Feasibility of International Trade Global Value Chain

Contract for International Sale of Goods

A Solid Reputation

Semicontronics is an Australian manufacturing company that has been in the business of semi manufactured electronics for over a decade. Semicontronics has a solid reputation for meeting customer demands for quality products on time and on budget. Semicontronics customers are international, mid-market manufacturing companies that produce generic electronics such as smart phones, digital media players and game consoles. Retail stores in foreign countries purchase the generic products and rebrand them for sale.

Recently, Semicontronics has been approached by Phoneson to act as a supplier in its supply chain. Based in Japan, Phoneson is an original design electronics manufacturing company specializing in high-end mobility devices, including smart phones, tablets and navigation systems. Phoneson is impressed with Semicontronics reputation and wants Semicontronics to supply several components for its next release of legacy products.

Phoneson has a reputation for producing best-in-class brands of electronics, and is recognized for cutting-edge technology and aesthetic design. It has built a loyal following from electronics enthusiasts in Japan as well as other Asian and European electronics markets. Phoneson wants to extend its brand into the highly competitive North American market and sees standard, 4G compatibility and HD video in its smart phones and tablets as the keys to its success.

In order to offer its products as a high-end alternative to the established North American competitors and at its existing top market price, Phoneson has decided to spend millions of dollars on aggressive marketing. It plans to cut production costs by having Semicontronics produce its computer chips, instead of its existing supplier.

A Realization

Semicontronics has enthusiastically accepted Phonesons invitation to join its supply chain. If Semicontronics can maintain its track record for supplying cost-efficient, quality products on target, it could open an entire new customer market for expansion.

While negotiating the supplier contract, Semicontronics realizes the memory in its current computer chips will have to be significantly increased to support the technical capabilities of Phonesons electronics. Its current manufacturing plant in Brazil is not equipped to meet these new demands, and an upgrade at this stage of a new customer endeavor is not economically feasible for Semicontronics.

FITT 1

Feasibility of International Trade Global Value Chain

Semicontronics realizes it must find a quality subcontractor with the capabilities to manufacture the Phoneson computer chips, including the enhanced memory requirements.

Subcontractor Selection

After careful market research and consideration of options, Semicontronics decides to subcontract the computer chip manufacturing to Singatron, a relatively new electronics manufacturer in Singapore. Singapore has been a hotbed for electronics manufacturing, and Singatron was created by venture capitalists hoping to get a foothold in this market, specifically in the next generation of computer chips. Although Singatron markets itself as a top quality manufacturer, its lack of experience is proving to be a major obstacle to it winning contracts.

The subcontracting offer from Semicontronics has the potential to be mutually beneficial for both parties, because they both have a market entry opportunity to prove they are a viable subcontracting option for high-end electronics manufacturing.

Learning Outcomes

This case study relates to the following learning outcomes from the module Risk Analysis and Management in the course Feasibility of International Trade, and the module Document Management in the course Global Value Chain:

Identify the intellectual property (IP) assets and potential risks associated with IP infringement to ensure business viability within both the domestic and international target markets.

Mitigate identified intellectual property (IP) risks associated with IP infringement to ensure business viability within both the domestic and international target markets. Explain the purpose and importance of using Incoterms rules within international trade transaction documentation.

Manage required documentation for international trade transactions to ensure compliance and maximum efficiency.

FITT 2

Feasibility of International Trade Global Value Chain

Case Study Questions

2. List ten areas of consideration Semicontronics should include in its contract to have Singatron manufacture computer chips.