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Dell to establish new center out west
Published on: 2010-09-19
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Dell announced Thursday a plan to open an operations center in Chengdu, Sichuan Prov-ince next year, an attempt to tap into China's long-neglected western regions and catch up with perennial industry leader Lenovo.

The center, slated to be completed in 2011, will be Dell's second in China after its Xiamen, Fujian Province location, and will initially manage support manufacturing, sales and services for West China, Amit Midha, the president of Dell China, said during a telephone conference Friday.

Midha declined to reveal the amount of the Chengdu investment. Analysts see great potential in China's western regions, which have trailed coastal provinces in economic development over the past three decades.

Research firm IDC predicted demand for PCs in West China will grow at an annual rate of 21 percent through 2014.

Dell may also be shifting locations due to rising labor costs in East China, Ye Lei, a Shanghai-based analyst with Gartner, a technology research firm.

But Dell's Midha said it is not "a huge concern," as labor makes up a small amount of the total costs of PC manufacturing. Dell's share will continue to grow in China, which is now the computer maker's second largest market after the US, Midha said.

But the world's second biggest computer manufacturer by sales still faces stiff competition from both foreign and domestic players.

Dell, which became the No. 2 PC maker in China in the second quarter with a 9 percent market share, still has less than a third of Lenovo's nearly 30 percent market share.

HP, the former No. 2, saw its market share drop to 8.2 percent in the second quarter from the previous quarter's 11.1 percent partly due to a reputation damaging recall.

Taiwan PC maker Acer may become a major player if it can utilize Founder's distribution network, the analyst said.

Last month, Acer signed a licensing agreement with Chinese PC maker Founder, currently No. 4, with a 7 percent share.

But Texas-based Dell has made it clear it will not settle for second fiddle.

In the next decade, the US firm will spend more than $100 billion on research and development, new facilities, hiring and procurement throughout China, Midha said.
 
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