After Google, Dell and GoDaddy mull pulling out

[Neutral]

Just a day after Google, the world’s largest search engine company, closed down its Chinese search engine, the world’s largest PC manufacturer, Dell, has hinted towards moving its manufacturing base away from China, possibly to India. Dell buys equipment and parts worth $25 billion from China.

Dell founder & CEO Michael Dell met Prime Minister Manmohan Singh in New Delhi on Tuesday. Singh said Dell informed him that the company is buying equipment and parts worth $25 billion from China, a release stated. “They would like to shift to safer environment with climate conducive to enterprise with security of legal system,” he said. The PM has also directed the Planning Commission to work towards the development of computer hardware industry in India.

The statement assumes significance as it comes on the heels of the uproar over Google’s exit from China. The country has invited immense flak over self-censorship---the underlying reason behind Google's exit from China. Moreover, about two weeks ago, Dell on its part has started exporting from its PC manufacturing plant in Sriperumbudur in Tamil Nadu. It is said that the company would be exporting several thousand desktop computers to West Asia in a quarter. “This very strong statement coming from the PM could bring together the entire political will towards hardware manufacturing in the country and could kick-start a new era for the industry,” said Vinnie Mehta, executive director, MAIT. While the country’s hardware and electronics industry currently stands at $45 billion, only $20 billion of it is sourced locally. Moreover, a meagre $4 billion is exported. The global hardware industry stands at around $1.75 trillion.

“Everyone is looking at a ‘China plus one’ strategy for their businesses due to its state-controlled way of functioning. India with its cost advantage and talent could be good substitute. However, a strong push is needed from the government for the manufacturing industry to really take off along with a conducive duty structure,” said an industry analyst. Currently, the duty structure in the country makes it more attractive to import equipment from hubs in countries such as China and Taiwan rather than manufacturing them locally. Meanwhile, post the meeting, a Dell spokesperson said during the meeting with the PM, “Michael shared his thoughts on ways of building the country’s hardware manufacturing eco-system: in this context, Michael said that Dell would be spending nearly $25 billion this year in sourcing components from its supply...


Source 1

Source 2

 

[below_freezing]

Dell can pull away, it's just a customer for our industrial base. the factories are still ours and still running. Huawei, Haier, Lenovo and other foreign companies like HP can replace them, or these factories can start selling the computers directly to customers. They can go where ever they feel the cost is lowest.

 

[topjumper]

This shouldn't come as too big of a surprise if you read into the details:

Mr Singh told the Hindustan Times: "This morning I met the chairman of Dell Corporation. He informed me that they are buying equipment and parts worth $25 billion from China (£16 billion). They would like to shift to safer environment with a climate conducive to enterprise with security of legal system."

The news came as Dell's first plant in India, in Sriperumbudur in Tamil Nadu, made its first export shipment. The plant has the capacity to make a million computers a year. So far, most of the plant's production has gone to the Indian domestic market, but it has now begun shipping to the Middle East. According to the Indian media, tax breaks given to Dell make it cheaper for the company to supply the Middle East, Africa and Europe out of India, rather than China.

A spokesman for Dell said the company had no imminent plans to pull out of China, however. "Mr Dell believes India also has an opportunity of becoming a hardware manufacturing hub, generating employment and adding to the country's impressive growth. Dell has not made any plans to shift its component spend at this time" he said. source Telegraph.



This trend is already taking place in China -- manufacturers on tight operating margins (such as Dell) will eventually move to a lower cost base as China's average income gets higher, and India is working hard to win those contracts by providing beneficial tax treaties, it's part of the globalization game.

India will need to improve its infrastructure such as roads, railways and the skills of its mass labor force etc to make sure it can become a more favorable manufacturing base, this is reinforced by Indian transportation minister's statement at this year's credit suisse asia investment conference -- India aims to build 7,000 km of high ways per year at the expense of further increasing the country's budget deficit, as this is very necessary for India if it wants to grow.

For China on the other hand, while its current low-cost manufacturing status still remains and probably will be for quite some time due to its superior infrastructure in the region and large workforce base etc, but unlike India, its workforce will age very rapidly in the coming decades and it now starts to shift towards building a more industrialized and high-value added economic model, this is very necessary and a natural part of a country's progression.

Just like India is offering tax-breaks to overseas manufacturing companies, China is offering tax-breaks to foreign R&D operations, cutting edge researches are encouraged to come to China where skilled graduates / engineers are available for hire at lower rates compared to the west. For example applied materials has moved its global R&D headquarter from Silicon Vally to Xian (where a skilled master's graduate can be hired for only $730 a month), GM has its auto research center in Shanghai, Intel has its semiconductors research lab in Beijing and its similar story for IBM and Microsoft etc.

There is a news in New York Times last week which caused quite a bit of an uproar in the US, but this is the step that China begins to take -- it has plenty of high quality university graduates and PhDs every year, it's time for them to become the attraction to foreign investors, not just migrant workers.

China Drawing High-Tech Research From U.S. - NYTimes.com

 

[graphican]

I wont say pulling out of Dell would not make any difference whatsoever but Chinese companies make the stuff that sells out there in the world. If Dell is looking to pull out and stop buying from China, the companies who are selling to Dell would start selling to companies who are anxious to take Dell's place in the market. These are called opportunity awaiting companies that cannot beat the market leader without such opportunities. The reality on ground stays that China makes the cheapest products because of cheap labor and one of the largest Industrial Base + the most systematic working models that the world have witnessed. India can compete but not beat the benefits that a company has working there in China.

But on the side notes, Good luck to India and Dell for their business together.

 

[Speeder 2]

Wtf is this GoDaddy? Never heard of. Some kind of crappy marketing firm essentially - selling domain names as the main revenue income.

As for Dell, a low end computer maker in a nuance (except relatively a Luxuary brand in conparison to India's $100 "computer" ) , not even close to anything "High Tech". To put Huawei in the same breath as Dell is kind of insult to the former, as Huawei is an authetic hitech firm, holding probably 10X In't IP rights more than Dell did last year alone.

As a low end producer, Dell is obviously ultra sentsitive to prices, both producer prices and consumer ones. As one can notice in the OP, despite of having much lower labour cost in India, Dell will not go there anytime soon, because the global value chain of computer biz is largely in China & Taiwan: R&D, chip design, fiannce, sub contractors, major competitors, local market, transport, marketing, et, etc., which can not be strategically replaced easily by just "more tax break" and "cheaper labour cost" that India puts on the table .

This is the reason why Dell said "yeah yeah, we are considering blah, blah, yet has no plan to shift to India at this time." In other words, mostly a political propanganda stance.

Actually low-end producers gradually moving out of China for cheaper outsourcing is a good sign for China indeed, to prove that China is fastly moving up the value chain, let alone being beneficial to China's environment.

 

[liteon]

<b>Dell Denies Discussing China Move With India Minister (Update2)
March 25, 2010, 8:09 PM EDT</b>


March 25 (Bloomberg) -- Dell Inc. denied an Indian government release that Chief Executive Officer Michael Dell discussed shifting procurement from China to a “safer environment” with Indian Prime Minister Manmohan Singh.

“There was no discussion concerning any change in how or from where Dell will source component parts for the computers it manufactures in Asia,” Minari Shah, a Dell spokeswoman, said in an e-mailed statement today.

Dell sources “equipment and parts worth $25 billion from China,” Singh told members of India’s Planning Commission on March 23, according to an e-mailed text of his speech released by India’s Press Information Bureau that evening.

“They would like to shift to safer environment with climate conducive to enterprise with security of legal system,” Singh told the plan panel. “So I think this is an area where there are immense opportunities,” he said in the speech.

The Web site for the Press Information Bureau, where releases of Singh’s official speeches are posted, no longer has a copy of the remarks. The text was removed after officials from the Round Rock, Texas-based company contacted the Indian press office, Dell’s Shah said.

Harish Khare, a media adviser to Singh, declined to comment.

Holding the Hammer

Dell should avoid damaging relations with the Chinese government because it’s such a large market, said Tom Wirth, senior investment officer at Chemung Canal Trust Co., which manages $1.6 billion in Elmira, New York, and doesn’t own any shares of Dell.

“For Dell as a company, certainly that hurts,” he said. Flare-ups between U.S. companies and China, including Google Inc.’s clash over censorship, could affect relations between the two countries, Wirth said.

“The fact is China holds the hammer to us -- we are indebted to China and not the other way around at this point,” he said.

China accounted for more than 60 percent of all personal computers shipped in the Asia-Pacific region last quarter, according to Gartner Inc. Shipments in that area climbed 44 percent, the fastest rate among the regions surveyed, according to the Stamford, Connecticut-based researcher.

Michael Dell met Singh the day after Google started routing China-based users to an unfiltered search service on its Hong Kong site, following through on a Jan. 12 statement to end self- censorship of its Google.cn portal. Dell declined to comment March 23 when asked about Google’s decision.

Dell dropped 12 cents to $14.87 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have climbed 3.6 percent this year.

--Editors: Suresh Seshadri, Peter Elstrom

To contact the reporters on this story: Mehul Srivastava at msrivastava6@bloomberg.net; Mary Childs in New York at mchilds5@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


*ttp://www.businessweek.com/news/2010-03-25/dell-denies-discussing-china-shift-with-indian-prime-minister.html

 

[liteon]

Never believe anything coming from indian mouths..

 

[below_freezing]

Wtf is this GoDaddy? Never heard of. Some kind of crappy marketing firm essentially - selling domain names as the main revenue income.

As for Dell, a low end computer maker in a nuance (except relatively a Luxuary brand in conparison to India's $100 "computer" ) , not even close to anything "High Tech". To put Huawei in the same breath as Dell is kind of insult to the former, as Huawei is an authetic hitech firm, holding probably 10X In't IP rights more than Dell did last year alone.

As a low end producer, Dell is obviously ultra sentsitive to prices, both producer prices and consumer ones. As one can notice in the OP, despite of having much lower labour cost in India, Dell will not go there anytime soon, because the global value chain of computer biz is largely in China & Taiwan: R&D, chip design, fiannce, sub contractors, major competitors, local market, transport, marketing, et, etc., which can not be strategically replaced easily by just "more tax break" and "cheaper labour cost" that India puts on the table .

This is the reason why Dell said "yeah yeah, we are considering blah, blah, yet has no plan to shift to India at this time." In other words, mostly a political propanganda stance.

Actually low-end producers gradually moving out of China for cheaper outsourcing is a good sign for China indeed, to prove that China is fastly moving up the value chain, let alone being beneficial to China's environment.

you're right, Huawei actually creates telecom infrastructure and high tech equipment, Dell just buys cheap computers and sells them for a higher price.

 

[Hammy007]

the thing is, china doesnt have any big PC manuacturing company. it just uses other foreign companies and mark their products with "made in china", though i agree, prices are lowest or cheapest

 

[below_freezing]

the thing is, china doesnt have any big PC manuacturing company. it just uses other foreign companies and mark their products with "made in china", though i agree, prices are lowest or cheapest

lenovo and huawei are already transnationals and there are others in china like &#31070;&#33311; and &#38271;&#22478;&#12290;

there's no need for Dell, it's not like they are giving us anything besides useless green paper.

 

[aimarraul]

Dell denies China pullout
09:03, March 26, 2010

Dell had already said at a conference in New Delhi that his company would not be embroiled in Google's move to shut down its mainland Chinese operation and stressed the importance of the Chinese market to Dell's growth. Photo:Xinhua

Dell Thursday denied claims by the Indian prime minister that the world's third-largest PC maker is considering shifting its operation from China to India.

According to the Hindustan Times, Indian Prime Minister Manmohan Singh said after his meeting with Dell Chief Executive Michael Dell, "This morning I met the chairman of Dell Corporation. He informed me that they are buying equipment and parts worth $25 billion from China. They would like to shift to a safer environment with a climate conducive to enterprise with security of legal system."

Dell met Singh on Tuesday during his visit to India to seek further growth in the region. He left India the same day.

Dell's operations in India currently employ 23,000 people, one-fourth of the company's total global staff, and generate $3.9 billion for the computer giant.

Most of its production targets the Indian domestic market and it has now begun shipping some production to the Middle East.

According to the report, Indian media suggested that tax breaks Dell enjoys in India make it cost-effective for the company to supply the Middle East, Africa and Europe out of India, rather than out of China.

The report came after Google stopped censoring its search service in the Chinese mainland on Tuesday and redirected Chinese users to its uncensored site in Hong Kong.

Dell had already said at a conference in New Delhi that his company would not be embroiled in Google's move to shut down its mainland Chinese operation and stressed the importance of the Chinese market to Dell's growth.

Dell China made no comment to a Global Times' inquiry for confirmation Thursday.

Bloomberg Thursday quoted a Dell spokeswoman, Minari Shah, as saying, "There was no discussion concerning any change in how or from where Dell will source component parts for the computers it manufactures in Asia."

India's Press Information Bureau removed a copy of Singh's official speeches from its website after Dell contacted the office, according to Bloomberg.

A Dell insider who declined to give his name told the Global Times that it is unlikely for Dell to move its entire operation from China to India.

"Dell may take cost into account when locating its assembly line worldwide. But given the huge Chinese market and thriving business here, it is impossible for the company to withdraw from China," he said.

Dell has 8,000 employees in China, its second-largest market, with a design center in Shanghai, and a manufacturing and distribution center in Xiamen.

Dell's sales in China grew 81 percent in the last quarter thanks to the government incentives to boost domestic consumption, and are expected to generate almost $5 billion in revenue.

The company will spend $25 billion this year sourcing parts from Chinese suppliers, according to Michael Dell.

The insider said manufacturing outsourcing has become a trend for many PC makers, and it has become less important as to where the assembly lines will go &#8211; it could be anywhere in the world.

Meanwhile, GoDaddy, the world's largest domain-name registration company, told US lawmakers Wednesday that it would stop registering new domain names in China following the introduction of new policies by the Chinese government, the Britain-based Telegraph reported Thursday.

In December, China's Internet Network Information Center (CNNIC) announced a stricter registration procedure for .cn domains, requiring applicants to submit their business licenses and photo IDs to authorities in China.

The new policy, taking effect from December 14, was meant to prevent the inappropriate use of ".cn" domains for spreading pornography or by criminals and fraudsters to pay with stolen credit cards, according to CNNIC. But the move was interpreted by some as a policy to enforce new Internet restrictions.

"Our experience has been that China is focused on using the Internet to monitor and control the legitimate activities of its citizens, rather than penalizing those who commit Internet-related crimes," Christine Jones, executive vice president of GoDaddy, said at a congressional hearing on Wednesday.

GoDaddy said that, among its 1,200 customers with ".cn" Web addresses it has requested for documentation, only about 20 percent have provided the documentation.

The move has won applause from US politicians.

Chris Smith, a Republican congressman from New Jersey, extolled the move as following Google's call "to defend the rights of the Chinese people," according to the Telegraph.

Network Solutions LLC, another US company offering similar domain-registration services, also said Wednesday that they already stopped registering new ".cn" domains in December.

An employee with one of China's leading providers of domain-name registration, xinnet.com, who refused to give her name, told the Global Times that the procedure for ".cn" domain registration is lengthy, which is likely to have a negative impact on clients.

But she said the procedure was helpful to crack down on sites spreading improper content like pornography or engaging in fraud.

Hu Yanping, director of the Data Center of China Internet (DCCI), told the Global Times that the GoDaddy company's mission is to help users register international domains and the .cn domain, but that the company's pulling out of China would not have much impact on the Chinese Internet market.

"There are a lot of sources of and agents for domain registrations," he explained, adding the company's move is nothing but a politicization of the Internet, which will eventually harm the development of the Internet.

As media reports speculate that GoDaddy and Google's move may prompt more foreign companies to leave China, the Chinese government assured that Google's decision was an "exceptional case" that wouldn't hurt Beijing's stance to encourage more foreign investment in China.

"We welcome foreign investors to grasp the huge business opportunities in China's economic development &#8230; and benefit each other," Zhong Shan, China's Vice Commerce Minister, said during his visit to Washington Wednesday.

Source: Global Times

 

[scuthan]

Dell denies China pullout
09:03, March 26, 2010

Dell had already said at a conference in New Delhi that his company would not be embroiled in Google's move to shut down its mainland Chinese operation and stressed the importance of the Chinese market to Dell's growth. Photo:Xinhua

Dell Thursday denied claims by the Indian prime minister that the world's third-largest PC maker is considering shifting its operation from China to India.

According to the Hindustan Times, Indian Prime Minister Manmohan Singh said after his meeting with Dell Chief Executive Michael Dell, "This morning I met the chairman of Dell Corporation. He informed me that they are buying equipment and parts worth $25 billion from China. They would like to shift to a safer environment with a climate conducive to enterprise with security of legal system."

Dell met Singh on Tuesday during his visit to India to seek further growth in the region. He left India the same day.

Dell's operations in India currently employ 23,000 people, one-fourth of the company's total global staff, and generate $3.9 billion for the computer giant.

Most of its production targets the Indian domestic market and it has now begun shipping some production to the Middle East.

According to the report, Indian media suggested that tax breaks Dell enjoys in India make it cost-effective for the company to supply the Middle East, Africa and Europe out of India, rather than out of China.

The report came after Google stopped censoring its search service in the Chinese mainland on Tuesday and redirected Chinese users to its uncensored site in Hong Kong.

Dell had already said at a conference in New Delhi that his company would not be embroiled in Google's move to shut down its mainland Chinese operation and stressed the importance of the Chinese market to Dell's growth.

Dell China made no comment to a Global Times' inquiry for confirmation Thursday.

Bloomberg Thursday quoted a Dell spokeswoman, Minari Shah, as saying, "There was no discussion concerning any change in how or from where Dell will source component parts for the computers it manufactures in Asia."

India's Press Information Bureau removed a copy of Singh's official speeches from its website after Dell contacted the office, according to Bloomberg.

A Dell insider who declined to give his name told the Global Times that it is unlikely for Dell to move its entire operation from China to India.

"Dell may take cost into account when locating its assembly line worldwide. But given the huge Chinese market and thriving business here, it is impossible for the company to withdraw from China," he said.

Dell has 8,000 employees in China, its second-largest market, with a design center in Shanghai, and a manufacturing and distribution center in Xiamen.

Dell's sales in China grew 81 percent in the last quarter thanks to the government incentives to boost domestic consumption, and are expected to generate almost $5 billion in revenue.

The company will spend $25 billion this year sourcing parts from Chinese suppliers, according to Michael Dell.

The insider said manufacturing outsourcing has become a trend for many PC makers, and it has become less important as to where the assembly lines will go – it could be anywhere in the world.

Meanwhile, GoDaddy, the world's largest domain-name registration company, told US lawmakers Wednesday that it would stop registering new domain names in China following the introduction of new policies by the Chinese government, the Britain-based Telegraph reported Thursday.

In December, China's Internet Network Information Center (CNNIC) announced a stricter registration procedure for .cn domains, requiring applicants to submit their business licenses and photo IDs to authorities in China.

The new policy, taking effect from December 14, was meant to prevent the inappropriate use of ".cn" domains for spreading pornography or by criminals and fraudsters to pay with stolen credit cards, according to CNNIC. But the move was interpreted by some as a policy to enforce new Internet restrictions.

"Our experience has been that China is focused on using the Internet to monitor and control the legitimate activities of its citizens, rather than penalizing those who commit Internet-related crimes," Christine Jones, executive vice president of GoDaddy, said at a congressional hearing on Wednesday.

GoDaddy said that, among its 1,200 customers with ".cn" Web addresses it has requested for documentation, only about 20 percent have provided the documentation.

The move has won applause from US politicians.

Chris Smith, a Republican congressman from New Jersey, extolled the move as following Google's call "to defend the rights of the Chinese people," according to the Telegraph.

Network Solutions LLC, another US company offering similar domain-registration services, also said Wednesday that they already stopped registering new ".cn" domains in December.

An employee with one of China's leading providers of domain-name registration, xinnet.com, who refused to give her name, told the Global Times that the procedure for ".cn" domain registration is lengthy, which is likely to have a negative impact on clients.

But she said the procedure was helpful to crack down on sites spreading improper content like pornography or engaging in fraud.

Hu Yanping, director of the Data Center of China Internet (DCCI), told the Global Times that the GoDaddy company's mission is to help users register international domains and the .cn domain, but that the company's pulling out of China would not have much impact on the Chinese Internet market.

"There are a lot of sources of and agents for domain registrations," he explained, adding the company's move is nothing but a politicization of the Internet, which will eventually harm the development of the Internet.

As media reports speculate that GoDaddy and Google's move may prompt more foreign companies to leave China, the Chinese government assured that Google's decision was an "exceptional case" that wouldn't hurt Beijing's stance to encourage more foreign investment in China.

"We welcome foreign investors to grasp the huge business opportunities in China's economic development … and benefit each other," Zhong Shan, China's Vice Commerce Minister, said during his visit to Washington Wednesday.

Source: Global Times

Thanks for your clarify. i don't think Dell will leave china for political reasons. I have two dell laptops. I like dell because their prices are very cheap. Dell is not a high-tech company, but a assembly one. Companies like that are very concerned about the cost.

It is still possible that these labor entensive industry will be transfered to India someday because labor cost there is much lower.

 

[applesauce]

the thing about china is, the second a company pulls out there 50 waiting in line to replace them

 

[manish123]

the thing about china is, the second a company pulls out there 50 waiting in line to replace them

I hope my country also learns to teach these white imperialists a lesson they wont forget.China instead of looking like a threat to India should look as a leader in the fight against white imperialism and india instead of standing on the sidelines acting suspiciously should actively engage with not only china but other similar minded countries against the western imperialists.

 

[chinapakistan]

I hope my country also learns to teach these white imperialists a lesson they wont forget.China instead of looking like a threat to India should look as a leader in the fight against white imperialism and india instead of standing on the sidelines acting suspiciously should actively engage with not only china but other similar minded countries against the western imperialists.

Fortunately, there still are some indian think so, Unfortunately, most indian and your polician are fooled by US and they dont think so.