U.S. computer maker Dell aims to stop using Chinese-made chips by 2024, and has told suppliers to significantly reduce the amount of other “Made in China” components in its products, Nikkei Asia reported. The world’s third-largest computer maker by shipments told suppliers late last year that it aimed to “significantly reduce” the number of Chinese-made chips it uses, including those made at factories not owned by Chinese chipmakers, three sources with direct knowledge of the matter told Nikkei Asia.
Dell aims to have all of the chips used in its products produced in factories outside China by 2024, they said.
The move is the latest example of how the technology war between the United States and China is accelerating electronics maker’s diversifying production away from Asia’s largest economy.
“The goal is very aggressive. The decisive shift involves not only chips currently produced by Chinese chipmakers, but also chips produced by non-Chinese suppliers in factories in China,” said a person with direct knowledge of the matter. “If suppliers do not respond to measures, they may end up losing orders from Dell.”
Dell’s domestic rival Hewlett-Packard has also started a survey of its suppliers to assess the feasibility of moving production and assembly out of China, the sources said.
Besides chips, Dell is also asking suppliers of other components such as electronic modules and printed circuit boards, as well as product assemblers, to help prepare capacity in countries other than China, such as Vietnam, the sources added.
Previously, computer makers such as Dell and Hewlett-Packard bought chips from chip developers and didn’t worry much about where they were made. The change in attitude has surprised some in the industry.
“Laptops have tens of thousands of components, and the ecosystem has been mature and complete in China for many years,” an executive at a chip supplier for Dell and HP told Nikkei Asia. “Previously we knew that Dell was kind of planning to diversify away from China, But this time it’s a bit aggressive. They don’t even want their chips made in China, citing concerns about US government policy…and it’s not just an assessment, it’s not wolf. It’s a real, ongoing planning, and the trend looks irreversible.”
When asked about its plans, Dell told Nikkei Asia, “We are constantly exploring diversification of the global supply chain, which makes sense for our customers and our business.” It also emphasized that “China is where we have team members and customers important market to serve”.
The computer maker did not comment in detail on its diversification plans, but said, “In order to best meet the needs and expectations of our customers and partners, we have built geographic diversity, flexibility and stability into our global supply chain. “
The U.S. government has been ramping up its crackdown on China’s chip industry out of national security concerns. In October, it unveiled several strict controls on the country’s exports. China’s top chipmaker SMIC said in November that some of its U.S. chip developer customers were hesitant to place orders after the crackdown.
These tensions have provided fresh impetus for companies to shift PC supply chains, including assembly, away from decades-entrenched China. Dell and HP will collectively ship more than 133 million laptops and desktops in 2021, according to data provider Canalys, with much of their assembly taking place in Kunshan, Jiangsu province, and Chongqing, Sichuan province. Apple plans to start producing MacBook computers in Vietnam by the middle of this year, meaning all of the company’s major product lines will have some alternative non-Chinese production base.
“Rising geopolitical tensions between the U.S. and China are one of the main reasons electronics manufacturers are now taking more seriously their plans to establish meaningful alternative manufacturing bases outside of China. For Apple, as well as for other U.S. electronics manufacturers and brand,” Eddie Han, an analyst at Isaiah Research, told Nikkei Asia.
Ivan Lam, a technology analyst at Counterpoint, told Nikkei Asia that more electronics manufacturing bases will start to emerge within the next five to 10 years.
“Regional production centers will emerge in India, Southeast Asia and Latin America, and the shift will start with product assembly only and involve more components,” Lam said. “We still think it’s going to take a lot of time, but this time the trend is really emerging and this is going to be the future of the tech supply chain.”