HP and Asus Return PC Production to China as AI Boom Drives Up Component Costs

Major PC manufacturers have begun shifting production capacity back to China, reversing years of diversification into Southeast Asia as the economic pressure of the AI hardware boom makes established manufacturing ecosystems indispensable again. According to reports, Acer is redirecting assembly lines to capitalize on China’s deep component supply chains and combat a severe industry-wide margin squeeze.

The strategic retreat follows a period where manufacturers attempted a “China+1” strategy, moving significant production to Vietnam and Thailand to mitigate geopolitical risks and diversify their footprints. However, industry data suggests the shift has become financially untenable. Acer is reportedly shifting part of its production capacity from Thailand and Vietnam back to China, as noted by The Times of India.

The AI Boom and the $699 Bill of Materials

The primary driver for this relocation is a massive spike in the cost of essential hardware. The global demand for AI-capable servers and high-performance computing has redirected the supply of memory and storage components, causing prices to soar for traditional PC makers. According to data from Omdia, the bill of materials (BOM) for a mainstream laptop priced between $500 and $699 has risen from $435 in early 2025 to $699 in the third quarter of 2026.

This increase means that for many mainstream models, the cost of parts now equals the retail price, effectively evaporating profit margins. Memory and storage components now account for nearly 40% of a PC’s total component cost, a dramatic rise from the historical average of roughly 15%. By returning to China, manufacturers hope to leverage local supply networks to shave critical percentage points off logistics and assembly costs.

Memory and storage now account for nearly 40% of the total component cost for mainstream PCs.

Supply Chain Fragmentation in Southeast Asia

While nations like Vietnam and Thailand successfully attracted final assembly plants, they have struggled to replicate the comprehensive “upstream” supply chain found in China. Many of the components used in Southeast Asian factories—from specialized screws to complex motherboards—still originate in China. Shipping these parts to secondary hubs adds layers of cost and time that manufacturers can no longer afford in a declining market.

The shift back to China is also changing who builds these devices. Traditional assembly giants like Foxconn have increasingly pivoted their primary production capacity toward high-margin AI data center servers. In response, PC brands are partnering with a secondary tier of Chinese contract manufacturers, including Luxshare Precision, Huaqin Technology, and Longcheer Technology, to maintain their consumer laptop lines.

The relocation comes at a precarious time for the hardware sector. Global PC shipments fell by approximately 20.1% year-on-year in the third quarter of 2026, forcing companies to prioritize cost-efficiency over geographical diversification. The economic gravity of China’s established manufacturing clusters appears to be overriding the strategic goal of supply chain independence.

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