Smiling Curve: Brand, Manufacturing and Core Technology
--All manufacturing return to the US?
Recently someone left a comment on our Facebook page and said, “Come on, man, buy American!” From time to time, we could hear such comments. About this, here I would like to share with you some of my ideas.
In economics, there is a smiling curve, and brand and core technology lie at the top of the curve while manufacturing stays at the bottom of the curve. From the analysis of the smiling curve, we can find that most American companies are at the top of the curve, possessing the brand and core technology. However, most Chinese companies are at the manufacturing end. If a company is at the top of the smiling curve, the company will have the right to make and negotiate a price, which means it can enjoy a higher profit. Trump calls on manufacturing return to the US. And it is the high-end manufacturing industry rather than the medium- and low-end and labor-intensive ones, like textile printing, that should be returned.
Taking the round collar shirt produced in Dongguan, China as an example, the retail price of the shirt is RMB 39, but if a “√” (Nike logo) is added to the shirt, the price will go up to RMB 299. The shirt is produced in China, while the brand is from the US, so the premium price of the “√” is RMB 200. What’s more, there are a lot of “Nike” brands in the US.
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