Dell is looking to phase out “Made in China” chips by 2024

US computer maker Dell aims to stop using chips made in China by 2024 and has asked suppliers to significantly reduce the amount of other “Made in China” components in its products as part of efforts to diversify its supply chain amid concerns about tensions between Washington and Washington. and Beijing. .

The world’s third-largest PC maker by shipments told suppliers late last year that it aims to “meaningfully reduce” the amount of China-made chips it uses, including those produced at facilities owned by non-Chinese chipmakers, three. People with direct knowledge of Nikkei Asia said it.

They said Dell’s goal is to use all chips in its products produced in factories located outside of China by 2024.

The move is the latest example of how the technology war between the United States and China has accelerated electronics makers’ efforts to diversify production away from Asia’s largest economy.

“The target is very aggressive. The specific shift includes not only those chips that are currently being manufactured by Chinese chipmakers but also in facilities in China for non-Chinese suppliers,” one of the people familiar with the matter said. “If suppliers don’t have response measures, they could lose orders.” Dell in the end.”

Dell’s local competitor, HP, has also begun surveying its suppliers to gauge the feasibility of moving production and assembly away from China, sources said.

This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, economics, business, and international affairs. Our correspondents and outside commentators from around the world share their perspectives on Asia, while our Asia300 section provides in-depth coverage of 300 of the largest and fastest-growing listed companies from 11 economies outside of Japan.

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In addition to chips, the sources added, Dell has asked suppliers of other components, such as electronic modules and printing circuit boards, and product assemblies to help prepare capacity in countries outside China, such as Vietnam.

Previously, PC manufacturers such as Dell and HP bought chips from chip developers without worrying about where they were made. The change in attitude has surprised some in the industry.

“There are thousands of laptop components, and the ecosystem has been mature and complete in China for years,” an executive at a chip supplier to both Dell and HP told Nikkei Asia. “Before, we knew Dell kind of had plans to diversify from China, but this time it’s kind of an extreme. They don’t even want their chips to be made in China, citing concerns about US government policy… It’s not just an assessment, It’s not a crying wolf. It’s a real, ongoing plan, and this trend seems irreversible.”

When asked about its plans, Dell told the Nikkei Asia: “We are constantly exploring supply chain diversification around the world that makes sense for our customers and our business.” She also stressed that “China is an important market that we have both team members and customers to serve.”

The computer maker did not comment in detail on its diversification plans but said, “To best meet the needs and expectations of our customers and partners, we have geographic diversity, flexibility and stability built into our global supply chain.”

Washington has been stepping up its crackdown on China’s chip sector, citing national security concerns. It unveiled several severe restrictions on exports to the country in October last year. SMIC, China’s major chipmaker, said in November that some of its US chip developer customers had become reluctant to place orders after the crackdown.

These tensions have provided new impetus for companies to shift the PC supply chain, including assembly, away from China, where it has been deeply rooted for decades. Dell and HP — which together shipped more than 133 million laptops and desktops in 2021, according to data provider Canalys — have most of their assembly in the Chinese cities of Kunshan, Jiangsu Province, and Chongqing, Sichuan Province.

Apple plans to start manufacturing its MacBook computers in Vietnam by the middle of this year, which means the company will have some alternative non-Chinese production bases for all major product lines.

“Rising geopolitical tensions between the US and China is one of the main reasons electronics builders are now getting more serious about implementing plans to build a meaningful alternative production base alongside China. This is true of the company,” Eddie Han, an analyst at Isaiah Research, told Nikkei Asia. Apple as well as for other US electronics makers and brands.

Evan Lam, technology analyst at Counterpoint, told Nikkei Asia that more manufacturing bases for electronics will start to appear in the next five to 10 years.

“Regional production centers will be established in India, Southeast Asia and also in Latin America, and the shift will begin from product assembly only to include more components,” Lam said. “We still think it will take a lot of time, but this time the trend is really emerging and that will be the future of the technology supply chain.”

Asked by Nikkei Asia to comment on its plans, HP said, “We have a strong supply chain in China and around the world to serve our customers.”

copy of this article First published by Nikkei Asia on January 5, 2023. © 2023 Nikkei Inc. All Rights Reserved. all rights are save

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