Cybernetics
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Selling below cost is never a viable market strategy.
UNLESS...
You have an alternate source of income to offset your market losses -- the government.
Or more accurately, the taxpayers who unwittingly supports unfair market practices.
This is China and she can do whatever she want in terms of internal affairs. If the Chinese government want to force Chinese companies to use only Chinese products, that is her right. But do not present this as anything else other than unfair business practices.
At this stage in development China lacks a competitive IC infrastructure like that of the US. To avoid having its market taken over by US chip manufacturers like Intel, Nvidia, Qualcomm, etc. in a completely free market it should foster the development of domestic firms. This will provide time for less competitive domestic firms to build up the capability to eventually be able to compete with American firms. Perhaps China should be smarter in approaching the technicalities (to avoid backlash) through granting government subsidies in the form of big defense contract from the government. On the other hand in that scenario these Chinese IC firms would probably be barred from the US market due to defense related activities, even though the American IC firms gets defense contracts and still have access to the Chinese market . Obviously there is an unspoken deal between the two nations, its implicitly understood.
I do agree that running a firm by selling below cost is not a viable market strategy in the long run. The difference for Chinese IC companies is that the value they provide in the long run surpasses the subsidies they receive. IC technology is seen as a strategic industry, vital for the "national security" of China, thus it becomes sort of a public good. I wouldn't expect a nation that values "national security" to buy strategic defense products from a foreign nation that they are weary of just because the product is more competitive in the short run.
Lets be honest here, every nation wants the best for itself. Even though nations want to get along and say they want to compete in a free market its almost never the case for vital industries. Back in the 1950's the US convinced Canada that the future of wars would not be fought with fighter jets but with missiles, thus Canada was convinced (or coerced) to cancel the Avro Arrow program which was the most advanced fighter program at the time. The completed planes were later scrapped, blueprints burned. Without the program jobs in the aerospace sector was destroyed. They were then scooped up by American firms like Boeing. This was a strategic win for the US and a big loss for Canada. That loss is not something Canada can easily get back. Maintaining independence in the strategic sectors are vital to the survival of a major nation.
In addition wouldn't it be great to have more choices in the marketplace? Better for consumers imo. This would force firms to become more innovative.
I would love to have sources but can't post links yet.
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