The Research On Smic Vertical R&d Cooperation Competition Strategy

IC industry has recently been the focus of our government to foster high-tech industries, has also been recognized as the country’s major economic industries. Headquartered in Shanghai, Semiconductor Manufacturing International Corporation(SMIC) is established under the China Government’s concern, and is the first local IC wafer manufacturing company headquartered in mainland China. Based on the principles of the construction and development of a high starting point, SMIC currently is still a leading IC wafer manufacturing company in mainland China.As the global economy has entered a comprehensive globalization era, IC wafer manufacturing industry has also experienced an era thru free competition in the market. Many wafer companies by mergers and acquisitions among enterprises, the industry appeared several giant wafer manufacturing companies. Now the global integrated circuit wafer manufacturing industry is also gradually step in oligopolistic competition era. Over the past 10 years, SMIC and its major competitors have been expanding their production capacity by merging and acquisitioning the rest of the small IC manufacturing plants to reduce cost. The low-cost leadership strategy is the major business strategy and competitive strategy for SMIC. However, as the industry enter the era of the oligopolistic competition, SMIC need to change the original competitive strategy and must focus on technology and management innovation to reduce production cost in order to gain competitive advantage.This article is based on SMIC looking for technology and management innovation competition policy. The analysis follows the contemporary business strategy analysis model, using the popular economic strategy analysis tools. For example, the use of Porter’s five forces analysis model for SMIC’s IC industry in which the company belong and carried out a detailed analysis. We also made horizontal comparison between SMIC and its major competitors in the industry and conducted a more detailed SWOT analysis about SMIC. In this article, we also use economics and management theory and practice of international business theory combination with SMIC. And this article focused on SMIC’s specific practice with international qualitative and quantitative analysis, combined with the economic game theory using the Cournot model on the basis of the analysis of the proposed practice which SMIC’s favorable business development strategy of vertical cooperative R & D competitive strategy.This paper presents the SMIC collaborative R & D competition strategy based on longitudinal IC industry value chain. And it proposed SMIC change the past simply expansion of production capacity and reduce production cost leadership strategy to develop more cost-competitive value chain upward vertical cooperative R & D alliances with IC R & D company’s competitive strategy. This strategy continued to keep in comparison with the industry’s competitive advantage. This competitive strategy can bring 3 benefits to SMIC: through vertical cooperative R & D, SMIC can improve their R & D capabilities, have more own intellectual property rights, and enhance competitiveness; through vertical cooperative R & D, SMIC can effectively reduce the industry value chain upstream IC chip design companies opportunism risk in the choice of the IC wafer manufacturing company, that is, SMIC can get a better vertical collaborators chip manufacturing orders; through vertical cooperative R & D, SMIC can more easily get the latest technology information and production trend from upstream IC chip design. SMIC can change faster than its competitor access to the market to meet customer’s business policy change.Final conclusion is that, as an integrated circuit wafer manufacture industry change from free competition model to more like oligopolistic competition, vertical cooperative R & D strategy based on the industry value chain is good to SMIC as a good business strategy on cost leadership corporate competitive strategy. And SMIC can achieve sustained competitive advantage.