TAIPEI: Contract laptop maker Inventec is in talks with Hewlett-Packard Corporation to build a plant in the western mainland aiming to supply global PC leader Hewlett-Packard, officials said yesterday.

The factory in the western city of Chongqing, the most populous municipality on the mainland, would have capacity to produce more than 4 million laptop computers every year, said the official at the Xiyong Micro-electronic Park, who would give his name only as Wang.

He added talks have advanced to the late stages. Land had already been chosen for the development. "If they start construction of the factory by the first half of this year, they can start production by the second half," he said.

An official at Inventec, the world's fourth-largest laptop PC maker, had no comment. HP spokeswoman was not available.

HP has held talks with Inventec on a manufacturing tie-up at its Chongqing facility, but has not reached any specific deal yet, said an official in HP's logistics department, speaking on condition his name not be used because he was not authorized to speak for the company.

Inventec moved forward after HP announced in October it would set up a production base in Chongqing to begin operations in 2010.

Contract manufacturers and other suppliers frequently set up manufacturing facilities in areas where clients already have large operations. The linkage streamlines logistics and simplifies supply chain issues.

Many top PC brands such as HP, Dell and Acer typically carry out their own design work. The labour-intensive manufacturing work then is outsourced to original equipment manufacturers (OEMs) such as Inventec.

Many such OEMs are headquartered in Taiwan, with Taiwanese contract manufacturers such as Quanta and Compal Electronics producing more than 80 percent of the world's laptop PCs.

Some analysts expressed concern about Inventec's move to set up a Chongqing factory, saying that expansion plans at this point might not be well advised. "Looking at their factory in Pudong (Shanghai), they're still having problems there and so I'd be a little concerned about how things go with them in Chongqing," said KGI Securities analyst Angela Hsiang.

Inventec shares were up 0.4 percent at NT$12.65 by 0355 GMT, lagging the benchmark TAIEX's 1.63 percent advance.

(HK Edition 03/17/2009 page16)