Lenovo has shut down one of its two computer manufacturing plants in India, as the company has seen its market share decline in the country.
The company has ramped down its Baddi manufacturing facility in Himachal Pradesh in north India since April last year, Lenovo said in a statement on Monday.
The company does not have manufacturing operations or employees working at present at the Baddi facility, it added.
Lenovo is in the process of completing the required regulatory formalities for closure, the statement said. From April last year, all production for Lenovo has been undertaken at its second plant in Pondicherry in south India, which has sufficient capacity to meet customer demand, it added.
Lenovo decided to close down the facility at Baddi as a move to reduce operational cost, and to align with current demand, a spokeswoman said.
Lenovo may have over-estimated demand for its products in India, when it created new manufacturing capacity, said Diptarup Chakraborti, principal research analyst at Gartner.
In the quarter ended Dec. 31 last year, Lenovo shipped about 155,100 laptops and desktops in the country, Chakraborti added.
When Lenovo announced the Baddi factory in 2007, it said it would eventually have a production capacity of 2 million units. It was designed to save on freight costs and shipment time to customers in north India.
Lenovo's market in the north of India was not large enough to require a large factory there, Chakraborti said.
The older facility at Pondicherry became part of Lenovo after its acquisition of IBM's PC business in 2005. It has a capacity of 1 million units.
The company's market share has been on the decline in India for over a year, according to Chakraborti. In the quarter ended Dec. 31, it ranked fifth behind Hewlett-Packard, Dell, Acer, and a local vendor HCL Infosystems, he added.
Lenovo's sales increased by volumes in the last two quarters of 2009, but it did not make a significant change to its market rank, as other vendors also had improved sales, Chakraborti said.