When the world’s second largest PC manufacturer decided to locate its European manufacturing operations in Ireland, it was considered a major coup for the country. But what once attracted Dell – the low-cost, high-quality workers – has altered after a period of rapid economic growth. The first signs that Ireland may have fallen victim to its own success have now emerged, with Dell’s announcement in early January that it plans to move its European manufacturing base to Poland, with the loss of 1900 jobs.

Dell says it will migrate all production of goods bound for customers in Europe, the Middle East and Africa (EMEA) from Limerick in Ireland to its Lodz, Poland facility, as well as using third-party manufacturing partners. It cites simplifying operations, improving productivity and reducing costs as the main reasons for the move, which is part of a $3bn cost reduction initiative announced last year.

First to leave

Dell is the first big US technology company to leave Ireland in favour of a lower-cost eastern European location. Although the American Chamber of Commerce in Ireland has warned of other disinvestments in the multinational sector over the next 12 to 18 months, the level of FDI in Ireland increased 14% in 2008, according to the Irish Development Agency’s (IDA) end-of-year statement.

Dell says that in the past few years, activity at its Limerick campus has broadened significantly. And a 22% increase in higher value R&D roles created in Ireland over the past year reflects Dell’s decision to retain its higher level roles in Ireland while moving its manufacturing assembly roles to Poland.

“The cost-sensitive jobs are moving out of Ireland and Dell is the only PC assembly company still in Ireland,” says Brendan Halpern, IDA spokesperson. “We’ve been migrating away from low-level assembly in all areas during the economic transformation of the past 15 years.”

Euro launchpad

But the job losses will still come as a blow, as FDI has played a major role in Ireland’s emergence as Europe’s fastest-growing economy over the past decade. The total value of investments by US companies in Ireland has grown from $36bn in 2000 to $87bn in 2008. A skilled, low-cost workforce and low headline corporate tax – as well as being the only English-speaking member of the eurozone – has attracted a host of US multinationals looking for a launchpad into the European market.

Dell Ireland currently employs 4500 people in its manufacturing centre in Limerick, which opened in 1991. The 1900 job losses will be phased from April this year, to be completed by January 2010. Dell’s employees in Limerick will continue to co-ordinate EMEA manufacturing, logistics and supply chain activities across a range of functions including product development, engineering, procurement and logistics. The company says the decision to move the manufacturing roles will not affect these functions. In addition, Dell also employs more than 1000 people at a sales, marketing and support centre in South County, Dublin.

Key functions

Limerick is also home to a number of Dell’s key European functions, which include its Centre of Competency for Communications and Network Product Development.

The centre includes an R&D capability to develop software solutions for Dell’s manufacturing sites worldwide. Limerick is also the location for the company’s EMEA Applications Solution Centre, where customers can design and road test software solutions. But Dell confirmed that it is not planning any future investments at this time for Ireland.

COMPANY PROFILE

DELL

Headquarters

Round Rock City, Texas, US

2008 turnover

$16.13bn

Founded

By Michael Dell in 1984

Revenue by region

Americas 62%; EMEA 24%; Asia-Pacific 14%

EMEA employees

17,500

EMEA headquarters

Bracknell, UK