World's largest personal computer (PC) maker, Dell Inc., has signed an agreement with the government of Tamil Nadu to set up its first manufacturing plant in India in the southern state to help help serve new clients in the fast-growing computer market.

Dell expects to begin manufacturing in India in the first half of 2007, initially focusing on desktop computers, which make up about 70 percent of its current business in India.

The plant will initially have a capacity to manufacture 300,000-400,000 units a year and the capacity would be enhanced depending on the requirements. Dell will also add notebooks, servers and storaged devices in the future.

The computer major is expected to invest $ 60 million (about Rs. 280 crore) in two phases in the new facility and related operations that will be located in a 50-acre area in Sriperumbudur Hi-Tech Park, outside Chennai.

According to Paul-Henri Ferrand, vice-president of Dell (South Asia Operations), the company will invest $ 30 million in the first phase, spread over five years, and invest the rest after five years in the second phase. The unit was expected to provide direct employment to 1,000 people and indirect jobs to another 4000 people, Ferrand said.

[Tamil Nadu] offers an exceptional work force and unique strategic-investment zone, along with easy proximity to a large base of current and potential Dell customers, he said.

The operation will give us far broader access to both India's dollar- and rupee-based information-technology markets, and we believe more and more customers will be drawn to the advantages of direct relationships with Dell, Rajan Anandan, Dell's vice-president of India (Sales), added.

Dell said that in its most recent operating quarter, its shipments in India increased 82 percent, while revenue grew 63 percent.

Dell has a market share of just 7 percent in India, and lags largely because of taxes that result in higher prices for its products. The Indian government imposes higher import taxes on fully assembled computers than computer parts, and Dell currently ships complete computers to India. A plant in India would help the company lower its tax bill, improve delivery time and cut logistics and transportation costs.

This will be Dell's third manufacturing plant in Asia, after those in Penang, Malaysia, and Xiamen, China.

It also has plants in Austin, Texas; Nashville, Tenn., and Winston-Salem, N.C., and in Limerick, Ireland, and Eldorado do Sul, Brazil. A second South American production site is currently under construction in San Paulo, Brazil. Dell Inc. has also signed a preliminary deal with Poland's government on Monday, September 18, 2006, for the construction of a $ 250 million plant to produce computers to satisfy surging demand in Central and Eastern Europe.