A Win-Win Deal

PC plant buy out may not prop Foxconn.
However, it is highly possible that Dell will raise its outsourcing to
Foxconn in the long run. The acquisition of Dell’s PC plant
located in Lodz, Poland by the Taiwan-based Foxconn Electronics, of Hon
Hai Precision Industry, is not likely to help increase considerably
Foxconn’s shipments of notebook in the short-term as the
plant’s notebook production is very small. However, it is
highly possible that Dell will raise its outsourcing to Foxconn in the
long run, sources from notebook makers have said. Once the transfer of
ownership is finalied, it will effectively become a customer of
Foxconn’s manufactirng services in Lodz, according to Dell.

Dell has transfered ownership of its manufacturing operation in Lodz to
Foxconn. Following the transfer, Dell will become a Foxconn customer,
sourcing its desktop, notebooks, servers and storage systems for EMEA
customers from the Lodz factory. According to Dell the move will help
make the company more efficient by simplifying its global operations.
All jobs at the facility should remain intact with Dell employees
continuing in their roles when Foxconn takes the reigns. Dell will keep
its sales and marketing office in Warsaw.

The in-house notebook production lines of Dell are located mainly at
its plants in Malaysia. Dell’s plant in Poland chiefly makes
desktops, and the volume of notebook production there is very small.
Hence, according to sources from notebook makers, the acquisition of
Dell’s PC-making plant in Lodz is bound to benefit directly
Foxconn’s shipments and sales of desktops.

According to these sources, Foxconn at present suffers from a lack of a
strong R&D team, and buying a plant that only manufactures PCs
and not having an R&D establishment is not going to benefit
Foxconn much, the sources added. Also, the acquisition of
Dell’s plant in Lodz is unlikely to have any effect on
Foxconn’s existing outsourcing plans for first-tier notebook
makers for 2010 since the company’s orders come from
Dell’s in-house production, industry analysts said.

At present, the notebook clients of Foxconn include Dell, Apple, Sony,
and HP. In 2009, Foxconn reportedly shipped 3 million-4 million
notebooks. Foxconn’s forecast for shipments of notebooks for
2010 is 6 million units. Foxconn, incidentally was designing the Adamo
series of ultra-thin notebooks for Dell.

The sale is the latest in a series of moves that Dell has made to
reduce manufacturing costs as it looks to maintain pace with rivals
that already outsource all or the majority of their hardware assembly,
such as HP and Acer. Earlier this year, Dell announced plans to migrate
all EMEA PC assembly from Limerick in Ireland to its Polish facility
and third-party manufacturing partners. Contract manufacturing is
thought to be less expensive than assembling partially-assembled
components in Dell-owned plants, particularly when the components are
made by contract manufacturers in the first place. 

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