Guest Blogger: Shibesh Banerji, Principal, Global Supply Chain Services, Tompkins Associates 

In April, guest blogger Shibesh Banerji talked about some recent shifts in China’s policies and trade practices that are affecting supply chains in high-tech industries.  This latest post is a follow-up.

Jim


I last wrote about China’s updated policy guidelines and how they are viewed as a sign that China recognizes the importance of fair competition, along with some points about the role played by global companies in developing the country’s high-tech capabilities.

Now I want to follow up with this important factor – specifically, how reverse migration of R&D talent to China comes into play.

There have been many articles written and opinions expressed about companies relocating their R&D activities to China. Yet, no other news has drawn as much attention as Mark R. Pinto’s (CTO, Applied Materials) decision to move to China to build a $250M research facility in Xi’an. According to some industry experts, the moment has been defined as the "beginning of a trend of reverse migration to China" (Read more in this article). 

Before overreacting, let’s try to examine the situation rationally. First of all, one of the key drivers for the move is China’s surging power demand. Solar technology is expected to play a significant role in supporting China’s future energy needs. It is estimated that two-thirds of the world’s solar panels will be produced in China by the end of 2010. 

Secondly, Applied Materials’ complex will primarily engage in fitting and assembling all the machine components manufactured in the U.S. and Europe to build the final assembly line for solar panel production.  Thirdly, it makes perfect sense to be close to raw material factories and end-consumers in order to create a sustainable manufacturing supply chain. 

And finally, Xi’an’s city government sold a 75-year land lease to Applied Materials at a deep discount and is reimbursing the company for roughly a quarter of the lab complex’s operating cost for five years. This means that they definitely made the offer attractive enough that Applied Materials could not refuse it.

So, one can argue for or against the logic of reverse migration to China, but technology innovation leaders need to be extremely careful while making their future decisions and ensure that while trying to achieve short term financial gains, they do not lose their “recipe” for sustainable innovation. 

What are your thoughts?  Are you for or against the logic of reverse migration to China?

For a more in-depth look into China’s high-tech industry and the current state of their supply chain capabilities, read the article “A Peek into Market and Distribution Capabilities of High-Tech and Home Appliance Industries in China.”

More Resources

Download the White Paper: Global Trade Management Technology

High Technology Industry: Resources and More Information

Technomic Asia: China Business Strategy Consulting