Facebook Blogging

Edward Hugh has a lively and enjoyable Facebook community where he publishes frequent breaking news economics links and short updates. If you would like to receive these updates on a regular basis and join the debate please invite Edward as a friend by clicking the Facebook link at the top of the right sidebar.

Monday, September 22, 2003

The Risks of Not Outsourcing

This piece tells us I think why the US would be ill advised to get involved in a trade war with China. Maybe such an eventuality would be good for the textile business back home. But for the companies in the technology sector, lack of Chinese outsourcing would only make them less, not more competitive with respect to their principal rivals.

Samsung Electronics, the world's top memory chip maker, said on Friday it would move most of its personal computer manufacturing operations in South Korea to China by 2005. This move is intended to increase its competitiveness against global rivals, such as Hewlett-Packard and Dell.

The transfer is the latest in a series of similar moves by Korean companies eager to exploit China's low labour costs and avoid industrial unrest at home, a trend that has heightened fears the country's manufacturing base is being hollowed out at a time when it is trying to recover from recession. "This is a global trend. If we produce and sell our products abroad, that will save our costs," a Samsung spokesman said. The PC business accounts for about 16 per cent of sales at Samsung's digital media division, which in turn contributes about a fifth of the group's total sales. Around 60 per cent of Samsung's home appliances and more than two thirds of its digital media products including PC monitors are already produced abroad. Under the transfer plan, Samsung's PC factory in Suzhou, China, which began operations in April, will become the group's main PC manufacturing base by 2005 with an annual production capacity of 1m units. Currently, 75 per cent of Samsung's PCs are sold domestically and the remainder abroad.
Source: Financial Times

No comments: