Corporate strategies in the East Asian electronics industry

During the 1990s two basic trends emerged in East Asia’s electronics industry. First, the competitiveness of East Asian countries greatly improved; so that the region now accounts for a large proportion of the total world trade in many electronics sectors. Second, trade in electronic products within the East Asian region accelerated markedly during the 1990s. Since the first half of the 1980s there has been a sharp rise in intra-Asian trade and direct investment in the industry, mirroring a broader process of market- and firm-led regionalization.

Both trends have been interpreted in terms of the so called “flying geese” or “product cycle” model, in which Japan plays the role of the leading, innovative country, and the East Asian NICs and other Asian economies follow as second and third-tier countries on the ladder of comparative advantage. This article provides another interpretation, based on the strengthening of the production networks in East Asia that have been described in the preceding article. It assesses trade patterns and the integration of the East Asian countries in electronic products since the 1980s by using an original trade database and taxonomy of trade flows in the electronics industry. The main purpose is to show that production networks based on strong intra-regional interdependence with respect to both inputs and sales have played a very significant role in the overall competitiveness and intra-regional trade in the electronics industry. These networks include those centered on Japanese firms, and also partly competing, partly complementary networks involving firms from the United States, the NICs, and even the ASEAN countries. The evolution of these networks has consequences not only for economic relations within East Asia, but also for the region’s economic ties to the other two major areas, the United States and Europe.

The first section begins with an outline of the taxonomy and database for trade flows in the electronics industry and surveys the performance of the electronics industries since the 1980s in the major countries of East Asia: Japan, the NICs (Korea, Taiwan, Hong Kong, and Singapore), the ASEAN countries (Indonesia, the Philippines, Malaysia, and Thailand), and China. The second section evaluates intra-regional trade patterns in East Asia, providing a detailed historical and sectoral breakdown. The third section summarizes the aeticle’s main empirical findings and gives an explanation for them. The final section includes some concluding comments and prospects for the development of the East Asian region.