After Hours

Dell to open new PC plant in United States

Company set to announce plan to build stateside factory, says CEO Kevin Rollins.

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By John G. Spooner
Staff Writer, CNET News.com

ROUND ROCK, Texas—Dell will announce within weeks a plan to build a new manufacturing plant in the United States, as other PC makers continue to send such work overseas, CEO Kevin Rollins said Tuesday in a wide-ranging interview with CNET News.com.

"We'll announce in the next month or two new capacity here in the U.S., and in the next few years, we're going to need new manufacturing capacity in Europe and Asia, too," Rollins said. Asked about reports that the plant could be located in North Carolina, Rollins said rumors about the expansion were, in general, "more accurate than not."

Dell, based here, shipped the most computers in the world during the third quarter and will need to expand its manufacturing capacity in order to keep up with its market share and revenue goals.

The company has a stated goal of reaching $60 billion or more in annual revenue over time. To hit that mark, the company will have to increase its share of the PC market to nearly 30 percent from approximately 18 percent, the company has said, thus requiring it to ramp up output.

In the interview, Rollins also touched on a number of topics, including the following:

• Consumer electronics will be an important, but not huge, part of Dell's business in the future. The sector currently accounts for only about 15 percent of Dell's revenue. Although the company has begun to sell more electronics products, prices and profits will remain low. Apple Computer's iPod, Rollins said, has been one of the notable exceptions to the grinding pressure of consumer electronics.

"If you look at the largest CE manufacturers, they are all doing terrible," Rollins said. "They are all selling a lot of doodads, but they aren't doing that well...The industry is fundamentally challenged."

Nonetheless, Dell will continue to come out with new TVs and to drive prices lower. "I'd like to see a plasma TV below $1,000," Rollins said. Dell's current 42-inch plasma TV sells for $3,400.

• Advanced Micro Devices "has gotten much better" at producing technology, Rollins said, but he indicated that AMD would have to overcome several impediments before Dell would buy its processors. For one thing, Dell customers aren't really asking for AMD processors, he said.

Dell would also have to dedicate teams to design servers and PCs to accommodate AMD-based computers, which adds complexity and costs. AMD cannot produce chips in the same volume as Intel, Rollins said.

• Dell's printer business is growing faster than expected. "In about the second quarter, we got close to breakeven," he said.

As for Dell's expansion plans, to double its global market share to 36 percent, the company would have to sell somewhere between 30 million and 40 million additional PCs annually, said Roger Kay, an analyst at IDC. "There's very little to limit Dell's growth, (but) manufacturing capacity could be one of its chief constraints," Kay said.

Still, the PC maker, which has a number of plants, including facilities near its Round Rock headquarters, does aim to keep its manufacturing in-house, Rollins said, locating the facilities near its major markets.

"We don't operate the way that everybody else does," Rollins said. "That's because our model requires that we own the value chain (which includes manufacturing as well as parts procurement). We can't outsource."

Dell has a factory in China, for example, but instead of shipping PCs back to the United States, the company uses the plant to serve customers in China and Japan.

"The issue has become one of logistics: The cost of moving a PC around is more expensive than the cost of labor" to build it, Rollins said.

CNET News.com's Michael Kanellos contributed to this report.

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