Monday - September 06, 2010

Dell is Chinese now?

I learned this bit of news from a friend I used to work with at Dell.  Dell has recently sold off all its manufacturing in the United States.  Most Dell employees who worked in manufacturing are now either out of work or they are employed by some other company that took over the factory.  This is shocking enough in itself because Dell's model for success was based primarily on its manufacturing innovations and how it made the build to order the money making juggernaut that Dell was in the late 1990's. 

But that wasn't what really made my jaw drop.  What he told me is that almost all of Dell's executives have picked up and left Austin, Texas and moved to China.  That's right, Dell is now a Chinese company with its headquarters in China.

It turns out that labor costs are pretty significantly lower in China, but the labor costs are a tiny part of the overall cost of business.  Dell has gotten its cost per box down to less than $1 to manufacture (not including cost of components).  That is, the labor and facilities to make a Dell computer costs the amount they have to spend to buy all the bits and pieces, and then less than $1 to put them all together and give it to the shipper all arranged neatly to arrive at the customer's door together.  So, really, the labor cost is not what drove Dell to move its executives overseas.

What drove them overseas was something entirely controllable. It's taxes.  The tax rate on American companies doing business in the US is exorbitant.  I don't know the numbers, but the point is that a lot of very highly paid people who run Dell Computer decided to pick up and move to a communist country to live in rather than stay near their loved ones.  China is killing us with tax breaks, or we're killing ourselves with outrageous tax rates.  Probably both are true.

How much would it be worth it to you to pick up your family and move to a communist country?  Personally, no amount of money would get me to move to China or any communist country, but there are apparently plenty of people who already make a ton of money in the US who were convinced to pack up and move to the other side of the Earth.

This is in fact more evidence that the war on immigration is misguided.  Businesses that can't compete without exporting executives will not stay in the United States.  It doesn't matter how many Mexicans come across the border, our businesses are going to move anyway.

This is one of the most depressing developments I've seen in a long time.  Why aren't we seeing this prominently published in the news?  I guess so-called journalists haven't been given their official press releases on the subject.  Journalists are worthless.

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