Dell may contract Taiwanese suppliers to do more on production

Taiwanese personal-computer industry watchers estimated that Dell Inc., after Chairman Michael Dell reassumed chief executive officer (CEO), would likely contract Taiwanese suppliers to finish its computers at their factories in order to further pare down costs.

Industry watchers pointed out that for a long time the world's No.2 PC supplier had insisted on assembling computers on bare-bone systems contracted from Taiwanese suppliers on its own at in-house factories at home and abroad. They noted that the production model had increased Dell's production costs since the supply chain was complicated by geographical locations. Currently, the company operates assembly factories in mainland China, Malaysia and the United States.

By contrast, other world leading PC suppliers including Apple and HP have contracted Taiwanese suppliers to complete and even deliver their products to customers from their factories.

Another major difference between Dell and its rivals is found in component-procurement authorization extent. HP and Apple usually allow contract manufacturers to buy parts for their computers, reserving for themselves only the right to buy liquid-crystal display panels and microprocessors. Dell has insisted on buying parts on its own for its computers, inevitably increasing its production costs and hamstringing Taiwanese suppliers' production flexibility.

Taiwanese industry watchers pointed out that PC manufacturing is more important than consumer-electronics and communications-equipment productions to Taiwan, given the fact Taiwan's electronics industry lies in PC manufacturing. They noted Dell would be able to better its relations with Taiwanese suppliers and boost its production efficiency if it could depend more on Taiwanese suppliers.

For Taiwan's electronics industry, revenue and earnings will definitely get a big boost as long as Dell decides to contract Taiwanese suppliers to finish its products at their factories.

source & copyright: CENS