Philips in China

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Submitted By asif22
Words 650
Pages 3
Chapter 9 = Production & Logistics
Philips in China
The Dutch consumer electronics, lighting, semiconductor and medical equipment conglomerate Philips NV has been operating factories in china since 1985 when the country first opened its markets to foreign investors. Then china was seen as the land of unlimited demand and Philips like many other Western companies demand of Chinese consumers snapping up its products by the millions, but the company soon found out that one of the big reasons the company like china-the low wages rates-also meant that few Chinese workers could afford to buy the product they are producing. Chinese wage rates are currently one third of those in Mexico and Hungary, and 5 percent of those in United States or Japan. So Philips hit on a new strategy; keep the factories in china but export most of the goods to the United States and elsewhere.
By the mid-2000s, Philips had invested over $2.5 billion in china. The company now operates 25 wholly owned subsidiaries and joint ventures in china. Together they employ approximately 30,000 people. Philips accelerated its Chinese investment in anticipation of Chinese entry into the World Trade Organization. The company plans to move even more even production to china in the future. In 2003, Philips announced it would phase out production of electronic razors in Netherlands, lay off 2000 Dutch employees, and move production to China by 2005. A week earlier Philips had started that it would expand capacity at its semiconductor factories in China, while phasing out production in higher cost locations elsewhere.
The attention of China to Philips include continuing low wage rates, an education workforce, a robust Chinese economy, a stable exchange rate that is pegged to the U.S dollar, a rapidly expanding industrial base that includes many other Western and Chinese companies that Philips uses as supplies…...

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