Experts said the decision of Dell Technologies to eliminate Chinese semiconductors from its products by 2024 will only weaken the strong ecosystem the company has built in China.
Given China’s indispensable position in the global supply chain for consumer electronics, experts said the reported decision of Dell Technologies, a US-based personal computer manufacturer, to eliminate all Chinese semiconductor chips from its products by 2024 will only weaken the strong ecosystem the company has assiduously built in China over the last several decades and also erode Dell’s global competitiveness.
After Nikkei Asia reported that Dell had instructed suppliers to lower the amount of chips and other Chinese components in its products, the remarks were made. One of Dell’s competitors, HP Inc., a maker of personal computers, has reportedly begun polling its suppliers to determine whether production and assembly could be moved abroad.
“The supply chain in China is largely responsible for Dell’s current production.” The business would have a very difficult time locating a substitute in the near future, said Xiang Ligang, the Information Consumption Alliance’s director general and a representative of the telecom sector.
Since the PC has a relatively low profit margin, according to Xiang, production costs are important, particularly given that chips made in China are typically less expensive. “It’s highly likely that forcing Dell to find an alternative will harm its output.” “The company’s growth and competitiveness will be negatively impacted if supply becomes insufficient,” he added.
In a statement, Dell stressed the significance of China as a significant market and pledged to pursue global supply chain diversification to best meet customers’ and partners’ needs and expectations.
In a November interview with China Daily, Wu Dongmei, global senior vice president of Dell, stated that the company “doesn’t just have a sales office in China” and that its expansion in the nation is based on “long-term consideration.”
Wu stated that Dell has a complete value chain in place, including design, research and development, production, manufacturing, supply chain management, sales, and services, all of which support the growth of the company’s business in China and internationally.
When Dell decided to operate in China, Wu told China Daily, “We became very focused in China.” In fact, our analyses show that many market conditions in China are, on the whole, better than those in other countries.
According to a report by market research firm Canalys, Dell came in second place to Lenovo Group in terms of PC vendors in China during the third quarter of last year, with a market share of 11.7%.
“This year, as China’s economy continues to stabilise, the country’s booming domestic demand will make it a market that no tech giant wants to miss out on.” According to reports, Dell’s decision will also result in the loss of its domestic business, including cloud computing, “said Beijing Academy of Social Sciences researcher Wang Peng.
“China also has great advantages in the global consumer electronics chain for its efficient cooperation in multiple manufacturing steps, including raw material supply and mould design to final assembly,” Wang said.
According to Yao Jun, deputy head of the planning division at the Ministry of Industry and Information Technology, manufacturing remains a significant area for foreign investment in the nation, even though some foreign-funded enterprises are diversifying their business models.