US computer giant Dell to replace all China-made chips in its products by 2024 amid tensions between Beijing and Washington

Dell wants all of the chips used in its products, including those made by foreign suppliers in China, to be sourced from outside the country
Dell reportedly also plans to move about 50 per cent of its production out of China by 2025

Semiconductors

Lilian Zhang

Published: 9:30pm, 5 Jan 2023

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Personal computer (PC) giant Dell Technologies plans to stop using China-made semiconductors by 2024 and urged its suppliers to cut down on components sourced from that country amid concerns over escalating tensions between Beijing and Washington.

That initiative by Dell, which was ranked by research firm IDC as the world’s third-largest PC vendor in the third quarter last year, forms part of the Texas-based company’s efforts to diversify its manufacturing supply chain outside China, according to a report on Thursday by Nikkei Asia, which cited people with direct knowledge of the matter.

Dell’s goal is to have all of the chips used in its products, including those produced by foreign suppliers in China, to be sourced from outside the country by 2024, the report said.

Dell is also expected to move about 50 per cent of its production out of the world’s second-largest economy by 2025, according to a separate report by Taiwanese financial newspaper Commercial Times.

A Dell Technologies office building is seen at the US computer giant’s main campus in Round Rock, Texas, on January 4, 2023. Photo: Getty Images via Agence France-Presse

These reports indicate how the tech war between Beijing and Washington, along with various manufacturing disruptions on the Chinese mainland, have prodded global brands like Dell to expand their supply chain networks elsewhere.

Apple is reportedly relocating some production of MacBooks to Vietnam, a move that has been planned since 2020, with the initial batch of its popular laptop computers expected to roll out from the Southeast Asian country as early as May this year.

Those developments come after the Biden administration’s move last October to implement updates that further restrict China’s ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors used in military applications, including weapons of mass destruction.

China’s chip imports also recorded their steepest drop last year in the 11 months ended November 30, as disruptions in manufacturing activity and economic headwinds continue to weigh on the country’s productivity.

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Dell, which started direct sales to China in 1995 and began selling its PCs to local retail stores from 2007, has certain laptop models assembled on the mainland by electronics contract manufacturers.

While emphasising China’s importance as a major market, Dell said in a statement that it was committed to pursue global supply chain diversification “to best meet our customers’ and partners’ needs and expectations”.

Dell, according to the Nikkei Asia report, has asked its components suppliers, including those that make printed circuit boards and modules, to bolster their production capacity in countries like Vietnam.

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Most of the major PC brands already source their components from suppliers based in Taiwan and South Korea. The top three American PC brands – Dell, HP and Apple – depend on Taiwanese firms for 90 per cent of their components.

Dell was China’s second-largest PC vendor in the third quarter last year, when it shipped 1.53 million units for an 11.7 per cent market share, according to a report published last month by tech research firm Canalys. Lenovo Group remained the market leader, with shipments of nearly 5 million units and a 38.2 per cent market share in the same period.

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