Factors that attract MNCs to China’s Semiconductor Industry

Factors that attract MNCs to China’s Semiconductor Industry

China’s growing influence on the semiconductor industry is having broad-ranging effects on existing industry players such as Samsung.   In understanding what Samsung’s response strategy should be towards this “threat or opportunity”, we must first examine the strengths and weaknesses of the Chinese Semiconductor Industry as it relates to Multi-National Corporations.

PROS
Some of the strengths that are present in the Chinese Semiconductor Industry include:

I. Market size and market growth, industry growth

1. Current domestic production, including the many foreign owned and joint venture facilities, meets only 15 to 20 percent of Chinese market demand, with the remaining 80-85 percent met by imports.  
2. China has become the largest manufacturing base for most consumer electronics products such as televisions, DVDs, personal computers and mobile phones. Continued growth of the Chinese market has provided new demand for outputs from the semicondustor industry.
3. Today, China’s market for semiconductor has reached $40 billion, making China the second largest market in the world with a global share of over 22%.
** Being in the market either as a foreign owned or joint venture would mean first access to this huge growing market.

II. The Chinese government is committed to supporting the semiconductor industry
1. China's entry into the World Trade Organization (WTO), clarified many trading and investment rules, and made foreign companies more confident in investing in China.
2. The Chinese Government has expressed explicit commitment to progress the semiconductor industry upward, and to gain high-tech knowledge through alliances with multinational corporations and tier-one industry players such as Samsung.   In fact, the goal to improve innovation in this area is listed as part of China’s 11th five-year plan.
3. Tax and Funding Incentives: Chinese government is offering substantial incentives to lure foreign investment into the country....