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December 19, 2004

Who's Afraid of China?

By GARY RIVLIN

[pic]ustin, Tex.

SHAYNE MYHAND, the day-shift manager of Dell's flagship factory here, does a lot of chaperoning. As many as four or five times a day, he finds himself playing host to corporate chieftains and midlevel scouts who come to marvel at the dazzlingly efficientassembly plant that may be the best hope for keeping blue-collar jobs in the United States.

A 31-year-old with a crisp, militarylike bearing, Mr. Myhand begins each tour the same way, moving to a display case and grabbing an unimpressive wooden plaque commemorating Dell's production of 49,269 personal computers in the last three months of 1991. "On a good day, during peak demand,we'll exceed that number by lunchtime," he said, with a slight nod and a faint smile gracing his lips. He told a visitor that even now, during the Christmas season rush, an order that hits the factory floor at 9 a.m. is typically stacked in the back of a truck motoring down an interstate highway by 1 p.m.

Inside Dell, the world's largest computer maker, executives study the assemblyprocess with the intensity of Alfred Kinsey and his researchers. They wheel in video equipment to examine a work team's every movement, looking for any extraneous bends or wasted twists. Designers give one another high-fives for eliminating even a single screw from a product, because that represents a saving of roughly four seconds per machine built - the time they've calculated it takes anemployee, on average, to use the pneumatic screwdriver dangling above his or her head.

Computer software clocks the assembly-line performance of workers, whether they're putting together PC's or the servers and storage equipment that Dell sells to large companies. The most able are declared "master builders" and then videotaped so that others may watch and learn. The weak are told that ittakes a special set of talents to cut it on the Dell factory floor - and shown the door.

Steely-eyed cold, to be sure, but at a time when economists and politicians fret over the future of American manufacturing as China emerges as the workshop of the world, Dell isn't just defying a global trend; it's helping to set the standard. "When everybody is outsourcing - when everybody isoutsourcing - Dell continues to manufacture in the United States because over two decades of fine-tuning, they've figured out how to do it cheaper and smarter," said Charles R. Wolf, an analyst at Needham & Company who has been following Dell since 1991. (He has also been reaping the financial rewards as a longtime Dell shareholder, seeing a 33-fold return on his investment.) "They're truly in the21st century when it comes to manufacturing."

No other major computer maker produces computers in the United States. Long ago, Dell's top rival, Hewlett-Packard, outsourced assembly of its PC's to third parties, primarily based in Asia, as did I.B.M., the world's third-largest PC maker. And I.B.M., which created the PC market in 1981, is leaving the business, announcing this month thatit is selling its PC unit to Lenovo, the Chinese computer giant. "It's been a long time since one of our competitors actually made a computer," said Michael S. Dell, the founder and chairman of the company that bears his name.

Dell, by contrast, operates three giant assembly plants in the United States - two in Austin and the third outside Nashville. Each is large enough to house sixcontiguous football fields. Last month, the company announced that it would build a fourth plant, twice as big as the others, near Winston-Salem, N.C. And, inside the company, executives talk about opening a fifth one, probably in Nevada, where it would build computers according to each customer's specifications. At a White House conference on the economy on Wednesday, Kevin D. Rollins, Dell's...
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