Dell and Toshiba sign US$5-billion components pact

Toshiba America Electronics Components Inc. (TAEC) announced Monday its parent company Toshiba Corp. has signed a deal to supply Dell Computer Corp. with components on a worldwide basis. Initially due to run for three years, the deal has a potential value during that period of US$5 billion.

Described as both a strategic alliance and a master purchase agreement, the deal, which is already underway, is best seen as an enhancement of the two companies’ existing relationship, according to Rob Taylor, vice president of TAEC’s computing segment.

Toshiba has been supplying Dell with multiple components for several years, Taylor said. What’s different about the new arrangement is that both companies will commit to ensuring their product road maps better align with each other, he added.

“If you look at Dell, they have a proven track record of bringing new products to market very quickly, while Toshiba has a proven track record of bring new technologies to market very quickly,” Taylor said. “We’ll make sure we match our road maps together.”

“We can give feedback to Toshiba since we deal directly with our customers,” which may help the Japanese company determine where to focus some of its R&D (research and development) efforts, said Dell spokesman T.R. Reid.

At the same time, through its closer relationship with Toshiba, Dell will have a better sense about advanced technologies on the horizon, such as polysilicon LCDs (liquid crystal displays) and how to create products to accommodate such technologies, Reid said. The deal will give Dell a “leg up” on gaining access to future technologies, he added.

The kinds of components covered by Monday’s deal will include Toshiba’s DRAM (dynamic random access memory), SRAM (synchronous RAM) and static memory, as well as its LCDs and storage products such as DVD (digital video disc) drives and hard-disk drives, Toshiba’s Taylor said.

Over time, Dell and Toshiba intend to broaden the agreement to add in other Toshiba products. Such products could include batteries and color display tubes, Taylor said.

Dell is also thinking of potentially signing up for Toshiba’s low-temperature, polysilicon LCDs and the vendor’s memory products with higher-density geometries such as RDRAM (Rambus DRAM), DDR (double data rate) SDRAM and PC133, according to Taylor. “(Memory is) an area where lots of technologies are still evolving. (It’s about what) we’ll be able to leverage with a reliable supplier,” Dell’s Reid said.

Dell hopes its expanded agreement with Toshiba will help improve the company’s access to future supplies of both memory and LCD displays, Reid said. “To strengthen a relationship with a key supplier of important components, especially with periodic availability issues with both DRAM and LCD screens, is a positive development in that area,” he said.

Reid compared the tie-up with Toshiba to a technology pact the U.S. PC maker signed last year with IBM Corp. valued at $16 billion. The IBM deal, with a duration of seven years, saw Dell agreeing to buy storage, microelectronics, networking and display technologies from Big Blue.

Both deals are part of Dell’s strategy to leverage the R&D efforts of its partners, rather than having to build up a large R&D operation in-house, Reid said.

Dell, based in Round Rock, Tex., can be reached at TAEC is the North American engineering, manufacturing, marketing and sales arm of Toshiba Semiconductor Co. and Toshiba Display Devices and Components Co. Based in Irvine, Calif, TAEC can be contacted at