HomeWorld BusinessDell budgets $100 bn for extending China operation

Dell budgets $100 bn for extending China operation

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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 centre next year in Chengdu, adding production, sales and support in the south-western 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 yesterday.

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 US as the largest PC market next year.

“It makes perfect sense to set up a regional centre 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.”

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% to 20% a year in volume terms, Dell China President Amit Midha told reporters on Friday 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% of its business revenue last year from Asia-Pacific, according to data compiled by Bloomberg.

The manufacturing and customer support centre 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 Thursday. The shares have fallen 14% this year.

Dell accounted for 9% of PC shipments in China in the second quarter, compared with 7,7% 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% last quarter, from 13,2% a year earlier, IDC said. — Bloomberg

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