Smiling curve

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In business management theory, the smiling curve is a graphical depiction of how value added varies across the different stages of bringing a product on to the market in an IT-related manufacturing industry. The concept was first proposed around 1992 by Stan Shih, the founder of Acer Inc., an IT company headquartered in Taiwan. According to Shih's observation, in the personal computer industry, the two ends of the value chain – conception and marketing – command higher values added to the product than the middle part of the value chain – manufacturing. If this phenomenon is presented in a graph with a Y-axis for value-added and an X-axis for value chain (stage of production), the resulting curve appears like a "smile".

Based on this model, the Acer company adopted a business strategy to reorient itself from manufacturing into global marketing of brand-name PC-related products and services. Acer accordingly invested heavily in R&D to develop innovative technology. The concept later became widely cited to describe the distribution of value-adding potentials in other types of industry to justify business strategies aimed at higher value-adding activities.^[1]