Case 2: Intel: Strategic decisions in locating a new assembly and test plant.
Dalian in China is the most attractive site for Intel to locate Assembly and Test plant in terms of its low-costed workforce and high labor productivity with skilled workers, reliable and qualified power infrastructure, as well as a relatively open environment and the increasingly mature law and regulation. |Criteria | | |Power infrastructure (reliability/quality) |Sufficient to meet economic development | |Water infrastructure (reliability/quality) |Daily water supply: 1.3 million tons | | |Water rates: $0.4/M3 | | |Waste water: $0.36/M3 | |Distribution network |International shipping and logistics hub (Free trade zone) | |Transportation infrastructure |Airport: 88 routs (17 international) | | |Roadway: well-linked expressway | | |Port: strong handling capacity | |Electricity rate price |$10/kWh (low) | |Educated workforce |22 colleges and universities | |Government tax & incentives |Income tax reduction &exemption/ refund paid tax |
Source: Adapted from Select Data for Potential AT Plant Sites in 2005
As the largest developing country, the advantage of China is irreplaceable albeit the labor cost is considered no longer cheaper than other south-eastern countries nowadays. Locating AT plant in Dalian, Intel could reap the fruit of highly productive and well-trained workers and fully developed infrastructure supported by government. Most importantly, with the currently invested chip fab in Dalian, Intel would take advantage of short lean time by establishing AT plant in the place where the lab is located, which also favorable to the electronic products producers.
However, the relationship building with local bureaucracy is seen as a barrier for locating the plant (Alcacer and Herman 2012). Actually, the chip giant like Intel has more bargin power when it comes to government restriction and personal connection, given the huge economic benefit and a great number of job opportunities that Intel would bring to Dalian. Moreover, there are two AT plant established in Chengdu and Pudong. This successful experience is somehow helpful for negotiation with Chinese government. Additionally, intellectual property protection still remain a risk for investing in China, according to Global competitiveness report (2012) however, China made more effort to intellectual property protection than other Asian countries such a India, Thailand and Vietnam. Indeed, China is increasingly concentrate on intellectual property by enhancing the awareness and progressing IP legislation, aiming to provide a healthy invest environment.
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