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How can consumer device producers actually make money in the Greater Chinese supply chain?

Although the average phone or media player may bear a European or Japanese brand, all but the very top level product decisions concerning it were probably made in the Greater Chinese supply chain. Early in the product development cycle, an idea or preliminary spec is transmitted to the device maker's Asian CE Division or partner for refinement. What happens next can spell success or failure.

If you market such devices, are you confident in your answers to these critical questions?

    1. Which ODMs and IDHs does your Consumer Electronics Division call in Taipei, Hong Kong, Beijing, and elsewhere?
      ...
      Or does it go straight to manufacturing in Guangdong?
    2. What resources in India are used for the software?
    3. Where do you integrate the product - in mainland China?
    4. What strategies will ensure that your ODM will protect your brand and IP?
    5. How can you use the complex, fluid nature of the supply chain as part of your solution instead of part of a fatal problem?

What's the right balance between domestic and export markets in your China sales and operations plans?

While developing mainland-based revenue streams in China may be a strategic imperative, the reality often involves long-term business development. Initial assumptions based on recovering self-sustaining profit from the domestic Chinese market quickly prove too optimistic.

  1. Will you, like many foreign companies, have to walk away from your initial China investment if initial assumptions don't bear out?
  2. What strategies can fund your China operations until you can take profits from the domestic Chinese market?
  3. Can manufacturing for export help you recoup and repatriate your China investment?
  4. How can you turn the dial so your export and domestic operations mutually leverage each other?
  5. What local or international ownership structures are appropriate?

How can you sell IP (and get paid for it) in China?

Chinese markets are nototiously reluctant to pay for intangibles and services.

  1. Do you know how to bind your IP to the right delivery mechanism or tangible to monetize it?
  2. How can you make it in your partner's or customer's interest to determine royalties on a more accurate and timely basis?
  3. Are you confident you can guarantee revenues beyond a turn-on fee or "minimal guarantee" (or at all)?
  4. As developing trends converge to make IP more enforceable in China, can your strategy adjust?

To learn more about how your business can target success in the Greater China marketplace, contact us!

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