Dell Inc, the world's top personal computer maker, wants to ramp up components sourcing from Taiwan by about a quarter to US $12.5 billion in 2006 and foresees global PC market growth slowing this year, its chief executive said on Monday.
Computer and consumer electronics vendors from Japan to the United States are increasingly buying from specialised Taiwan companies such as display maker AU Optronics Corp to hold down costs.
Dell's move to increase purchases of components from Taiwan comes after posting a drop in world-wide market share in the first quarter, when its slice dipped to 18.1 percent versus 18.6 percent a year earlier, according to consultants IDC.
"The PC market globally last year was at a pretty rapid pace and in the first quarter it was going at 11 percent, so we think it will be healthy growth world-wide although a bit slower than last year," Chief Executive Officer Kevin Rollins told reporters.
Rollins visited the island this week to outline his company's strategy to a select group of suppliers.
He had been scheduled to meet executives from AU Optronics and Chi Mei Optoelectronics Corp, Taiwan's two largest makers of liquid crystal displays, as well as major contract makers of laptops, the Commercial Times said.
Executives declined to reveal Dell's current suppliers.
Dell - which vies with Hewlett-Packard Co and China's Lenovo Group in a steadily expanding global personal computer market - spent some US $10 billion on procurement to buy parts in Taiwan during 2005.
"Dell plans to spend US $12.5 billion purchasing products in Taiwan this year to support our global business and manufacturing," Rollins told reporters. "Growing solid partnerships in Taiwan ... will be key to our global expansion."
Taiwan is cementing its pivotal role in the global supply chain by ruthlessly slashing costs and relocating capacity to mainland China. Cut-to-the-bone production techniques employed by personal computer makers, for instance, have won them an estimated four-fifths of global contracts. "Dell is here at a pivotal time to discuss prices with major Taiwan OEM, ODM players," said Merrill Lynch analyst Tony Tseng, referring to contract manufacturers that make products for brand-name firms.
"The results from Dell's meetings will be very important to Taiwan's PC players, while margin pressure continues to hit the notebook sector." Analysts now warn that contract manufacturers, such as laptop makers Quanta Computer Inc and Compal Electronics, need to adopt cutting-edge designs or risk losing contracts. And a growing number of tech giants are bypassing the island altogether by setting up their own Chinese bases.
Dell itself has expanded its production capability in southern China, in part because of an erosion of market share in that country.
Dell saw market share slipping in 2005 in crucial Asian markets such as China, where its share of the market slid to 8.2 percent in the third quarter versus the second quarter's 9.6 percent, although it ended the year with a 9.1 percent slice, according to consultants IDC.
In contrast, Taiwan's Acer Inc, the world's fourth-largest PC vendor, posted an 87 percent jump in first-quarter profit thanks to strong demand from Asia and North America.
But Rollins, while declining to comment on specifics, said the US giant had reversed that trend in the first quarter.
"This past quarter, we've taken market share in all of the major markets such as China, Japan," Rollins said without elaborating. "Some of our largest new growth markets took the highest market share we've had in a long time."