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By | Timothy Prickett Morgan 29th February 2012 21:20

IBM peddles used servers, PCs in China

A market economy matures

As the Ferengi rules of acquisition point out, anything worth selling once is worth selling at least twice and maybe three times. And thus, Big Blue is opening up a server and PC refurbishing center in Shenzhen, the first such facility in China and one aimed at the burgeoning second-hand equipment market in that country.

With so much money sloshing around, you might think that Chinese companies would be exporting used kit to Europe and North America. But as it turns out, some Chinese firms are just as cash-strapped and are looking for bargains on PCs and servers. And the Chinese government wants to keep heavy metals out of landfills, too.

So the used IT equipment market is growing. According to market researchers at IDC, the secondhand IT equipment market in China is forecast to reach $25bn by 2014, and $18bn of that – nearly three-quarters – of that will be spent on low-end, midrange, and high-end servers and desktop and laptop PCs.

Taking back equipment as part of an upgrade or system replacement is not new behavior for IBM. The company has made a tidy living by increasingly controlling the secondhand market for its own systems, cleaning up the gear and peddling it to customers who need older hardware (usually because they want to support older software and do not want to move to the newer releases required by newer iron) or who just don't want to buy new equipment (as some of us never do with cars, homes, and other capital goods). Reusing equipment is obviously green, in as much as it keeps the gear in use somewhere and not in a landfill, but is also often dirty, in the sense that it generally does less work per watt and takes up more space.

The server and PC refurbishing center in Shenzhen is down the road from IBM's global supply chain management center, and near the PC factory that it sold as part of its spinoff of its PC business to Lenovo a few years back. IBM also manufacturers entry and midrange Power Systems servers in Shenzhen, where it moved manufacturing operations from Ireland back in October 2010.

In January 2010, IBM moved manufacturing of high-end Power Systems iron as well as System z mainframes from its factory in Mulhuddart, outside of Dublin, to Singapore. IBM still makes entry and midrange Power Systems machines in Rochester, Minnesota, and high-end Power Systems and System z mainframes in Poughkeepsie, New York – at least for now.

The Shenzhen refurbishing plant will start out modestly by refurbishing hundreds of Power-based servers at first. The plan, according to Richard Dicks, general manager of IBM's Global Asset Recovery Services division inside of its Global Financing arm, is to push around 100,000 used machines (both PCs and servers, with IBM and other labels) through the Shenzhen facility by 2014, cleaning them up, upgrading them where necessary, and slapping a new – or rather used – price tag on them for resale to xiǎoqì guǐ.

An IBM spokesperson tells El Reg that the vast majority of these 100,000 machines will be servers, not PCs, and that about a 10 per cent of the machines will be Power Systems, 10 per cent will be PCs, with the remaining 80 per cent being a mix of IBM and non-IBM x86 servers.

IBM operates refurbishing and manufacturing centers in the United States in Endicott, New York, where it was founded 100 years ago, and in Raleigh, North Carolina; it has other refurbishing facilities in Australia, Japan, Brazil, Canada, France, and Germany to serve those local markets. And now, China.

IBM doesn't talk much about how much money is involved in this refurbishing operation. But in 2004, the company said it handled an average of 112,000 pieces of used equipment per month worldwide and generated more than $1bn in revenues from the sale of used gear for the entire year. A company spokesperson told El Reg that in 2011 it Global Asset Recovery Services handled approximately 2 million pieces of gear across its refurbishing and scrapping operations. ®

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