How have the financial
crises that beset East Asia in 1997–8 affected the evolution of IPNs in
electronics? It is too soon to discern the longer term effects that the crises
may have on the evolution of local industries. Some immediateeffects that may
have an impact over the medium term are, however, apparent.
Most worrisome is a
significant erosion of the region’s small and medium-sized
suppliers Global OEM customers such as Compaq and Seagate
have been quick to respond to the devaluation of local currencies and
have requested substantial price reductions from their Asian suppliers. OEM
suppliers do not have much choice but to comply. For the stronger ones this may
be feasible, yet there is an important risk involved: once devaluation is
reversed, Asian OEM suppliers will find themselves being caught in a high-cost
production structure, but they will then be unable to back away from the price
reductions that they have granted in response to the currency depreciation.
There is a real danger that current price reductions may force many of these
suppliers out of the market.
At the same time,
however, Asian suppliers are under tremendous pressure to recapitalize in order
to maintain their links with global OEM customers: survival requires that these
suppliers upgrade their product mix and their efficiency; they also need to
proceed with a regionalization of their production base. This dual pressure has
resulted in severe cash-flow problems, especially for smaller local suppliers.
The crisis also has very
negative implications for the region’s innovation systems. It has led to a
substantial cutting back in the R&D efforts of some local firms, especially
those in Korea. R&D expenditures fell in 1998 by 12.3 percent overall from
the previous year. In some sectors, the fall was much more precipitous: in automobiles,
chemicals, and medical research it was estimated to be closer to 50 percent. In
semiconductors, Korea’s largest single export earner, R&D fell by 20 percent.
The Korea Industrial Technology Association suggests that 5,000 of a total of
75,000 jobs in R&D were lost in 1998. The number of patent applications in
1998 fell by close to 20 percent. Investment in plant also declined because of
the economic crisis. Although R&D expenditures were expected to rebound
somewhat in 1999, the economic crisis may have a longer lasting impact on
research capabilities. Several thousand researchers were reported to have been
lured abroad in 1998 by more attractive employment opportunities. The Korean
press noted with particular alarm that a
number of chip designers had been recruited by Taiwanese companies that were
competing with Korean firms. The loss of the tacit technology embodied in
skilled personnel may be far more difficult to replace than an aging plant. One
effect of the crisis might therefore be to redistribute capabilities away from
the most severely affected economies to those that escaped relatively
unscathed. The financial crisis also had a profound effect on the capacity of
Korean companies to invest abroad. According to UNCTAD data, foreign investment
by Korean corporations had already declined in 1997 by nearly 10 percent
compared with the previous year. In the first nine months of 1998, the foreign
investments of Korean companies declined by a further 8 percent compared with
the equivalent period in the previous year. Moreover, new investments of US$
1.4 billion were partly offset by foreign divestments of US$ 900 millions. These
divestments, forced by capital shortages, are of particular importance in the
development of technological capabilities. In the first half of the 1990s, Korean
companies used foreign investment as an instrument to attempt to gain access to
technology. Korean companies purchased chip manufacturers in the United States,
and they purchased automobile design companies in the UK and Germany. How
successful in the long term such investments would have been had yet to be
demonstrated by the time of the crisis. Technology is in many instances “tacit,”
residing in the personnel employed by the companies. Whether skilled personnel
would have remained with the companies under Korean ownership is uncertain. With
the onset of the financial crisis, however, Korean companies were forced to
liquidate some of these investments. Most notable is Hyundai’s sale of Symbios Logic
in the United States for US$775 millions. Symbios, which Hyundai had acquired
in 1995 from ATT, had been profitable throughout the period of Korean
ownership, returning a net profit of US$69 millions in 1997. The longer term
significance of the Symbios divestment lies in its role in Hyundai’s efforts to
move beyond DRAM production to non-memory chips, which generally enjoy higher
profit margins. threaten their efforts
at internationalization and at constructing their own
0 comments:
Post a Comment