DHS H2 ECONS P1

Name: Index Number: Class: DUNMAN HIGH SCHOOL Preliminary Examination Year 6 ECONOMICS 9757/01 (Higher 2) Paper 1 19 September 2018 2 hours 15 minutes Additional Materials: Writing Papers READ THESE INSTRUCTIONS FIRST Answer all questions. Write your name and class on all pieces of work handed in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid. The number of marks is given in brackets [ ] at the end of each question or part question. At the end of the examination, submit your answers to the two questions as two separate bundles. This document consists of 7 printed pages including this cover page. [Turn over

© DHS 2018 Answer all questions. Question 1: Vietnam and Samsung Electronics Figure 1: Samsung Electronics’ Total Operating Profits Source: Samsung Newsroom Extract 1: Samsung Electronics divestment and acquisition moves Samsung Electronics’ printer business will disa ppear in history. The company’s decision to sell its printing solution business division to U.S. based HP Inc., a printer and personal computer manufacturer, is part of its efforts to concentrate on its core business areas. In November the same year, Samsung Electronics announced a deal to buy U.S. car infotainment and audio company Harman. The deal could make Samsung a mainstay in the automotive electronics market, as it looks to diversify revenue. The market for automotive electronics is projected to grow to over $100 billion by 2025, according to Samsung. By acquiring Harman, Samsung should be able to gain solid footing in the automotive component business since Harman already has a large and established clientele network. Furthermore, analysts say Samsung has diversified its businesses from computer chips, flat screens and mobile phones to secure stability in its revenue streams. Sources: Samsung Newsroom, 12 September 2016 and Forbes, 16 November 2016 Extract 2: China anti-trust regulator questions Samsung about chip price fixing China's anti-trust regulator decided to have a talk with Samsung after receiving a slew of complaints from phone makers about price hikes in its memory chips, sources told the 21st Century Business Herald on Thursday. The National Development and Reform Commission (NDRC), China's anti-trust body for price- related enforcement, has interviewed Sams ung about the company's sixth consecutive quarterly hike in memory chip prices, but whether an anti-trust investigation will be initiated is still unknown. A scarcity in memory chips, widely used in phones and computers, has caused prices to jump since last year. As one of the world's largest chipmakers, Samsung's DRAM chips account for 48 percent of the global DRAM chip market, while its NAND Flash memory account for 35.4 percent of that chip's market.

© DHS 2018 Source: CGTN, 23 December 2017 Extract 3: Spotlight on Vietnam The government of Vietnam has committed to creating favourable conditions for all investors and businesses. Other than infrastructure development with a focus on improving transportation systems, the government is also making an effort to increase education at the tertiary level and targeting at skills upgrading. By and large, the labour force in Vietnam is cost-competitive, educated and increasingly skilled. This offers greater value and serves as an ideal production base for companies thinking of shifting or diversifying out of larger economies such as China. Consumer expenditure has been increasing steadily in Vietnam, in particular due to rising incomes amid strengthening economic activity. As such, Vietnamese consumers are increasingly purchasing fashionable and quality products from overseas to improve their living standards. Foreign brands and suppliers are increasingly distributing medium-priced and value-for-money products to tap this emergi ng demand, including a wide range of imported goods due to lack of local products with comparable characters. Sources: HKTDC 9 May 2017 and PricewaterhouseCoopers, October 2017 Extract 4: Samsung and LG lead Vietnamese economy The Vietnamese government provides various benefit s to foreign companies that invest in Vietnam, such as the exemption from corporation income taxes. South Korean electronics companies, such as Samsung and LG, are leading the Vietnamese economy with large-scale investment and recruitment. Currently, Samsung Electronics and its affiliates employs 160,000 workers in Vietnam. Samsung is the largest major investor in Vietnam, a low-cost manufacturing centre for products that include its signature SMART televisions. Samsung Electronics, which also produces home appliances and cell phones in Vietnam, exported US$44 billion over the same period, accounting for 22.7 percent of Vietnam’s total exports. However, Nguyen Duc Thanh, head of the Vietnam Institute for Economics and Policy Research, said that Vietnam is too dependent on foreign firms such as Samsung Electronics. This is dangerous because technology is ever changing. Furthermore, according to the 2016 World Economic Forum, the efficiency of technology transfer from foreign invested enterprises in Vietnam is surprisingly low. Although these electronics and computer manufacturing sectors are considered ‘high technology industries’, the works implemented in Vietnam are simply assembling components which is the lowest value in the global production chain. Sources: Vietnam Net, 2 March & 4 October 2017 and Business Korea, 13 December 2017

© DHS 2018 Extract 5: Samsung workers on the line, foreign firms are destroying Vietnam’s environment In a study on the experiences of women working at two Samsung factories in Vietnam, a new report documents health and workplace violations by the electronics industry giant. The workers’ experiences of fainting or dizziness, miscarriages, standing for eight-to-twelve hours, and alternating day/night shift work are documented in a report released by Research Centre for Gender, Family and Environment in Development (CGFED) and IPEN. Foreign investment in metal plants, textile factories, mines and ship construction is driving the Vietnamese economy, but they are incredibl y energy-intensive industries and the economic growth is inevitably taking its toll on the country’s eco-systems and draining the nation’s natural resources. The government needs to stop viewing potential environmental damage as an afterthought. There is a need for government to preserve environmental integrity as part of its plans to promote economic growth. Source: IPEN, 4 December 2017 Questions (a) Describe the trend in Samsung Electronics’ operating profits. [2] (b) (i) Explain the type of integration when HP bought over Samsung’s printer business. [2] (ii) Using the concept of opportunity cost, explain the economic case for Samsung’s divestment. [2] (c) Define scarcity. Based on your understanding of scarcity, do you agree that it is the ‘scarcity in memory chips’ that has caused its ‘prices to jump’ (Extract 2)? [2] (d) Using the data provided, discuss the effectiveness of the possible strategies taken by Samsung Electronics to maximise profits. [10] (e) Account for the increase in foreign investment into Vietnam. [4] (f) Assess whether the benefits of increasing foreign investment outweigh the costs for Vietnam. [8] [Total: 30]

© DHS 2018 Question 2: Economies Face Protectionism Extract 6: Coming and going Figure 2: Trade Balance Figure 3: US Labour force participation rate of males aged 25 -54 Between 1999 and 2011 America lost almo