US-China Chip War Sees Dell Move to Stop Using Chips from China by 2024

The US and China have been engaged in a trade war for years, and the semiconductor industry has been caught in the middle. As the war chip war between the two countries continues, companies are taking action to avoid future trouble. That includes Dell, one of the largest companies to react to the changing landscape by moving to reduce and potentially eliminate reliance on chips and components from China.

Background on the chip war: Semiconductors are used in various areas, including military hardware, and the US wants to limit China’s access to them. Because of that, the Biden administration has pushed export controls that target chips made by US equipment around the world.

• The controls expand the reach of previous actions to stifle China’s tech and military advances.
• China has filed a complaint with the World Trade Organization (WTO), claiming the controls are being used to gain an industry advantage.

Additionally, there is an “entity list,” and US companies need government permission to do business with any of the companies on it. The result is companies having a harder time doing business with Chinese companies, and it is only getting worse as tensions build.

Dell’s decision to pull away from China: In order to avoid future trouble as tensions build, Dell made the decision to stop using chips made in China by 2024. Moreover, the company will also move to use fewer components made in China whenever possible in an attempt to diversify its supply chain.

• Dell is including chips made in China by non-Chinese chip manufacturers in its decision.
• The end goal is for all chips to be produced in plants located outside of China.
• Assembly is another major issue, with most of it taking place in Chinese cities.

It is an aggressive move away from reliance on China, which has been a major supplier to many technology companies around the world. But Dell is determined to follow through with the plan, telling Nikkei Asia, “We continuously explore supply chain diversification across the globe that makes sense for our customers and our business.”

HP is also making some moves: Dell is not the only company to start looking at its options. Rival HP is also exploring the feasibility of moving away from China. However, it is not as firm in its actions at this point in time, simply stating, “We have a robust supply chain operation in China and around the world to serve our customers.”

Diversification is a larger issue: Dell and HP were not the first companies to begin exploring diversification, and they are unlikely to be the last. Another example is Apple, which started diversification efforts by beginning to manufacture devices in India and Vietnam.

• Protests at a Chinese factory in Zhengzhou set Apple back last year, causing supply issues during a peak season.
• Supply issues have caused other companies to create contingency plans for similar situations, even if they are not involved in the chip war.

For any company, putting all of its eggs in one basket is a risky move. The chip war only adds an additional reason for certain companies to move away from China. Only time will tell how successful the attempts to diversify will be.