PROFITABILITY ANALYSIS IN CHINA INTEGRATED CIRCUIT (IC) INDUSTRY

Abstract

The purpose of this study is to analyze the Integrated Circuit (IC) industry profitability performance in China. This study is urgently important due to the impact of the Sino-US trade war that happens recently. Also, the Sino-US trade war is predicted to influence seriously the economic development speed and un-employment issue in China and the United States. In this regard, the study analyses the financial performance of the five big IC corporations in China, such as the sales volume, the percentage of R&D personnel, the percentage of top 5 customers, and the percentage of top 5 suppliers as independent variables. Then, this study employs net profit and ROAE as the proxies of profitability analysis that represent dependent variables. The research methodology is panel data general least square (GLS) regression by STATA M-64. The result of the study is that the sales volume, the percentage of R&D personnel, the percentage of top 5 customers, and the percentage of top 5 suppliers has a significant influence on the corporation profitability. In addition, this study shows that the percentage of personnel in R&D has the greatest influence on the corporate profitability. Through this finding, this study confirms that in China IC industry, the percentage of personnel in R&D plays important role to generate its profitability, therefore, this study encourages the future researcher to emphasis on the human capital characteristics that will be needed to sustain IC corporations in China in the future.