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Like many successful Chinese firms, it is caught at the bottom of what Taiwanese technology baron Stan Shih famously called the “smile.” Shih observed that in the tech industry, high profits are earned at one end by companies that control the design of core technologies (such as Intel), and at the other by companies that control the design and distribution of products to consumers (such as Apple). In between are commodity firms that manufacture and assemble the products, in high volumes but for low profit margins. Taiwan is filled with such low-margin bottom-of-the-smile firms, such as Shih’s own Acer, TSMC (the world’s biggest contract maker of integrated circuits), and Foxconn (the world’s biggest contract assembler of consumer electronics). For the most part, China’s technology companies seem to be heading in the same direction.
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Arthur R. Kroeber (China's Economy: What Everyone Needs to Know)