The Electronics Industries springboard: transistor 1948 significance: provider of components

Electronic Production System Dicken’s focus

Global trends Active components production was initially dominated by USA 1980s: Japan overtook USA 1990s: U.S. producers have rebounded

World production of active components, % 11% 37% 9%

Trade balances in active components, 1994, $billions *Hong Kong, Taiwan, Thailand, Malaysia, Philippines, Singapore

World production of consumer electronics more dispersed role of East and SE Asian NIEs is more pronounced

World production Consumer electronics

Trade balances in consumer electronics, $billions

The demand factor-semiconductors Demand is derived. Depends on demand growth for products in which they are embedded spectacular demand growth. Significance of personal computer role of spectacular price decline subject to fluctuation---> supply gluts and shortages segmentation of demand

The demand factor--consumer electronics Final demand products for which demand is income-elastic demand depends on life-cycle stage

Role of governments-- semiconductors Rationale for intervention??? How to gain access? –Build indigenous production capacity –attract foreign firms –buy on open market and concentrate on developing end uses

U.S. –initially used defense/aerospace demand to develop indigenous production –more recently has shifted to reducing Japanese dumping Japan –encourage growth of industrial & consumer applications –protect domestic industry –coordinate collaborative efforts Europe--collaborative efforts

Role of governments--consumer electronics Primarily defensive in response to import penetration

Production Costs, Technological Change & Corporate Strategies --semiconductors--

I. Industrial concentration trends Initially fragmented. Entry was relatively easy Steep recent increases in cost of entry due to pressures to: –pack more circuits on a single chip –improve yields result is industrial concentration

II. Trends in producer types Vertically integrated captive producers- manufacture for in-house use. IBM, GM merchant producers. For sale to other firms. Intel, Motorola hybrids. Most Japanese and European producers trend is toward greater vertical integration

III. Mergers and acquisitions 1970s and 1980s followed by international strategic alliances Why? Rapid pace of technological change & high costs of installing new capacity.

IV. Multiple stages to production process Design of semiconductors Prod’n of silicon crystal Wafer fabrication Testing Assembly & packaging Final testing & shipping Requirements for scientific, technical & engineering personnel Requirements for cheap, low-skilled labor

Result: Offshore production Which stages? those most attracted by cheap labor. American firms pioneered. Hong Kong Japanese firms accelerate offshoring in 1980s. Why? Appreciation of value of yen.

Changing structure of East and SE Asian production Semiconductor Imports into the U.S. 1. Geographic changes

Factors Labor cost increases in South Korea, Taiwan, Hong Kong, Singapore Gov’t policy changes in Malaysia and Philippines

2. Emergence of higher skill stages of production--factors Hong Kong--wafer fabrication with Chinese support Korea--backward integration of consumer electronics producers Taiwan--gov’t sponsored research organization U.S. plants add functions like testing with more local sales

Result--hierarchical organization within the region