Dell CEO Wants To Reduce Supply Chain Dependence On China

Swarajya Staff

Apr 18, 2023, 12:51 PM | Updated 12:53 PM IST

Dell HQ, Round Rock, Texas. (Wikimedia Commons).
Dell HQ, Round Rock, Texas. (Wikimedia Commons).
  • Tech companies have built complex global supply chains, but US pressure has led Western firms to reassess and reconfigure their partnerships in China.
  • Michael Dell, CEO of the major computing group, is focussed on procuring components from non-Chinese sources due to worries over supply-chain interruptions.

    Dell stated that his company's customers are demanding diversification of component sources due to rising US-China tensions and semiconductor production disruption during the pandemic, in an interview to the Financial Times.

    Dell emphasized the crucial need to develop a stronger supply chain to ensure the continuous availability of products in today's uncertain world.

    He did not disclose how many parts Dell buys from China and avoided commenting on the reports about their goal to discontinue using China-made chips by 2024.

    Dell heavily depends on China's supply chain. Its components, such as print circuit boards and casing, are mainly produced in the country and a significant part of its computer product assembly also happens there. Dell is amongst the top three computer vendors in China, sharing its position with Lenovo and HP.

    Tech companies built complex global supply chains, but US pressure has led Western firms to reassess and reconfigure their partnerships in China.

    Last year, Samsung began relocating its smartphone and TV production from China to Vietnam, along with other tech giants such as Google and Microsoft. Apple, on the other hand, faced difficulties in expanding the manufacturing of iPhones to India.

    Dell, who started his IT company at 19 in 1984, prioritised diversifying the supply chain for a long time. The PC and server group has manufacturing outposts in the US, China, Malaysia, Brazil, India, Poland, and Ireland.

    The businessman, aged 58, stated that investments in Europe and the US into production of chips and other components have made it "quite a bit more possible" to source parts outside of China. He stressed that they were focused on it because some customers had requested it.

    Dell and other computer manufacturers have been hit hard as demand for PCs has declined over the past 18 months, following a boom during the pandemic. According to IDC, computer shipments fell by almost 30 per cent in Q4 2022, bringing them to pre-pandemic levels last seen in 2018.

    Dell acknowledged an uncertain global economic situation, but pointed out that companies investing in technology upgrades to appeal to and retain employees, could improve demand in the latter half of the year.

    The increasing workload for machine learning and artificial intelligence is a major factor in the growth of Dell's infrastructure division, which generates almost 40 per cent of their sales.

    He said enterprises and organizations with lots of data should use AI with their data, or they will be doing it wrong.

    He responded optimistically when asked about concerns from the tech and scientific community over the speed of AI system development.

    Tech researchers and executives, including Elon Musk, penned an open letter last month urging for a pause in the development of advanced AI systems, including ChatGPT from OpenAI, citing concerns over a potentially "dangerous" arms race.

    Dell stated that while safeguards are necessary, humans have always told stories about unknown powers causing chaos.

    Humans tend to course correct well, which is why catastrophic events have been rare. Thus, in this case, course correction will occur.

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