The cost of going global for China's high tech companies - The McKinsey Quarterly - cost of going global China's high tech companies - High Tech

Chinese high-tech and electronics companies are continuing to improve their productivity; McKinsey research shows that in most segments, private-sector Chinese companies outperform the multinationals already. Coupled with a growing focus on better-designed mass-market products and on quality, these improvements have helped Chinese technology companies grab a larger share of the domestic market, mostly through gains in the largest and fastest-growing consumer segment, the midrange one.
But our study shows that when these companies try to export their success, they face new obstacles. Global costs—in particular, marketing, R&D, and labor costs—are substantially higher, driving down already thin profit margins.

Exhibit 1: China will continue to be an attractive manufacturing base as long as productivity grows more rapidly than labor costs.
Exhibit 2: Local private-sector technology companies are reaching and surpassing the productivity levels of their foreign-owned rivals in China.
Exhibit 3: As a percentage of revenues, the largest private Chinese companies spend twice as much as the next-largest ones on R&D do.

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