Dell tells suppliers to diversify fab and backend facilities

Dell Technologies has told its semiconductor suppliers to diversify their fabrication and backend facilities by the end of 2024 for all components used in the tech giant’s global supply chain.

In a letter seen by Computer Weekly that was sent to its suppliers a few weeks ago, the company said the requirement comes after a review of its integrated circuit sourcing strategy in the wake of global supply chain challenges.

Noting that Dell, like many multinationals, had been affected by labour shortages amid the pandemic, reduced logistics capacity, natural disasters that disrupted fulfilment facilities and unprecedented IT demand, among other challenges, it said more resilience was needed in its supply chain.

Dell said those challenges had led Dell to review its sourcing strategy for reasons such as the shortage of semiconductor components during the pandemic, the 12- to 18-month time frame to implement component substitutions, and trade regulations that limited the use of certain components.

“Resilience through improved diversification and continuity of supply will help Dell to mitigate future disruptions and continue supporting its global business,” it said.

In an interview with Computer Weekly on a recent trip to Singapore, Tom Sweet, chief financial officer at Dell Technologies, said supply chain management has been one of the company’s competitive strengths.

“We have been focused on how to manage our supply chain and the diversification of our supply chain for quite some time,” Sweet said. “We have a big supply chain in China, and we had to navigate through the Covid restrictions there.

“I think the team did a really nice job as a result of that. Not that China’s not important to us, but that was just from a customer resiliency and customer stability perspective,” he added.

In reaching out to its supply base, Sweet reiterated that Dell was looking to increase the stability and resiliency of its semiconductor supplies.

“That’s an area that we’re focused on given the global nature of the semiconductor shortages we’ve seen. We’re proactive on how we manage our supply chain. We’ll continue to work our way through that and I’m optimistic that the team will do a good job of it,” he added.

Earlier this year, news agency Nikkei Asia reported that Dell plans to have all chips used in its products produced in plants located outside China by 2024, citing sources with knowledge of the matter.

Rival Hewlett Packard Enterprise (HPE) had also been affected by supply chain challenges, resulting in higher server prices and a backlog that was five times normal levels. Lenovo faced shortages in components like storage drives, but not resistors or power control chips, according to Wilfredo Sotolongo, chief customer officer of Lenovo’s infrastructure solutions group.