ABSTRACT
Taiwan has been an important player in the global ICT industry for decades, occupying a significant position within the global production network (GPN) and global innovation network (GIN) (Ernst 2006; Chen 2002; Sturgeon and Lee 2005). In the ICT hardware industry, a number of Taiwanese-made products have enjoyed a significant global market share in many products including integrated circuit (IC) foundry, IC packaging and testing, liquid crystal display (LCD) panels and light-emitting diode (LED). Taking a closer look at this list of products, one finds that most of them are producer goods or intermediate goods rather than final goods. This fact, however, cannot be used to support the argument that the Taiwan-based ICT final product producers have lost the edge on their international competitors. Instead, it should be interpreted within the context of the GPN, because most of the Taiwanese industrial players are engaged in original equipment manufacturing (OEM) and/or original design manufacturing (ODM) (Chen et al. 2006; Chu 2009) and, more importantly, have gone global (Chen 2004; Ernst 2006). What underlies this outcome are well-regarded production and design capabilities of the Taiwanese ICT producers, which in turn have made Taiwan a major source of contract work for internationally prominent ICT companies. A body of literature has tried to highlight the characteristic feature of Taiwan’s
ICT industry and explain the underlying reasons for its development. A key aspect of Taiwan’s ICT industry is its vertical disintegration, with an origin in many small entrepreneurial firms and local clustering (Amsden 1991; Chang et al. 2012) and due credit given to a few research institutes, such as Industrial Technology Research Institute (ITRI) (Hsu 2005). This also gives rise to similarity in industrial structure between Silicon Valley and Hsinchu (in Taiwan), making networking between the two regions much easier and more intensive, especially regarding the IC industry (Hsu and Saxenian 2000). Another stream of the literature focuses on the evolution of the GPN and the
outreach of Taiwan’s ICT industry (Sturgeon and Lee 2005; Yang and Coe 2009; Chen 2004). The GPN is a production scheme where various stages of a
manufacturing process are undertaken at different geographic locations where they can be carried out most efficiently (UNCTAD 2005). Along with the trend towards the formation of the GPN, and more recently the GIN, the strategy of outsourcing and order-based production adopted by major brand marketers has greatly rationalized their global supply chain, and hence changed their contractual relationships with their Taiwanese counterparts. As a result, Taiwan’s ICT firms have participated in R&D, cross-border supply-chain management, logistics operations and after-sales services, by forming a fast-response global production and logistics network (Chen 2002; Ernst 2005, 2006). In addition, due to the Taiwanese firms’ outreach, China has become an overwhelmingly important offshore production site for Taiwan’s ICT industry, which in turn has fuelled China’s growing significance in the assembly and manufacturing of ICT products. There are even signs that China is playing a growing role in R&D (Liu and Chen 2012). However, for most of the ICT firms, particularly the IC and LCD manufacturers, their R&D bases remain largely located in Taiwan. This outcome, together with the IC design industry, makes Taiwan an innovation hub for the global ICT production and innovation network. However, there are some intriguing features of Taiwan’s ICT R&D, in terms
of both inputs and outputs. Taiwan’s manufacturing R&D is highly concentrated in the ICT sector, accounting for more than 70% of Taiwan’s manufacturing R&D. This has brought about a remarkable achievement in US patenting, with Taiwan’s global rank in this regard being fourth for eight years in a row before 2006 and remaining fifth afterwards. These patents have been mainly in ICT-related fields, seemingly implying that Taiwan’s ICT sector has moved from foreign technology to indigenous innovation (Wang and Tsai 2010). Ironically, even with so many US patents and a substantial investment in ICT R&D, Taiwan faces a huge deficit in technological trade, related greatly to the ICT sector; a phenomenon termed an ‘innovation paradox’ (Chen 2007). Some of the stylized facts provided on Taiwan’s ICT industry fail to capture
adequately this deep-rooted aspect of Taiwan’s ICT industry. Specifically, the mainstream views are related mainly to industrial organization, economic geography and value chain relationships. These approaches cannot convincingly explain why Taiwan’s manufacturing R&D and US patenting in the ICT sector are not proportional to its trade balances in technology, or benignly neglect this part of the jigsaw. To deal with this issue, one may need to dig into the nature of R&D and technology in which Taiwanese ICT industry is involved. In so doing, the authors would like to offer a synthetic view on the rise and
development of Taiwan’s ICT industry by incorporating a perception of interorganizational platform-based development. Platforms, in their most general sense, are intellectual assets and materials shared across a family of products (Robertson and Ulrich 1998), which can be further extended to a few related concepts, such as product platform (Meyer and Lehnerd 1997) and platformbased development (Krishnan and Gupta 2001). Platform-based development takes place within one firm (Sköld and Karlsson 2007) and between firms
(Sköld and Karlsson 2011; Gawer 2010). By borrowing some ideas from the platform-based development approach, the authors aim to elaborate the intrinsic features of R&D networking within the GINs involving Taiwanese ICT firms, and so address the innovation paradox. While the mainstream views tend to focus on the division of labour and organizational coordination across firms and locations within the GINs, the platform-based development approach can provide a magnifying glass to unveil the way in which R&D in the GIN is conducted and intertwined within and between the networked firms. The paper is structured as follows. Section two highlights the stylized views
and innovation paradox of the Taiwanese ICT industry and goes further to provide a synthetic view, based on the platform-based development approach. Section three presents two intensive case studies of IC foundry and HTC, which enable one to look beyond the stereotype of platform-based development in the ODM business of Taiwan’s ICT industry in order to provide new insights gleaned from the platform approach. Further discussions are presented in section four. Section five concludes the paper.
