Friday, October 07, 2005

Intel inside? 

Venezuela has announced that it will soon be manufacturing its own PC clone computers:

CARACAS, Venezuela -- Venezuelan President Hugo Chavez said Tuesday his government will manufacture "Bolivarian computers" affordable to all Venezuelans -- the latest initiative in honor of a Latin American independence hero that inspires his leftist revolution.

"We will begin producing computers in Venezuela ... the project of the Bolivarian computers," Chavez said in televised remarks.

Chavez says he is leading his country toward a socialist revolution inspired by Simon Bolivar, a 19th-century independence hero who sought to unite South American nations.

The Venezuelan leader, who is a fierce critic of capitalism, said that brand name computers are too expensive and that the project seeks to make computers more accessible to all Venezuelans.

The Bolivarian computers will sell for anywhere between 900,000 bolivars and 1 million bolivars [about $400 – OW], Chavez said.

Under his "Bolivarian Revolution," Chavez has launched a range of socialist-inspired initiatives, including free education promoting leftist ideology at campuses across the country and deals to supply oil on preferential terms to Venezuela's neighbors as part of a "Bolivarian Alternative" trade pact.

A new company will be created, Technological Industries of Venezuela, that will form a joint venture with China's Lang Chao International Ltd. to produce the computers.

Venezuela will provide an initial investment of 17.2 billion bolivars, [about $7.5 million – OW]Chavez said.

The company is expected to begin production before the end of the year and plans to produce as much as 80,000 computers in the first year, said Chavez.

A total of 100,000 should be produced during the second year of operations and as much as 150,000 during the third year, according to the president.

The president said the new computer company will eventually manufacture laptop computers and cell phones as well.

The first thing that should be pointed out is that Venezuela will not really be “manufacturing” computers. The heart of computers such as the processor, memory and hard drive are very sophisticated and beyond Venezuela’s capability to make. Rather they will be taking these components and assembling computers from them. Also, as Venezuela has become a big proponent of “freeware” I expect there won’t be anything made by Bill Gates on these computers.

Now the “value added” by this will be small and there are already lots of very cheap PC clones sold all over the world. So its not clear that Venezuela receives any major benefit by doing this. However, it does point up a very interesting concept.

Note that the partner that is probably supplying the technical expertise for this is China. It is quite possible that China and Venezuela could form numerous such joint ventures that could prove quite advantageous to Venezuela. After all, Venezuela does need to move further into manufacturing, particularly of low to medium tech items, and China could supply Venezuela with the capability to do that. Further, as China is a rapidly growing market Venezuela could insist on getting access to that market for exports of these newly manufactured goods. What would be in it for China? Simple. Access to some of the largest energy reserves in the world.

In exchange for China getting preferential access to Venezuelan oil Venezuela would get the technical know how to start up manufacturing concerns and a market for at least some of their output. That certainly sounds good, at least conceptually. So while this computer assembly start up may not amount to much in its own right if it leads to bigger and better manufacturing projects it could prove to be more than worthwhile.


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