Component suppliers face pressure from Dell to cut costs

A decline in sales of PCs is affecting multinationals like Dell but that is also putting pressure on Taiwanese manufacturers to cut their costs.

Last week a large number of well known Taiwanese ODMs (original design manufacturers) reported poor results for February.  The Taiwanese bourse requires listed companies to file their results monthly.

And now it has emerged that companies like Dell are putting pressure on their component suppliers to cut costs in a market where margins are already razor thin.

Taiwanese wire Digitimes reports that Dell is putting pressure on its suppliers to rejig their prices, and inviting tenders from competitors in a bid to gain an extra few points on margin.

US PC multinationals depend almost entirely on Asian suppliers to build machines, and it is a fragile system at the best of times, with the region subject not only to economic pressures but to natural disasters including earthquakes, floods and tsunamis.

As economic sentiment in the USA and in Western Europe is still more than a little on the downbeat side, companies like Dell become increasingly subject to shareholder pressure.  It is those pressures that have persuaded the board of directors of Dell to come up with a private equity answer, although that process appears to have its own travails.