Ireland’s reputation as a high-tech centre is under threat following Dell’s decision last week to move its European manufacturing base from Limerick to Poland, taking with it a full 5% of the country’s GDP.
The decision to close what is Dell’s largest manufacturing plant outside the US will immediately affect 1,900 of the plant’s 3,000 workers, mostly assembly line workers, while the knock-on effects to supporting industries will come as a sizable blow to the country’s economy as a whole. The facility has historically produced between 30,000 to 60,000 PCs per day for export to the EMEA market. Limerick itself will inevitably be hit hard by the loss of one of its biggest employers.
The move is part of Dell’s $3 billion cost-cutting plan announced last year, and will allow the company to take advantage of Poland’s substantially lower average wage. Workers in Poland are paid a quarter of their counterparts in Ireland, according to some reports.
There is fear that other high-tech firms with manufacturing plants in Ireland, including Intel, HP and Analog Devices, may consider similar moves or cutbacks in light of Dell’s decision.
Like Dell, Intel’s European manufacturing is based in Ireland. Its fortunes are a gauge for the IT manufacturing industry as the company’s chips are used in 80% of PCs and usually among the first components ordered.
The outlook does not look promising. In the lead up to the release of its quarterly results on January 15, the company has said it expects fourth quarter revenue to be down 23% to $8.2 billion, $2 billion short of its original forecast. Furthermore, in November a spokesman for the firm’s Irish division was reported in the Irish Independent as saying “we may have to take pragmatic decisions."
Poland’s foreign investment agency is understandably delighted about the Dell announcement, with the agency’s head Pawel Wojciechowski telling Reuters that the decision “confirms the competitive advantage of Poland as attractive for investment. It is a good sign, especially in these difficult times.”
As a sweetener, the EU is reportedly considering allocating 53 million euros in Polish state aid for the new factory in Lodz. Influenced by Dell’s move, Ireland’s unemployment is meanwhile expected to hit 10% by the end of the year, the highest in a decade and symptomatic of a full-blown recession.
Last week’s news was Ireland’s loss and Poland’s gain, but only because Poland is treading the same steps as Ireland following its induction to the European Union. The economic equalising effect of the EU, coupled with increasing foreign investment, could see Poland in a similar situation to Ireland within three to four years as its economy soars.