chp-15-philips-in-china

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Philips Investments in China
The Dutch consumer electronics, lighting, semiconductor, and medical equipment conglomerate Koninklijke Philips NV has been operating factories in China since 1985, when the country frst opened its markets to foreign investors. When Philips initially entered China, it had dreams of Chinese consumers snapping up its products by the millions. However, the company soon found out that the reason it liked China—low wage rates—also meant that few Chinese workers could afford to buy its products. So Philips hit on a new strategy: Keep the factories in China, but export most of the goods to developed nations. The initial attractions of China to Philips included low wage rates, an educated workforce, a robust Chinese economy, a stable exchange rate that is linked to the U.S. dollar through a managed foat, a rapidly expanding industrial base that includes many other Western and Chinese companies that Philips uses as suppliers, and easier access to world markets given China’s entry into the World Trade Organization in 2001. By the early 2000s, Philips employed some 30,000 people in China either directly or indirectly at joint ventures. Philips exported nearly two-thirds of the $7 billion in products that its Chinese factories were producing. At this point, 25 percent of everything that Philips made worldwide came from China. As time passed, Philips started to give its Chinese factories a greater role in product development. In the TV business, for example, basic development used to occur in the Netherlands but was moved to Singapore in the early 1990s. In the early 2000s, Philips transferred TV development work to a new R