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Dell to diversify from China production

US computer maker to end reliance on China-made chips by 2024

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Computer chips on a circuit board.  

Computer chips on a circuit board.   (AP photo)

TAIPEI (Taiwan News) —U.S. computer maker Dell recently revealed it will phase out use of Chinese-made chips by 2024.

A CTwant report said Dell will also require component suppliers and product assemblers to seek production capacity in countries outside of China such as Vietnam. Nikkei recently reported Dell notified suppliers by the end of 2022 to significantly reduce the number of Chinese-made chips used in its products as it sought to promote diversification of its supply chain in response to mounting tensions between Washington and Beijing.

Dell’s intention is for all chips used in its products to be produced in factories outside China by 2024, completely discontinuing the use of Chinese-made chips. According to a Chinese news website, eight branches of Dell (China) Co., Ltd. have been closed or had licenses revoked.

Market analysts believe Dell's current production largely depends on the Chinese supply chain, and it will not be easy to diversify production or seek alternatives to China-made chips and other components. Furthermore, insufficient supply will be detrimental to company development and will cause a decline in competitiveness.

Dell's U.S. domestic rival Hewlett-Packard has also begun to survey suppliers to assess the feasibility of moving assembly lines out of China. Dell is not only looking beyond China for chip supply as it is also requiring suppliers of components such as electronic modules and printed circuit boards to establish factories in countries other than China such as Vietnam.

The move once again proves that a technology war is accelerating between the United States and China. Such conflict is accelerating the withdrawal of electronics manufacturers from China, Asia's largest economy, and aiding the transition to Vietnam and other Southeast Asian countries.

Washington has stepped up its crackdown on China's chip industry over national security concerns. In October, the United States announced several strict measures to control exports to China. After that, Semiconductor Manufacturing International Corporation, China's largest foundry, said in November that some U.S. chip customers were hesitant to place orders.

U.S. companies are being forced to transform their PC assembly and supply chain, which has been entrenched in China for decades. According to data from Canalys, Dell and HP together shipped more than 133 million laptops and desktops in 2021, most of which were assembled in Kunshan, Jiangsu Province, and Chongqing, Sichuan Province.

Escalating tensions between the U.S. and China have prompted electronics manufacturers, including Apple, to build alternative production bases outside China. Many expect regional production centers to appear in India, Southeast Asia, and Latin America.