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Dell to Stop Using Chinese Chips

Business

Dell Computer | Image by monticello/Shutterstock

Dell, one of the largest companies in Texas, intends to cease using chips manufactured in China by 2024.

The third-largest computer vendor globally has also instructed suppliers to significantly reduce other “made in China” components used in Dell products.

In early December 2022, it was reported that another major American computer company, Apple, was similarly moving to diversify its supply chain outside of China.

“The rising geopolitical tensions between the U.S. and China is one of the top reasons that electronics builders are now more serious about executing the plans to build a meaningful alternative production base besides China. That is true for Apple as well as other American electronics makers and brands,” according to Isaiah Research analyst Eddie Han.

Dell says it aims to “meaningfully lower” its reliance on Chinese production. This includes components produced in the country, even by non-Chinese companies. By next year, the Texas-based PC maker hopes to have all chips used in its machines made outside China.

One of Dell’s competitors, HP, has also begun investigating the possibility of moving some of its production and assembly out of China.

While companies have long recognized the benefit of a diverse supply chain, the latest move appears to be more significant, an executive at a Dell and HP chip supplier told the Japanese financial newspaper The Nikkei.

“Previously we knew Dell kind of had plans to diversify from China, but this time it is kind of radical. They don’t even want their chips to be made in China, citing concerns over the U.S. government’s policy. … It’s not just an evaluation, it’s not crying wolf. It’s a real and ongoing plan, and this trend looks irreversible,” he said.

Dell stressed that China remains “an important market where we have team members and customers to serve.” Nevertheless, the company continues to “explore supply chain diversification across the globe that makes sense for our customers and our business.”

Washington’s increasingly aggressive stance toward trade with China continues to rattle the tech sector. In October 2022, the U.S. government unveiled strict export controls, citing national security concerns.

As a result of the measures, the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co. (TSMC), suspended advanced silicon production for the Chinese firm Biren Technology.

Another major chipmaker out of China, SMIC, said in November 2022 that it was witnessing hesitancy from some of its U.S.-based customers for new orders.

According to Counterpoint tech analyst Ivan Lam, the manufacturing landscape will expand and diversify over the next five to 10 years.

“The regional production hubs will be emerging in India, in Southeast Asia, and also in Latin America,” says Lam. “We still think it will take a lot of time, but this time the trend is really emerging,” he said.

And not just tech, it seems. Dallas-based luxury leather brand Barrington Gifts aims to make the challenging transition to bring manufacturing closer to home in Mexico and even North Texas.

“We have begun transitioning our production to the USA and are making the most of Barrington’s best-selling products in our new Dallas, Texas, factory. We will continue to move additional production to the USA over the months ahead,” the company told customers in an email.

Most of Dell’s chip assembly occurs in the Chinese cities of Kunshan and Chongqing. In 2021, the Texas-based PC company shipped 59.3 million units globally.

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