Dell shifts desktop production to China

In what may become an increasingly popular trend after China's membership of the WTO is granted, Dell is to move its desktop production there from Malaysia

PC maker Dell Computer is relocating its desktop production activities for the Japanese market from Malaysia to China, a move many manufacturers are expected to make as China prepares to enter the World Trade Organization (WTO) in November.

The move first began in May with its OptiPlex product line, said Yasmin Mahmood, Dell Asia Pacific general manager (Malaysia).

By month's end, the company will start to shift its Dimension desktop production as well, Yasmin said in an email interview.

Dell has two manufacturing facilities in Penang, Malaysia -- Asia Pacific Customer Center (APCC) 1 and 2 -- which serve Asia Pacific and Japan. The company also has a plant in Xiamen -- China Customer Center (CCC) -- which ships made-to-order products to China and Hong Kong.

"To ensure that we meet and exceed all customer requirements and load balance in terms of production and logistics within our manufacturing facilities, we decided to use CCC as a production hub for desktop PCs for the Japanese market," Yasmin said, explaining the relocation.

"APCC will continue to manufacture notebooks, workstations, servers and storage products for the Japanese market, as well as the complete line of Dell systems to the rest of Asia Pacific -- except China and Hong Kong, which are serviced out of CCC in Xiamen," she noted.

With China and Taiwan's imminent entry into the WTO, the PC maker's move does not come as a surprise, analysts say. And many warn that Malaysia could be the hardest hit.

"Many manufacturers are moving to China since operational costs are cheaper there," said Pearly Yap, an analyst with BNP Prime Peregrine Securities in Singapore.

"There are also many good Chinese engineers and is it easy to buy land in China," Yap said.

With China emerging as a lucrative manufacturing base, Malaysia will try to gain a foothold in making high-end semiconductors, and not just focus on lower-end consumer electronics production and assembly, said Gartner Asia Pacific semiconductor analyst Tan Kay Yang.

In addition to relocating desktop production activities for the Japanese market to China, Dell also shifted its Home and Small Business Sales Call Center for Hong Kong from Penang to Xiamen early this month, Dell's Yasmin said.

She explained that the move serves "to further maintain and enhance efficiencies in our Asia Pacific operations" and is "transparent" to its customers.

In July, Dell told Malaysia.CNET.com that it laid off 60 workers from two plants in Penang due to sluggish global demands.

Yasmin maintained that there will be no additional job losses as a result of the relocation, and its current headcount in Penang stands at 2,000.

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