Dell, one of the top names in personal computers, is planning an aggressive expansion in smaller Chinese cities as the market grows despite a global trend toward smaller devices, a senior executive said this week.
The US-based company, facing uncertainty with a buyout bid by its founder Michael Dell, will add stores and product development in cities down to tier-six level on the mainland, Dell's computing products vice-president Kirk Schell said.
More presence in the mainland, which received 69 million PC shipments last year to become the world's largest consumer of the traditional computing tools, would boost Dell's odds against two other favourites, Hewlett-Packard and homegrown developer Lenovo. It would also complement China's quest to modernise its vast countryside.
Dell announced yesterday that it had opened a 30,000 square-metre factory in Chengdu with capacity for seven million desktops a year.
"We're opening a large number of storefronts in China so that more people will touch and feel our products," Schell said on the sidelines of the Computex Taipei technology show. "We need to get our hands on customers not only in both tier-one and tier-two cities but also the fourth to sixth, which are the big growth opportunities. So that's clearly a focus."
He declined to give a specific number of stores, expected revenues for Dell's growth in the country where it first invested in 1998 and every year buys about US$20 billion from supplier partners. Dell also would invest more in building devices especially for the mainland - in China - due to the country's "strategic importance", Schell said.
"The most competitive?" he said, comparing China to other countries. "That's hard to say, but we're here to compete, and clearly it's a place where we aim to win."
The mainland's PC market is forecast to grow more than 3 per cent for last year, market research firm IHS iSuppli said in an April brief, going against the world trend of declining sales. In other markets, more portable tablets have slowed replacement of notebooks and desktops. Dell, however, expects Windows XP users worldwide eventually will replace their PCs en masse to get newer Microsoft operating systems.
Smaller Chinese cities show the most promise for consumer technology, moving the market away from the big centres such as Beijing, Shanghai and Shenzhen, market research has found.
The middle third in terms of wealth will spend 13.6 per cent more this year than last year on consumer electronics, more than the country's richest regions, according to a November report from technology research firm IDC. That consumer segment would lead the nation this year in buying PCs, smartphones and printers, IDC found.
That report refers to places such as Tianjin, with 13 million people and just half an hour by train from Beijing, Anhui province west of Shanghai and the western mega-city of Chongqing.
Government plans to spend about 40 trillion yuan (HK$50.25 trillion) on a decade's worth of rural infrastructure projects would create another new wave of first-time PC buyers, the IHS brief notes. Rural Chinese with money often move to smaller cities for work.
"The first- and second-tier cities are already saturated, and their [PC] refreshment rate isn't that high," said Tracy Tsai, principal analyst in Taipei with market researcher Gartner. Dell, like its competitors, must open sales channels in China's outback where people see PCs as essential as televisions, she said.