(Bloomberg) -- Lenovo Group Ltd. started building AI servers in India’s south, the latest boon for the rapidly growing country’s push to become a high-tech powerhouse.
The company said Tuesday it has started making the large, powerful computers in Pondicherry, southeastern India, moving beyond products such as laptops and smartphones. The Chinese company will also build out its facilities in the Bangalore region, including a research lab with a focus on artificial intelligence.
Those decisions form part of a broader shift as Lenovo positions itself for an anticipated boom in AI-empowered PCs and devices. The company will invest $1 billion globally over the next two years researching and developing AI platforms and hardware, said Amar Babu, Lenovo’s Asia Pacific president.
Lenovo’s plans also mark another win for India as Prime Minister Narendra Modi tries to attract more technology investment into the country. While India’s tense relationship with China has suffered setbacks in recent years, global tech companies see it as an attractive option to build out operations as Beijing and Washington are mired in a trade war.
The servers perform the computations needed to run services including generative AI, made famous by apps such as ChatGPT. The addition of AI servers means Lenovo will make its entire stack of hardware in India for the domestic as well as export markets, underscoring the country’s importance for the company.
While India’s tech manufacturing sector is still small compared with China, it has been catching up and now makes increasingly sophisticated products such as iPhones. AI servers represent another milestone, showing India can offer an alternative to regions with more established high-end manufacturing industries.
The country is also a fast-growing market in its own right. India AI demand is currently $17 billion and growing 25% to 30% annually, Babu said.
Taiwan currently produces the bulk of the world’s AI servers, which are used by technology giants such as Amazon.com Inc., Microsoft Corp. and Nvidia Corp. But with geopolitical tensions on the rise between China and the West, companies are under pressure to shift manufacturing outside Taiwan. Demand for generative AI tools and applications has sent the need for related hardware soaring, with electronics manufacturer Foxconn Technology Group last year predicting that annual sales of AI servers could touch $150 billion by 2027.
(Updates with executive’s comments from the third paragraph)
©2024 Bloomberg L.P.