PARIS Holding on to skilled staff in China is getting as hard as protecting intellectual property for Western technology and media firms, executives told an industry summit this week.
Poaching is rampant.
Long considered a low-cost manufacturing center, China is increasingly offering specialized skills that foreign companies are keen to tap.
"The biggest problem we have there is that they are taking people -- Chinese people we train, people we send," Robert Lerwill, chief executive of UK media group Aegis AGS.L told the Reuters Global Technology, Media and Telecoms Summit in Paris.
Aegis, with 1,000 staff in China already, is among those companies looking to expand operations and development facilities to be closer to customers in the world's biggest consumer market and to acquire local knowledge.
"There are big skills opportunities in China. One of the shortages in this world is highly skilled, capable engineers and there are a lot of them in China," said Miles Flint, President of phone maker Sony Ericsson (6758.T)(ERICb.ST).
"It is an attractive location for value creation not just for cost avoidance," Flint added.
But competition for talent is fierce and Chinese employees readily jump ship. Executives said hiring graduates fresh out of school was easy. The difficult task was finding experienced staff, particularly managers.
"To find top management, middle management so that you can control and guide them is not quite so trivial," said Gerhard Florin, Executive Vice President of Electronic Arts ERTS.O, the world's leading video game publisher.
Electronic Arts said it had 130 people in China and would hire more to boost its online gaming operations there.
Executives said hiring in China was more a strategic than a cost-related move, though researchers there still tended to still be cheaper than India, where employees are closing the gap with Western counterparts after 10 years of TMT investment.
"We have been doing some research and development in Bangalore and increasingly we will be doing it in Shanghai," said John Scarisbrick, chief executive of British-based Bluetooth specialist CSR CSR.L.
He stressed that his company was more motivated by talent than cost.
While some TMT executives said the potential rewards of developing operations in China outweighed the risks, others said they would use caution, even if that meant arriving late.
Chip design company ARM (ARM.L), which has a technical support centre in China with about 20 people, said it planned to transform it into a design center over the next three to five years but there was no hurry.
"If we move too quickly it's a way of spending a lot of money and not getting a lot in return," said Warren East, chief executive of the chip design company ARM (ARM.L).
A long standing fear for Western firms entering China has also been the possible loss of intellectual property in a country that is a global centre for piracy.
"Anything that can be copied, that differentiates your products, will not be manufactured in China," said Russell Ellwanger, chief executive of Israeli chip maker Tower Semiconductor (TSEM.O)(TSEM.TA).
"Companies are concerned about intellectual property."
Some companies such as Fujitsu-Siemens Computers, Europe's biggest maker of personal computers, also said they preferred to keep design and manufacturing at home to have more control over quality and speed of delivery.
FSC said the Asian labor cost advantage was almost "eaten up" by transport costs.
"Manufacturing in Germany is still competitive and will remain competitive," said Barbara Schaedler, chief marketing officer at FSC, a joint-venture between Japanese conglomerate Fujitsu (6702.T) and German industrial group Siemens (SIEGn.DE).
"Our whole supply chain is centered around customers needs. We built the product as soon as customers need it. This is less costly than shipping the product from somewhere," she added.