Going mobile in China: shifting value chains and upgrading in the mobile telecom sector

Abstract

This paper examines the question of how a shift in the end point of a global value chain alters the prospects for industrial upgrading in a developing economy through an analysis of the mobile telecom sector in China. Over the last decade, China has become the world's largest market for mobile phones, and domestic Chinese firms have been able to take advantage of both increasing modularity (to outsource components that they lacked the technology to produce) and their superior knowledge of low-end market segments to expand sales vis-à-vis foreign firms. But these advantages are temporary: high levels of modularity lead to intense competition and low-profits among domestic firms and foreign firms rapidly improve their market knowledge. The key to long-term success for domestic firms is investment in design capabilities, and a shift away from purely modular relationships, but the rapid rate of technical change in the industry complicates this process.

Global value chains in a post-Washington Consensus world

“…US hegemony was eroding and the large emerging economies, led by China and India, were altering the organization of production and how rules were made that affected the global economy. Consolidation was growing at both the country and supply chain levels in a number of hallmark global industries, such as apparel (Frederick and Gereffi, 2011;Staritz and Frederick, 2012), automobiles (Sturgeon et al, 2008;Sturgeon and Van Biesebroeck, 2011) and electronics (Sturgeon and Kawakami, 2011;Brandt and Thun, 2011). When the global economic recession hit in 2008-09, this ended all prospects of a return to the old order.…”

“…They can engage in higher value-added activities, such as product development and design, which they would have little chance to do in the global chains. With more intimate knowledge of local and regional markets vis-à-vis multinational firms, they can generate 'frugal' innovations that are suitable to resource-poor environments (Clark et al, 2009 (Brandt and Thun, 2011).…”

Post-crisis China impact on trade integration and manufacturing competitiveness between Argentina and Brazil

“…The company has developed design capabilities to create chipsets for mobile handsets. Its lowcost chipsets have made it a viable competitor in China as well as other emerging economies (Brandt & Thun, 2011). In comparison, despite efforts to localize production, Brazil has relied on imports to improve its sparsely populated and antiquated mobile telecommunications network.…”

Влияние Внешних Факторов На Развитие Рынка Консалтинговых Услуг

“…But the shift to more regional markets could be associated with fewer upgrading opportunities and even greater competition, as demand in lower income countries tends to be linked with lower quality and less variety, and lower entry barriers mean more developing-country suppliers can participate. Moreover, MNEs could quickly catch up on local knowledge advantages once profitability emerges, as illustrated by the displacement of domestic firms in the Chinese mobile phone industry (Gereffi, 2014: 15;Brandt and Thun, 2011;OECD, 2013).…”