Lenovo, Dell, and HP Are Considering Relocating Their Production to Saudi Arabia. Favorable Import Tariffs Make Saudi Arabia the New Promised Land for PCs.
According to Digitimes, Lenovo, Dell, and HP are heading to Saudi Arabia. The three major PC manufacturers are reportedly looking to scale up their chip production in the Middle East. The more favorable import tariffs imposed on Saudi Arabia by the United States suddenly make the country a potentially interesting alternative to China and other East Asian countries.
Of the mentioned companies, Lenovo’s plans are the most concrete. In early January, even before Trump’s inauguration, Lenovo announced the construction of a new production site near Riyadh, the capital of Saudi Arabia. Initially, it was intended to serve markets in the Middle East and Africa, but in Trump’s trade war, the site could play a larger role in (partially) avoiding import tariffs.
Favorable Import Tariffs
Saudi Arabia has embarked on a large-scale ‘charm offensive’ to put itself on the world map as a production hub for electronics and chip technology. The country, which doesn’t have the best reputation when it comes to human rights, has no shortage of one thing: money. Through a government-backed investment fund, a savings pot of 620 billion dollars is ready. The budget of the European Chips Act, which tries to achieve the same goal, pales in comparison.
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PC Manufacturers Relocate to Saudi Arabia to Avoid Import Duties
Lenovo has taken the bait on a two billion dollar subsidy, but the Saudis want to convince more parties from the PC industry. Dell and HP haven’t announced any plans yet, but have reportedly already viewed potential sites at the government’s invitation. The government also hopes to attract major chip manufacturers such as Foxconn.
Besides petrodollars, Saudi Arabia has an additional economic trump card (pun intended). The country has been slapped with an import duty of only ten percent by Trump. This is significantly lower than the countries where production is currently located, which could make the Middle East an interesting production and distribution center in the long term.
The ‘Trump tariffs’ are causing uncertainty in the global PC market. Manufacturers have been working on moving their production out of China for some time, and the looming trade war with the United States is accelerating that process. While Trump’s tone around his tariffs is somewhat softening, with him, you never know when he might change his mind again.