Dell's New PC for the China Masses
For almost a year, Darrel Ward has been working on Project Huangpu, the code name used inside Dell (DELL) for a new, low-cost computer designed specifically for the hotly contested Chinese market. Huangpu is the name of the river that runs through Shanghai. And last summer, just a few months after Project Huangpu's launch, Ward moved from Austin, Tex., to Dell's research and development center in Shanghai to oversee the project.
On Mar. 21 his boss, Michael Dell, was in Shanghai to unveil the first product to emerge from the PC maker's new Chinese product rollout. It's the beginning of what Dell hopes will be a successful market-share assault in the world's fastest-growing PC market. The Dell EC280 is compact, energy-efficient, and still packs considerable processing power. It will retail starting at $340 for a basic configuration with no monitor, to $520 for a more advanced setup with a 17-in. LCD screen.
Ward insists that a lot of brainpower went into the design of the EC280. "We didn't just want to make a cheap PC. That's easy enough to do," explains Ward, a 16-year Dell veteran. Rather, his Chinese design team decided they needed to create something that would appeal to consumers who have never bought computers before and who live in less affluent parts of the country where cost and availability of electricity are bigger issues than in wealthy coastal cities like Beijing, Shanghai, or Shenzhen. "We wanted to design something optimized for users and the environments that [the computers] are going into," he says.
Tailored for China's Consumers
Because many urban Chinese live in modest apartments, the EC280 is much smaller than an ordinary desktop. It's actually one-eighth the size of an ordinary desktop and comparable to Apple's (APPL) Mac Mini. It uses an Intel (INTC) Celeron processor, commonly found in laptops, rather than a Pentium. And the PC consumes far less power—65 watts compared to an ordinary PC's 250 watts. Because it uses less power, it only needs one fan, which makes it much quieter.
Again, that's something Chinese living in cramped quarters might find appealing. And appeal might well translate into sales growth. China is the world's second largest PC market after the U.S. And according to International Data Corp., in 2006 Chinese PC sales grew 21%, vs. just 2.6% in the U.S.
Lenovo (LNVGY) dominates the market, with 36% share, but both Dell and Hewlett Packard (HPQ) are at about 9%, putting them within striking distance of longtime No. 2, Beijing-based Founder Technology Group.
Dell's Rebound Strategy
While Michael Dell was in Shanghai, he addressed questions about how the troubled PC maker would regain momentum less than two months after the departure of former chief executive Michael Rollins and an admission that quarterly results wouldn't match analysts' expectations. In particular, he said, Dell would look to grow through acquisitions in its division that provides computing services. "I expect to see acquisitions there and significant investment to enable us to build capability in the software and services area," Dell said at a press conference.
Ward hopes that the new PC will give Dell—which traditionally has been strong in sales to companies but not to consumers in China—a way of reaching a bigger base of customers. To do that, his designers looked at market research showing that typical PCs have more features than most Chinese need. For instance, while computers have several slots to allow add-ons like high-performance graphics cards, Ward says that market research shows over 90% of users only use one slot.
So the Project Huangpu team created a PC with just one slot. "The fewer slots you have, the fewer openings you have, the more reliable [the PC] tends to be," says Ward. Because the EC280 has just one slot, "if it gets knocked around, it will hold up."
Bid for the Next Billion
Dell, of course, is hardly the only tech giant trying to create simpler products for new customers in places like China. Companies like Motorola (MOT), Nokia (NOK), Intel, and Microsoft (MSFT) all are looking to boost sales in the developing world—home to what's known in the IT world as the "next billion" consumers (see BusinessWeek.com, 12/7/06, "Telecoms Hungry for Next Billion Callers").
Dell sees the Shanghai-designed computer as its first major entry in the next-billion sweepstakes. "This is a product designed first for the demands of Chinese consumers," said Michael Dell in a statement released by the company on Mar. 21. "Many of the world's second billion PC users are right here in China, and we intend to earn their confidence and their business over time."
Sure enough, Ward sees variations of the model working well in India, Brazil, and other emerging markets. "This is just the first step," he promises. He expects to launch a version of the EC280 in India by the middle of the year and is looking at Latin American markets, too. Project Huangpu could easily morph into Project Ganges and Project Amazon.