Global innovative technology leader Advanced Micro Devices (AMD) said yesterday that China could become the company's largest single market within the next two years, boosted by the country's booming rural market and increasing demand for notebooks.
The observation came from AMD president and chief executive officer Dirk Meyer, whose company now stands as the world's second largest chipmaker.
"There are speculations that China will become the world's largest PC market by 2012, but for us, China could become our largest market sooner than that, as we have a higher market share in the country," he said.
China's PC market has showed signs of recovery during the past few months, as the government's economic stimulus package and efforts to subsidize rural computer buyers took effect.
According to figures from research firm Gartner, the PC market in China is estimated to have grown 28.5 percent in the third quarter of 2009, compared with a worldwide average growth of 0.5 percent in the same period.
AMD senior vice president and president of AMD Greater China Karen Guo said China's PC market has shown great potential during the financial crisis. She said the company's growth in the country is expected to come from rural areas and demand for notebooks in the future.
Since the company's entry into China in 1993, it has maintained sustained growth as it successfully won local customers such as Lenovo, Founder, Tongfang and Dawning.
The company also established a close relationship with key Chinese government organizations by transferring key x86 microprocessor technology and helping China develop its own supercomputing capability.
Lagging behind market leader Intel, AMD accounts for about 25 to 30 percent of desktop computers around the world, according to the company. In the emerging notebook market, the company's share is about 10 to 15 percent.
Guo said in China AMD's market share is relatively higher. She said the company would work closely with local governments and its partners in China to cash in on the plan to sell more computers in rural areas.
AMD now has nearly 2,000 employees in China and has the company's second largest research center in the country. The company also has a microprocessor test, mark and pack (TMP) facility in Suzhou, east China's Jiangsu province.
Last month, the giant chipmaker Intel announced that it would pay $1.25 billion to settle its long-running disputes with AMD, ending the industry's most bitter legal war that covers both antitrust and patent claims.
Dirk said yesterday that most of the payment it received from Intel would be used to pay the company's current debt. "But we will assuredly increase our investment in emerging markets such as China where most of the PC shipment growth comes from," he said.
In the past few years, AMD has challenged its biggest rival Intel Corp as never before in the company's 40-year history.
Earlier this year, AMD decided to drop its "Smarter Choice" tagline in exchange for "The future is fusion", as it tries to highlight the combination of its microprocessor and graphics technologies.
China announced Wednesday a regulation to standardize and encourage the establishment of joint venture enterprises by overseas investors.
According to the regulation, which will take effect from March next year, the government is to encourage overseas investors with advanced technology and management experience to set up joint ventures in an effort to promote the development of industries such as the modern service sector.
The regulation defines those joint venture enterprises as those set up by more than two overseas investors or by an overseas investor and a Chinese investor.
The regulation, issued by the State Council, the cabinet, covers both enterprise and individual investors.
It also applies to investors from the Hong Kong special administrative region (SAR), Macao SAR and Taiwan.
The amount of foreign direct investment into China rose for the third consecutive month in October, up 5.7 percent year-on-year to $7.1 billion, according to statistics from the Ministry of Commerce.
The sales revenue of China's online gaming industry is expected to reach 27.5 billion yuan (US$4.03 billion) in 2009, according to Ma Huateng, president and CEO of China's leading Internet service provider Tencent Holdings Limited.
Ma made the prediction at the opening ceremony of the Seventh China International Digital Content Expo on Friday.
The third quarter financial reports of major Chinese online game companies including Sohu, Tencent, NetEase and Shanda, showed most of them recorded a 60 percent or even higher increase in gross profit, Beijing Daily reported Saturday.
The sales revenue of China's online gaming industry reached 18.38 billion yuan in 2008, up 76.6 percent from 2007.
An executive from the gaming department of NetEase attributed the continuous growth of the online gaming industry to the development of Internet technologies and preferential policies from the government.
Chinese online game companies' expansion overseas also contributed to the growth.
The Nasdaq-listed Perfect World, a leading Chinese online game developer and operator, entered the Russian market and set up a branch company in the United States in 2009.
Andrew Hupert over at the Chinese Negotiation blog did an interesting and helpful post on negotiating strategy in China in a post entitled, US-China Variation of Prisoners Dilemma -- The Factory Game. In his post, Andrew, who teaches at New York University's (NYU) Shanghai campus, discusses in detail the experiment he did with his students and the results of that experiment.
More importantly, he then sets out five good lessons American businesses can learn from relating to their business negotiations with Chinese companies:
What lessons can US negotiators in China draw from this exercise?
1 – Set the stage for trust, or you will poison the potential relationship from the start.
Test orders are an American concept while systematically building relationships is Chinese. Americans assume that the relationship will grow from successful transactions. Chinese assume that successful transactions will grow from relationships. The result is that Americans tend to under-promise (“we’ll have to see how well you do on the first order before we discuss raising the volume”) while the Chinese over-promise (“oh yeah, we can definitely do what you want at the right price and quality level” – even if they don’t know what they are doing – yet). Both behaviors tend to undermine trust in the early stages of a US-China business relationship.2 – Penalties and missed bonuses are often interpreted by Chinese actors as ‘cheating’ behavior – and a betrayal of trust.
Americans often employ the ‘carrot and stick’ technique of using potential bonus payments and penalties to enforce positive behavior. Unfortunately, Chinese counter-parties often view this as dishonest and manipulative. It is human nature to count the bonus and ignore the penalty during the pre-execution phase of the deal. Once trust is lost, it is very difficult to restore. A missed bonus – regardless of how justified the American side feels it to be – often triggers negative behavior from the Chinese side.3 – Guanxi-building activities like dinners, tours and meetings are the Chinese method of vetting partners.
You should be doing the same. Use your banquet time to talk about how you and your counter-party define success. What are your goals? How can you work together? American negotiators are often shocked at how much time the Chinese waste on relationship building. Chinese negotiators are equally shocked at how much opportunity the Americans waste by not building proper relationships.4 – Overly picky contract terms tend to be counterproductive.
Your corporate lawyer thinks you can write-out the risk of overseas deals, but in China this can be counter-productive. Detailed contracts with penalties and financial stipulations can make the Chinese side feel that you are not a suitable long term partner. Contract terms that seem normal in the US can trigger the “cheat” switch in China — since they think you are already pulling fancy tricks.5 – Relationships are not organic in China.
Americans tend to feel that close relationships are the product of positive experience and time. Chinese negotiators are a bit more transactional, and expect partners to ‘work at the relationship’ in the early stages. Don’t blow an opportunity by paying lip-service to your Chinese counter-party. When they say, “we want to have a good relationship” it isn’t necessarily a pro-form business platitude. Use the opportunity to define slippery terms like ‘trust’, ‘success’ and ‘long-term’. Assumptions can be lethal in a cross-cultural negotiation.
My experience concurs with all these suggestions and I am going to speak to Andrew's Nos 2 and 4 because those relate most directly to my role as lawyer on foreign-Chinese transactions. My experience is contractual bonuses are frequently misunderstood and oftentimes do create unexpected problems. For whatever reason, Chinese companies frequently seem to be of the view that if a contract provides for a bonus for achieving a particular goal, getting close to that particular goal warrants the bonus, or at least a strong request that it be paid. I also agree with Andrew on the penalty front, but with a pretty big caveat. Our experience has been that they can be quite effective, not so much in their enforcement, but in their keeping the Chinese factory or counter-party's feet to the fire and, when things go wrong, as a leverage piece to force a quick discussion of how things will be resolved. In other words, their strength lies not so much in their enforcement, but in their availability as a leverage tool to get things done.
I also agree with Andrew's view on what he calls "overly picky contract terms." I have always had the sense that the typical Chinese company views the length of the contract as being inversely proportional to the strength of the relationship and though it is important that the contract have all of the critical terms, this is a big incentive to keep it as short as possible. One other thing Andrew hints at here is that Chinese companies typically do not interpret contracts as technically as do Americans. A great example of that is joint venture contracts. If an American holds 51% of a venture, it assumes it pretty much controls everything, whereas the Chinese company might well view that split as simply giving the American the right to 2% more of the profits.
Let's hear your China negotiating stories. What are you seeing out there?
Read more: China Negotiating Strategy. An Expert's Perspective.
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