning to traditional contract manufacturers like Foxconn, which have focused on AI data centres, the PC makers are signing contracts with smaller Chinese firms such as Luxshare, Huaqin Technology and Longcheer Technology. “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.
The shift back is negatively impacting 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.”
Despite the risk of rising Western protectionism, experts believe more companies may follow. “China’s supply chain retains a distinct advantage,” an analyst told Semafor. Tech giants like Apple have sought to create alternative supply chains in India, which has spent billions to attract high-tech manufacturing. But a Bloomberg columnist argued that “paying its suppliers ever-larger subsidies in the hope of recreating China is unlikely to be a winning trade,” Semafor reported.
PC makers have not abandoned the “China+1” strategy entirely, but the mature Chinese manufacturing ecosystem and lower costs are helping offset the component price increases, making China an attractive option again for at least some production.
Analysis
Why This Matters
- PC prices may stay lower than otherwise as manufacturers cut costs, but the return to China could undermine Western efforts to diversify supply chains.
- The AI-driven component shortage shows how the boom in data-centre spending ripples through the broader electronics market, affecting consumer goods.
- Southeast Asian suppliers that invested heavily in new PC production lines now face idle capacity and uncertain returns.
Background
In 2024 and 2025, many PC makers moved assembly out of China to avoid US tariffs and sanctions, adopting a “China+1” strategy by opening factories in Southeast Asian countries like Thailand and Vietnam. At the same time, the AI boom has driven enormous demand for memory and storage chips, sending prices up 500% in a year. US policy has tried to encourage domestic manufacturing, but building a complete PC supply chain outside China has proven slow and expensive.
Key Perspectives
- Analyst (Semafor): “China’s supply chain retains a distinct advantage.”
- Bloomberg columnist: Paying suppliers ever-larger subsidies to recreate China in India “is unlikely to be a winning trade.”
- PC component supplier manager (to Nikkei Asia): New lines in Thailand built for PC clients are now losing orders back to China, and it is unclear when they will turn profitable.
What to Watch
- Whether other major PC brands such as Dell and Lenovo announce similar shifts back to China.
- The trajectory of memory chip prices: if they remain high, more production may return.
- Potential new US or EU tariffs on Chinese-made electronics that could again disrupt these flows.
Checked
12 claims in this story checked against 2 sources: 10 supported.
Show each claim
- SupportedHP has joined Asus and Acer in shifting some PC manufacturing capacity back to China as AI-driven component costs rise.Latest from Tom's Hardware: “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.”
- SupportedHP had planned to move more than half of its production out of China as part of a China+1 strategy.Semafor: “Firms including US-based HP — which had planned to shift more than half of its production out of the country in a “China+1” strategy — are moving some manufacturing back”
- Partly supportedHP’s plan to move production out of China was specifically intended to spread geopolitical risk.Latest from Tom's Hardware: “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.”
- Not in the sourcesThe moves back to China followed earlier similar moves by Asus and Acer.Latest from Tom's Hardware: “HP, Asus, and Acer have reportedly moved some of their manufacturing capacity back into China”
- SupportedA shortage of memory and storage chips driven by AI demand caused memory prices to rise 500% in 12 months.Latest from Tom's Hardware: “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.”
- SupportedRising component costs have made China’s supply chains more attractive to PC makers.Latest from Tom's Hardware: “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.”
- SupportedA supply chain manager told Nikkei Asia that Chinese contract manufacturers said working with them could improve access to Chinese-made memory chips.Latest from Tom's Hardware: “"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.”
- SupportedA PC component supplier manager said two new Thailand production lines had not turned profitable and did not know when orders would return.Latest from Tom's Hardware: ““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.””
- SupportedAcer chairperson and CEO Jason Chen complained that suppliers were hyping shortage fears to protect margins.Latest from Tom's Hardware: “Acer chairperson and CEO Jason Chen bemoaned as suppliers hyping shortage fears to protect margins.”
- SupportedAn analyst told Semafor, “China’s supply chain retains a distinct advantage.”Semafor: “Despite the risk of rising Western protectionism, experts believe more companies will return: “ China’s supply chain retains a distinct advantage ,” an analyst said.”
- SupportedA Bloomberg columnist argued that “paying its suppliers ever-larger subsidies in the hope of recreating China is unlikely to be a winning trade.”Semafor: “But “paying its suppliers ever-larger subsidies in the hope of recreating China is unlikely to be a winning trade ,” a Bloomberg columnist argued.”
- SupportedThe shift back to China is negatively affecting newly established supply chains in Southeast Asia.Latest from Tom's Hardware: “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.”
