Dell Plans Larger Spending in China

The US IT giant Dell plans to invest a big amount of greenbacks in China to earn more from this big market.

Dell Inc. plans to spend more than $100 billion over 10 years to broaden operations in China and increase its sales in the world’s second-largest economy.

Dell will open a second China operations center next year in Chengdu, adding production, sales and support in the southwestern part of the country. The world’s third-biggest maker of personal computers will also add an office and as many as 500 workers at its existing Xiamen site, it said in a statement on September 16.

Dell overtook Hewlett-Packard Co., the world’s biggest PC maker, to rank second in computer shipments in China last quarter, according to research company IDC. The Round Rock, Texas-based company is boosting capacity in China as Microsoft Corp. Chief Executive Officer Steve Ballmer projects the country may replace the U.S. as the largest PC market next year.

“It makes perfect sense to set up a regional center in the hinterland city of Chengdu,” said Steven Zhang, an analyst at DBS Vickers (Hong Kong) Ltd. “All other major PC brands, such as HP, Acer and Lenovo, are also pushing for rural market expansion in China over the past couple of years. The $100- billion investment over 10 years doesn’t seem to be blowing off the roof.”

Conservative Estimate

The $100 billion spending projection is a conservative estimate that includes purchases of components and products procured in China, Dell spokesman David Frink said. The company spent about $23 billion in China in 2009, he said.

In the coming years, Dell’s business in China will probably expand faster than the overall PC market in the country, which is expected to increase by 18 percent to 20 percent a year in volume terms, Dell China President Amit Midha told reporters on September 17 from Shanghai, without specifying a timeframe.

Last year’s sales increased in the Asia-Pacific region for Dell at a faster pace than in other parts of the world. Still, the company got only 12 percent of its business revenue last year from Asia-Pacific, according to data compiled by Bloomberg.

The manufacturing and customer support center in Chengdu will begin operations in 2011 and may eventually employ 3,000 people, the company said. With the additional capacity, Dell can meet demand in China for the next decade, Midha said.

Dell rose 12 cents to $12.42 in Nasdaq Stock Market trading on September 16. The shares have fallen 14 percent this year.

Dell accounted for 9 percent of PC shipments in China in the second quarter, compared with 7.7 percent a year earlier, according to data from IDC. The US company ranked second only to Lenovo Group Ltd. in China, according to IDC.

Hewlett-Packard’s PC share in China shrank to 8.2 percent last quarter, from 13.2 percent a year earlier, IDC said.