Research On The Labor Division And Value Allocation Within Global PC Production Network

This paper utilizes a blend of theoretical analysis and case studies to discuss the labor division and value allocation within the global PC production network (GPN). As a major coordinator, the brand leader(BL) of the global PC production network, focusing on branding, marketing and innovating activities, offshores and outsources (OEM/ODM) its production process; Higher-tier suppliers provide key components (e.g. operating system, microprocessors, LCD, etc.) within the network, while lower-tier suppliers provides minor parts(e.g. cable, case, keyboard, etc.) for the ODMs and higher-tier suppliers. A detailed study of the value allocation reveals that, with the exception of Microsoft and Intel, other participants within the GPN cannot reap hefty profits over time; most BLs' profit margins are below the GPN average; while ODMs only retain very low level of operating profit, their advantage lies in higher return on assets; despite some microprocessors (logic and analog processors) account for a tiny amount of the PC's total cost(less than 1%), relevant suppliers can still extract huge profits.During the past three decades, in terms of its scale and level, China's PC industry has been playing an increasingly phenomenal role within the global PC production network. Implications for the future development of China's PC industry require a rethinking of the past industrial policy and a shift from brand-focused strategy towards value-added strategy; enhancing firms'bargining power, cultivating their systematic and integral innovation; formulating policies based on a modular framework, constructing a common platform for small and median size enterprises, favoring them upgrading towards higher-tier suppliers; encouraging leading multinational corporations to invest and develop continuously in China and strengthening their business connection with local suppliers.