Going mobile in China: shifting value chains and upgrading in the mobile telecom sector. (16th August 2011)

• Record Type: Journal Article
• Authors: Brandt, Loren; Thun, Eric
• Is Part Of: International journal of technological learning, innovation and development. Volume 4:Number 1/2/3(2011)
• Page Start: 148
• Page End: 180
• Publication Date: 2011-08-16
• Subjects: China -- mobile phones -- modularity -- shanzhai -- industrialisation -- emerging markets; Organizational learning -- Periodicals; Technological innovations -- Economic aspects -- Periodicals; Industrial organization -- Technological innovations -- Developing countries -- Periodicals; Diffusion of innovations -- Developing countries -- Periodicals; 338.064091724
• Languages: English
• ISSNs: 1753-1942

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.