The rise of information technology (IT) has provided a boon for Asia, from Taiwan’s contract manufacturer to China’s mobile service provider. Asia has won dominant shares in markets for key products and components, such as mobile phones, personal computers, memory chips and LCD screens.
But as the world economy swings and technologies constantly evolve, the business model has to change. Asia’s competitiveness in devices, parts and materials is being challenged, while content and software have become game changers.
Researchers at Samsung Economic Research Institute, plus external contributors, put together a comprehensive analysis about the Asian technology industry landscape and its future, published in the latest edition of SERI Quarterly magazine.
Let us share the gist of their insights, especially on the dynamics and perspectives of four leading technology powerhouses: China, Taiwan, Japan and Korea. The four Northeast Asian countries in 2010 had 41 companies on the list of the world’s top 100 IT companies by revenue, representing half of the world’s $165 billion IT hardware production.
China, which churned out nearly 30 percent of global IT production in 2010, is transforming itself from the “world’s factory” to the leading innovative force in global markets. Chinese companies are shifting away from low-cost, low-skill manufacturing jobs toward more sophisticated high-technology production, but still at lower cost than its competitors. Digital TVs and wireless communication gear are such examples.
China is also witnessing rapid growth in software and services, from system software to IT solutions, with new global companies emerging in the sector. Ongoing investments and technology development indicate that China will become a major power in mobile Internet and cloud computing as well.
Thanks to strength in platform-based manufacturing and cost competitiveness, Taiwan has become the global center of electronics manufacturing services (EMS) and original development manufacturing (ODM). These foundry services deliver diverse products with speed and flexibility, helping clients focus on research, design and marketing. All of the world’s top five ODM companies by revenue are from Taiwan.
As Taiwan focuses on component technologies that are “designed to order” and develops strong networks of suppliers that enable innovations, the country has become an indispensable partner of Silicon Valley, the technology industry’s global center. Now Taiwan is trying to position itself as the research hub for global technology giants while also capitalizing on growing cooperation with China.
Despite the recent difficulties of its consumer electronics companies, Japan remains as the world’s powerhouse in electronics parts and materials thanks to its technology leadership and focus. In 2010, Japan had eight companies among the world’s 10 largest electronics parts makers by revenue. Exports of electronics components in 2010 accounted for 77 percent of the country’s total electronics exports.
In fact, Japan is benefitting from growing sales of intermediate goods, such as semiconductor manufacturing equipment and materials used to make LCD screens, to electronics makers in Korea and Taiwan. Its challenge going forward will be maintaining its competitive edge in the field, and expanding into emerging markets such as China and India.
Korean companies have rapidly emerged as leaders in the technology sector thanks to timely, large-scale investment, aggressive technology development and innovations. One example is memory chips, where Korea started as a latecomer but secured global leadership by investing heavily in mass production facilities and introducing simultaneous development systems for next-generation products.
Korea has yet to diversify its growth engines in terms of products and markets. Most of all, moving away from its hardware focus and developing competitive software and content industries will be key as mobile and services emerge as the new center of gravity for the global technology industry.
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Each of the four countries has carved out a role for itself. But as Asia’s dominance in the hardware industry matures, it needs new growth models, including software and services, to continue its success.
(More details about this research are available at the SERI Quarterly website)
About Samsung Economic Research Institute (SERI):
SERI's goal is to become a cornerstone of today's knowledge society through groundbreaking, open and field-based research that contributes to the community.
At SERI, researchers and support staff strive daily to interpret the myriad of factors and events in this fluid global environment as well as domestic developments. Our research ranges from macroeconomic trends, industries and public policy to security concerns on the Korean peninsula.