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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: LKO who wrote (59907)	2/3/2005 12:54:50 AM
From: RealMuLan	Read Replies (2) \| Respond to of 74559

>>Why not increase the price ? Is someone forcing them to sell cheap ?<< Yes, the buyers, usually large US/foreign companies, force those Chinese manufacturers to sell cheap. Take Walmart for example, they first sign a large contract and buy all what a manufacturer can produce. After a while, they said they are going to pay less for the same amount of product. And the manufacturer, by then, already lost all other customers, so they have only 2 options, goes with the lower price, thus lower profit, or no profit, or close down. So what would you choose? As a matter of fact, Walmart knows better, at the price they paid for in a lot of cases, the manufacturers have no choice but having to hire child labor, although in their contract, they write no child labor allowed. It is all just a game. The consumers in developed countries should also know better before they scream Chinese gov. does not follow a decent labor law! On the positive side, this game cannot go on forever. Many Chinese workers already "voted" with their feet, refusing to work for sweatshops any more. And I read that some Taiwan business already chose to move to other Asian nations where have cheaper labors and enough energy. Chinese banks now also decide not to hold the bags for profitless SOEs any more. >>How does it work in China for people who produce intellectual property ? << First of all, China owns very little IP right in high-tech product. Among 4 major electronic products exported by China --Color TV, computer, DVD, and cell phones, China holds only a few non-crucial IP right in them. In DVD, among the 57 key technologies, China only has IP right for 9 of them, and none of these 9 are crucial. In PC industry, among 114 key technologies, China only holds IP right for 69 of them. In 114 key technologies for color TV, China only holds 72 of them, including 10 non-crucial technologies. In the 65 key technologies of the cell phone industry, China only has IP right for 33 of them. In 2003, in Shenzhen only, there were >100 dvd manufacturers went belly up. Main reason? hefty loyalty. for a $30 some dollar finished DVD player, the manufacture has to pay $15-20 loyalty fee. This has pretty much become the strategy of multinational companies, since they cannot beat the labor cost in China, so they will use loyalty fee to squeeze Chinese companies out of the market. And in most case where China does hold IP right, usually it is the state right (using gov. money for the research), so usually state companies do not need to pay patent fee. Although if the IP right belongs to the individual, which I think rare, some reasonable loyalty still need.