China's Lost Revenue
Thursday, June 3rd, 2010According to the San Jose Mercury News, when factories in China build products for global brands, they get “four pennies on the dollar” for a pair of Nike shoes, or maybe $25 dollars from a popular consumer electronics device that sells for $750. They leave “a boatload of money” on the table, according to the secretary-general of the China Industrial Overseas Development and Planning Association.
So China is no longer satisfied with being just the world’s factory—it wants to move to the “top” of the supply chain where margins are fattest. To do that, the country needs it own mega brand names, and intellectual property. Lenovo was purchased from IBM, Volvo was purchased from Ford. But much, much more needs to be done.
And they need to move quickly, as new contract manufacturing aspirants from Mexico, Eastern Europe, and even Vietnam nip at their heels with even lower component costs and wages.
