Dell may boost its orders for Chinese-made parts

Dell Computer Corp, the world's second-largest personal-computer maker, said it may double the value of components it buys from Chinese suppliers as it seeks to trim costs and boost market share in Asia.

Round Rock, Texas-based Dell, which sources 60 percent of its computer parts from Asia, last year bought US$3.5 billion of components in China. That's equal to the company's sales in all of Asia last year.

"That amount definitely can double," said Bill Amelio, head of Dell's Asia-Pacific operations, in an interview. "You go to Shanghai, Shenzhen. Components suppliers all over the world have units or partnerships there. It's foolish if we don't continue that trend."

He wouldn't give a timeframe.

Computer prices are falling by 1 percent every week, according to Dell, allowing the company and rivals such as world No.1 PC-maker Hewlett-Packard Co to lower prices to attract customers.

Dell Asia's third-biggest computer maker by shipments in the fourth quarter. Its market share in China, which overtook Japan as the world's No.2 computer market in the second half, rose about one percentage point to 5 percent last year, market researcher International Data Corp said.

Legend Group Ltd, China's biggest computer maker, is the market leader with 27 percent. In October, Legend cut prices of its Pentium4 computers, with LCD monitors, by 14 percent to 7,999 yuan (US$966) after Dell slashed prices by as much as 26 percent. Legend's cheapest Pentium4 model now sells at 6,499 yuan.

Higher volumes are helping Dell raise profits even as computer prices drop. The company said its fourth-quarter profit jumped 32 percent in the three months to Jan. 31, driven partly by strong unit sales growth in China and Japan.

Desktop notebook computer shipments in China may grow 12 percent to 10.2 million this year, according to Gartner Research.

Analysts boosting marketing share in China may be a tough task for Dell, whose biggest clients are government agencies and bigger companies. Consumers made up less than a 10th of Dell's China sales last quarter. Dell takes orders directly from buyers online and doesn't sell through retail stores.

"Growth in China's computer market is now driven mainly by lower-income consumers in second-tier cities," said Clement Wong, an analyst at E2-Capital Holdings Ltd. "Dell may be a threat in the mid- and high-end market. In the mass market, Legend has the edge because of its extensive distribution network."