Dell drops out of China's low-end PC market

Beaten at own game?

Dell has quit the highly competitive low-end PC market in China, focusing instead on higher-end kit and servers.

The company's move, revealed by its Asia-Pacific chief, Bill Amelio, during an interview with Reuters, isn't entirely surprising. Western PC companies entered China's nascent PC market in the 1990s on the back of high, double-digit growth forecasts and declining demand in their own, domestic markets.

But local players, with their better understanding of local tastes and needs, and better access to local non-urban distribution channels, have stormed ahead.

Lenovo, formerly known as Legend, shot well ahead of the likes of Dell, HP, IBM and even Acer - the latter with Taiwanese roots - to dominate the Chinese PC market, particularly at the low end. Others, such as Great Wall Technology, Beijing Founder Electronics, HiSense and Fujian Start, have shown similar major-brand beating performance.

Alas, the rush to satisfy booming demand has led to fierce price competition. For Dell, the game is now simply not worth the candle and, according to Amelio, it's moving up-market to the "higher price bands of the consumer space".

Still, it must bridle that Dell's own meteoric rise in the West, driven by the lower prices made possible by first its direct sales model and later its scale, should not only fail to be mirrored in China, but that it has, in effect, been beaten at its own game.

Down, but not out. While growth reached 25-30 per cent in 2001, this year, according to market watcher IDC, PC sales will be up just 19 per cent, so there are signs the heat of previous years is cooling.

The territory remains Dell's fourth biggest market, and despite its move away from low-end PC sales, it still expects to see growth in the region of "two times" the overall market rate, according to Amelio, down from its previous forecast of three times higher. ®

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