24 June 2019

What does Shenzhen have to do with Intel’s future?

A number of family-operated small factories in Shenzhen are getting big-company treatment from United States chipmaker Intel.

These factories make keyboards, adaptors and other accessories that go into Intel’s Ultrabook laptops on which the semiconductor giant has bet its future.

Intel wants the Ultrabook, launched three years ago, to compete with Apple Inc.’s Macbook Pro and Macbook Air on size (thinness), weight (lightness), performance and battery life.

So the company has been scouring the world for original equipment manufacturers that can meet these specifications, Economic Observer reports.

But price is an issue. A 3.5 millimeter keyboard, which fits in nicely with its requirements, is more than Intel is willing to pay for. When it learned that a Shenzhen factory makes 3.7 mm keyboards at a lower cost, it lost no time getting the necessary information.

Intel’s own survey shows that consumers prefer laptops with metal unibody housings, but the cost of producing them is prohibitive. MacBook Air’s aluminum enclosure reportedly costs Apple more than US$100.

It turns out that a smattering of small, family-owned stamping and metalworking plants in Shenzhen and neighboring areas can do the job for less than US$30 a pop.

Intel already benefits from Shenzhen’s expertise in lithium battery production. Ultra thin and ultra light batteries made by BYD Electronic (00285.HK), Capchem Technology (300037.CN) and Green Eco-manufacture Hi-tech (002340.CN), among others, power Ultrabooks cheaply and efficiently.

A senior executive said Intel orders accessories from the Shenzhen factories in bulk. Samsung, Asus and Lenovo are also known to buy large quantities.

What took Intel eight to 10 months to coordinate with Taiwan factories for a new product line needs just half the time with their Shenzhen counterparts. Also, the Shenzhen factories are within 20 kilometers of a Foxconn plant. Foxconn assembles laptops and tablets for Sony, Dell and HP with Ultrabook specifications.

It’s no surprise Shenzhen is humming and analysts say there’s more yet to come.

Thousands of small manufacturers that made a fortune making low-priced knockoffs are struggling to stay afloat amid a government crackdown. Major players in the electronics industry can tap their facilities and expertise by bringing them into the mainstream.

That’s like having an entire manufacturing ecosystem with built-in qualities of speedy production and efficient cost management.

– Contact the writer at [email protected]


EJ Insight writer

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