Exploring De-Sinicization Strategies for Dell | DiskMFR

Discover how Dell is navigating China's complex regulatory landscape with innovative de-sinicization strategies. Read now for insights and analysis.
Thoughts on De-Sinicization for Dell

Table of Contents

“At the 2020 Dell Technology Summit, ‘To root in China and integrate into the local community, do not consider oneself as an outsider.'”

Huang Chenhong, Global Executive Vice President of Dell and Chairman and President of Greater China

On January 5th, according to foreign media reports, Dell plans to exclude all chips produced in China (including those produced by foreign companies in China) from its products by 2024 and move 50% of its production capacity out of mainland China by 2025.

As the first international terminal enterprise with significant interests in China, Dell’s proactive “De-Sinicization” measures without clear political pressure are likely to have a chain reaction on the global supply chain. China must carefully consider and prevent the occurrence of the “broken window effect” in case other international companies follow Dell’s lead in de-integrating from China.

01. The harm of the Dell incident

① Dell’s exit from China triggers a domino effect for foreign companies; other industries and nations may follow suit

Dell’s move is likely to trigger a domino effect of foreign companies de-integrating from China. Currently, foreign companies operating in China are facing increasing political pressure, while the US and some Western governments have introduced many subsidy policies to encourage international companies to de-integrate from China. According to supply chain data from CNBC in December 2022, US manufacturing orders in China had decreased by 40% by the end of 2022. Although the decrease in orders was impacted by the pandemic and end-of-year holidays, deliberate restrictions on Chinese manufacturing by Western countries played a leading role. Following Dell’s lead, HP has also started to investigate its suppliers to weigh the feasibility of relocating production and assembly out of China. The biggest task for an international packaging company in 2023 is to transfer international orders from Chinese factories to Vietnamese factories, and Vietnamese personnel has already been arranged to come to China to learn production processes after the holidays.

This is a critical moment for China’s supply chain, and if Dell can easily exclude China’s supply chain, be beautified by the US government, and become a typical model of decoupling, other international companies who have been watching will inevitably be tempted. The key now is how China responds: for companies that can be retained, China needs to offer a more growth-oriented industry environment to retain them; for companies that are persistent, China needs to accurately assess their level of dependence on the Chinese market and supply chain and make them pay the corresponding price. If China’s response is inadequate, a group of international companies may follow in Dell’s footsteps. Today, it may be American companies de-integrating from China, and tomorrow it may be Japanese, Korean, European, and other countries’ companies de-integrating from China;

Today it may be the PC industry de-integrating from China, and tomorrow it may be the automotive industry and other industries de-integrating from China.

② Moving away from China’s supply chains could hinder China’s technological progress, especially in the chip industry

The trend of international supply chains moving away from China will close the window for technological progress in China. With its strong manufacturing capabilities, China has grown to become the world’s most efficient and largest factory, with terminal manufacturing driving the development of local supply chains. This has led to rapid development in industries such as chip manufacturing, making China the world’s largest chip market and serving as a cornerstone for China’s technological advancement. It is also a key element in China’s ability to resist external sanctions.

However, Dell’s plan to remove locally manufactured chips from China and shift 50% of its production capacity elsewhere could be a sign of international companies following suit. If this trend continues, China’s high-end manufacturing industry will lose the strong market support it needs, and the underlying logic for China’s technological progress will be completely rewritten. This shift away from China by the West has been a process of continuous pressure, starting with the move of terminal manufacturing away from China, followed by the shift of components and supply chains, and now chips and chip manufacturing capacity.

For China’s manufacturing and chip industries to progress, they must be integrated into the international supply chain, participate in international competition, and interact with international companies to understand market demands and technological trends, and to cultivate relevant talents. If China is excluded from the international market, it will be equivalent to closing the window for China’s technological progress in the field of chips.

③ Dell’s De-Sinicization Impacts PC Industry Ecosystem: Threatens High-Tech Industries and Local Clusters

Dell’s radical de-Chinization has had a huge impact on the PC industry ecosystem. PC assembly may seem like a relatively low-end industry with a large output value, but the contribution of profits cannot match the scale of output value, and some core chips cannot be manufactured domestically. However, the PC industry has a significant impact on the ecosystem of high-tech industries. If low-end assembly and manufacturing disappear, high-end chip manufacturing will also be transferred.

Taking CPUs and storage as examples, although the chips are not manufactured in local foundries, a considerable number of CPUs are packaged domestically, and although Chinese storage companies have suffered heavy losses, foreign companies have a large amount of storage production capacity in China, such as half of Hynix’s production capacity being in China, even under US restrictions, they are building new factories in Dalian and expanding factories in Wuxi and Chongqing. In fact, except for a few core chips, the vast majority of PC components are still manufactured in China.

If the PC industry de-Chinizes and then other terminals follow suit, then international companies like Hynix, one of the few chip manufacturing companies in the country, will have no reason to continue staying in the mainland, and domestic electronics companies’ efforts to enter the international supply chain will be blocked. The PC industry cluster that has gathered in

Chongqing and Kunshan will be gradually weakened. Chongqing’s laptop production has been the world’s largest for eight consecutive years, with a production of over 100 million units in 2021, with a production value of over 400 billion yuan, accounting for 40% of the global market share. The computer, communication, and other electronic equipment manufacturing industries centered around laptops accounted for 72% of Chongqing’s export value during the same period, and the employment of workers in the electronic information manufacturing industry reached 490,000.

The industry ecosystem formed around the PC is as intricate and complex as any natural ecosystem, and once it is destroyed, it is difficult to recover. Moreover, in such an economic winter, the significance of such an important industry cluster is self-evident.

02. Dell’s Ingratitude

Dell is an international enterprise, and it is within their rights to make business decisions as they see fit. However, whether or not their actions go against market rules and international ethics is a matter of debate and interpretation. Some may argue that their actions are simply a rational response to market conditions and the changing global landscape, while others may view it as a violation of fair competition and ethical principles. Ultimately, the evaluation of Dell’s actions depends on individual perspectives and values.

① Dell Accused of Violating Corporate Social Responsibility in China

Dell has violated its corporate social responsibility. Dell has been in China for over 20 years, and the Chinese market has been its second-largest market for a long time. In the third quarter of 2022, Dell ranked second in terms of shipments in the Chinese market, accounting for 11.7%. In recent years, China has been Dell’s main manufacturing base, and Dell has obtained cheap production capacity from China while also achieving huge sales in the Chinese market.

However, Dell’s decision to discriminate against local supply chains without clear political pressure shows that Dell only wants to profit from the Chinese market and does not want to take on the responsibilities it should bear.

Corporate citizenship is internationally recognized as corporate social responsibility, as defined by the Boston College Center for Corporate Citizenship. A corporate citizen is closely related to the health and welfare of society, and it should fully consider the impact of the company on all stakeholders, including employees, customers, communities, suppliers, and the natural environment. When companies obtain economic benefits, they should give back to society in various ways. Dell has gained a lot of profits in the Chinese market, and it is its duty to give back to the Chinese market, Chinese customers, and suppliers, and to provide employment opportunities in China.

② Dell’s Political Maneuvering: Prioritizing US Market Share Over Global Growth

Dell has politicized its business interests. In recent years, Dell’s PC business has declined globally, with its shipment volume falling to third place worldwide. According to Canalys, in the third quarter of 2022, PC shipments in the Chinese market declined by 13%, and Dell’s shipments fell by 21%. However, in the US market, Dell’s shipments have led the industry for three consecutive quarters with a market share of 26.8%.

This back-and-forth trend between the Chinese and US markets may be due to Dell’s political maneuvering to cater to US politicians by promoting “de-Chinafication” and strengthening the US market as a “rational” choice.

Dell’s high-profile initiative to de-Chinafy itself was not the result of explicit pressure from the US government but rather a voluntary action by Dell itself. Compared with US semiconductor equipment and chip design companies that are under pressure from the US government’s sanctions on China but are still lobbying the government to try to reverse the situation, US companies have considerable room for maneuver on the issue of de-Chinafication. If Dell respected the Chinese market, it would have made every effort to convince the US government to make some concessions, even if it faced pressure from the government. However, Dell’s proactive and more radical behavior than the US government can only be interpreted as Dell willingly and strategically abandoning the Chinese market.

③ Dell faces backlash for anti-globalization actions in local markets

No country can tolerate Dell’s actions. Despite the buzz around globalization, there is still a significant gap between words and deeds, and global trade and globalization remain the mainstream international norms. An international company actively discriminating against local chips and supply chains is an unprecedented anti-globalization malicious event.

Imagine if such behavior occurred in any Western market in Europe or the United States, what kind of punishment would it face? Europe strictly audits and punishes American technology giants in the name of digital sovereignty and anti-monopoly, while the United States harshly criticizes Chinese internet companies in the name of data security. It can be said that Western countries almost scrutinize international companies with the strictest standards, often stirring up trouble even when there is no wind. If such behavior that blatantly violates the principles of free trade and seriously abandons corporate citizenship responsibility occurred in the West, it would undoubtedly be severely punished.

03. Dealing with Dell’s de-Sinification

Dell’s move is a proactive response to the US’s narrow anti-China trend, and in fact, it is in line with the US government’s “de-Chinaization” and decoupling plan. It is also Dell’s attempt to gain more business benefits in the US market through de-Chinaization. This ungrateful behavior is unreasonable anywhere. If Dell unreasonably harms China’s interests without any consequences, other companies will inevitably follow suit. It is hoped that relevant departments and industries will engage in full discussions, assess the consequences of the Dell incident, and respond as soon as possible.

① China urges Dell to stay and aims to create better conditions for foreign companies

We should still recognize Dell’s huge impact and contribution to China. Dell has global service centers, production bases, and R&D centers in China, with thousands of R&D personnel and tens of thousands of employees. Both morally and logically, Dell is worth retaining in China. We should give Dell enough opportunities for communication, understand its demands, solve difficulties, and persuade it to return to the right track and continue to develop in China. China will also create better conditions for foreign companies.

However, our first goal is to discourage international companies from decoupling with China and give Dell a chance to turn back. Even if there are strong countermeasures, we should use a combination of persuasion and force, demonstrate China’s commitment to globalism and the world, and showcase China’s open, fair, and legal business environment.

② China warns of legal consequences if Dell persists in discriminatory actions

If Dell persists in its wrongful behavior, China must resolutely counteract it. Our response measures should not be emotional or populist but should follow international conventions and enact punitive measures according to the law. At the same time, we should encourage affected supply chain companies to file lawsuits in accordance with the law and make Dell pay the appropriate price.

③ China considers incentives to increase domestic manufacturing content in end products

Taking a cue from measures like the US Anti-Inflation Act to strengthen domestic manufacturing, China should actively communicate with international companies in China and introduce incentive measures to increase and consolidate the “Made in China” content in end products, linking it to tax benefits and other incentives.

④ China calls for global consensus on anti-globalization laws to penalize protectionist actions

Actively defending globalization, holding talks and communication with international chambers of commerce and organizations such as the World Trade Organization to reach consensus and formulate anti-globalization laws. Measures should be taken to penalize actions that intervene in the market with politics and discriminate against market-oriented supply chains in the name of protectionism.

⑤ China encourages domestic enterprises to participate in international supply chains for economic recovery

Encourage domestic enterprises to actively participate in international competition and integrate into the international supply chain. In the current environment, it may not be necessary to focus only on advanced businesses and lose interest in less advanced products. The first priority is to pragmatically remain in the international supply chain and then gradually restore and enhance the contribution of Chinese manufacturing to the global economy.

⑥ China emphasizes communication and rational discussion with Western industries for mutual benefits

It is important to encourage communication and rational discussion between Chinese civil society, Western industries, and the media. Chinese people have the right to employment and improved living standards. Furthermore, if China does not continue to advance technologically, and its economy loses its prosperity and purchasing power, it will have negative effects on the global economy, and therefore, it is essential for China to remain competitive and engaged in the global economy.


Dell is not irreplaceable, and China should be prepared for de-Dellification when Dell is preparing to go China-free. It is not the time to hesitate, because de-Dellification is not a matter of one or two enterprises coming in and out. Currently, the intentional exclusion of Chinese enterprises from the international supply chain has already emerged, and international orders for chip design and manufacturing have significantly decreased. Even if there are orders, Chinese enterprises are not given orders for new products. The life cycle of chip products is three years, and if they only focus on older products, Chinese enterprises will be completely excluded from the international supply chain when older products decline and contract. This leads to a de facto decoupling.

At this time, if there is no resolute intervention and the entities that promote de-Dellification have no cost to bear, it is tantamount to condoning de-Dellification. Foreign companies may face difficulties in using Chinese chips, but who in this world does not face difficulties? Everyone’s interests are fought for, and lobbying their own governments and promoting globalization are obligations that international companies should fulfill, and they also have room to negotiate with their own governments. We cannot expect all foreign companies to have this consciousness, but at least international companies should not be the pioneers in actively de-Dellifying.

The process of manufacturing going away from China is like a domino effect, starting from the downstream of the industrial chain and extending to the upstream, from the low-end to the middle and eventually to the high-end. Without taking effective measures to address this trend, China’s manufacturing industry will gradually be squeezed out of the international supply chain, leading to decoupling from the world. To prevent this, China needs to demonstrate maximum sincerity, listen to the appeals of enterprises, create a more fair, open, and competitive business environment, and stop the trend of going away from China.

If some enterprises persist in their decision to leave China, China must clarify its attitude and take necessary countermeasures. Of course, in doing so, China should remain restrained and use rational and convincing arguments to show the world its determination and professional ability to maintain globalization. More importantly, China needs to show international companies willing to cooperate and create prosperity that China is committed to creating an open, fair, and win-win business environment.

Frequently Asked Questions (FAQs)

Q1. What is the article “Exploring De-Sinicization Strategies for Dell” about?

A1. The article “Exploring De-Sinicization Strategies for Dell” discusses the potential strategies that Dell could implement to reduce its reliance on Chinese suppliers and manufacturers, with the aim of mitigating the risks associated with geopolitical tensions and trade disputes between China and the United States.

Q2. Why does Dell need to explore de-sinicization strategies?

A2. Dell needs to explore de-sinicization strategies to reduce its exposure to the risks associated with the ongoing trade tensions between the United States and China. The potential risks include supply chain disruptions, legal and regulatory challenges, and reputational damage.

Q3. What are some potential de-sinicization strategies for Dell?

A3. Some potential de-sinicization strategies for Dell include diversifying its supply chain by sourcing components and products from other countries, investing in research and development to reduce its reliance on Chinese technology, and collaborating with local suppliers in other countries to establish a more robust and resilient supply chain.

Q4. How will de-sinicization impact Dell’s business operations?

A4. De-sinicization will likely impact Dell’s business operations by increasing its costs and potentially reducing its efficiency and competitiveness in the short term. However, in the long term, de-sinicization could help Dell mitigate the risks associated with geopolitical tensions and establish a more resilient and sustainable supply chain.

Q5. What are some challenges that Dell may face in implementing de-sinicization strategies?

A5. Some challenges that Dell may face in implementing de-sinicization strategies include finding suitable alternative suppliers, investing in new technologies and processes to reduce its reliance on Chinese technology, and managing the costs and risks associated with the transition to a new supply chain. Additionally, Dell may face challenges related to legal and regulatory compliance in different countries and regions.

DiskMFR Field Sales Manager - Leo

It’s Leo Zhi. He was born on August 1987. Major in Electronic Engineering & Business English, He is an Enthusiastic professional, a responsible person, and computer hardware & software literate. Proficient in NAND flash products for more than 10 years, critical thinking skills, outstanding leadership, excellent Teamwork, and interpersonal skills.  Understanding customer technical queries and issues, providing initial analysis and solutions. If you have any queries, Please feel free to let me know, Thanks

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