Industrial Development in the New
Century
Chi Schive
President
Taiwan Academy of Banking and Finance
Adjunct Professor
National Taiwan University
May 4, 2001
Industrial Development in the New Century
Outline
I. Megatrends in the Coming Decade
1. Production Technology in Retrospect
2. Globalization
II. Conventional Thinkings of Industrial
Development
1. Definition of Industry
2. Target Industry and Industrial Policy
3. Ambiguity and Challenges
Industrial Development in the New Century
III. Alternative Thinkings of Industry
1. Knowledge-Based
2. Organization
3. Location
IV. Impacts and Implications
1. Business Model--Global Logistics
2. Regulation--Competition vs Industrial Policy
3. Software Infrastructure--Institutional Reforms
V. Conclusions
Production Technology in History
The Tonne Age
Industrial revolution - 1950s
Steel, ships, textile, construction
The Kilo Age
1960s-1970s
Cars, consumer electronics, appliances
The Gram Age
1970s - 1980s
Micro electronics, robotics
The Vacuum Age 1990s
Services, systems, media
Source: Slightly revised from Jean-Pierre Lehmann,“The Future of the Asia Pacific Economies:
Dynamism of Trade and Investment” presented at APEC Economic Committee
Symposium The Future of Asia Pacific Economies, December 6 1999, Tokyo.
資訊傳遞速度
1950 年代
越洋平信
一月
1960-70 年代 越洋航空
一週
1980-90 年代 電傳 Facsimile
分
1990 年代
即時
E-mail
服務通道趨勢－銀行處理成本
通道
1.分行
2.電話銀行
3.ＣＤ／ＡＴＭ
4.（專屬）ＰＣ銀行
5.網際網路銀行
成本／交易
ＵＳ＄
ＵＳ＄
ＵＳ＄
ＵＳ＄
ＵＳ＄
1.07
0.54
0.27
0.015
0.010
Source: Booz Allen & Hamilton research (1996/North American)
Lowering Real Inventory-to-Sales Ratios
Ratio of Inventory to Sales in the U.S.
World Output and Goods Trade
8.7
6.9
World Output
(Growth, %)
World Goods Trade
Volume (Growth, %)
5.3
Trade Growth/
Output Growth
3.5
2.9
2.2
84-88 89-93 94-98
2.0
84-88 89-93 94-98
2.4
3.0
84-88 89-93 94-98
Regionalism, Regionalization of Trade
Intra-regional Trade as a percent of Total Trade
65
EU
60
55
Taiwan
East Asia
50
45
40
NAFTA
35
30
1980 1985 1987 1989 1990 1991 1992 1993 1994 1995 1996 1997
Net Private Capital Inflows to Emerging
Economies
US. $ billion
1984-19893 1990-19963
1996
1997
1998
1999
Total Capital1
FDI
Portfolio
Others
12.5
141.7
214.8
117.8
69.5
89.7
13.1
4.4
-4.9
64.6
64.0
13.0
121.1.
79.9
13.9
145.0
66.6
-93.8
127.3
42.0
-99.8
119.2
25.1
-54.5
Asia &NIEs2
9.9
58.3
108.1
-15.1
-49.5
-38.1
Africa
2.3
3.7
5.1
14.1
7.3
14.2
Middle East &
Europe
2.3
22.9
3.9
7.9
24.9
21.9
Latin America
-0.2
46.1
81.7
88.3
73.6
75.3
Note: 1. Net private capital flows comprise net direct investment, net portfolio investment, and other
long- and short-term net investment flows, including borrowing.
2. NIEs = Hong Kong, South Korea, Singapore, Taiwan, and Israel.
3. Annual averages.
Source: IMF, World Economic Outlook, December 1998.
II. Conventional Thinkings of Industrial
Development
Definition of Industry: Any branch of trade,
business, production, or manufacture
• Output-oriented
Agriculture, Industry (mining, manufacturing,
public utilities, construction), Service
• Characteristics-oriented
Heavy and Light Industry
II. Conventional Thinkings of Industrial
Development
High-tech / Technology Intensive Industry
Capital / Labor Intensive Industry
• Stage of Process (Commodity)
Agriculture Intermediates
Capital goods) Service
Final (Consumer,
II. Conventional Thinking of Industrial
Development
Target Industry:
• Ten emerging industries in Taiwan
• 15 New Growth Areas in Japan (1995)
Ten Emerging Industries
•
•
•
•
•
Communication
Information
Consumer Electronics
Semiconductor
Precision Instruments
and Robotics
• Chemical Specialties
and Drug
• Health and Medical
• Anti-pollution
• Aerospace
• Special Materials
II. Conventional Thinking, Targeted
Industry
Fifteen New Growth Areas: New Products and Services
Examples of new products and services
Health and welfare
Culture and family life support
Information and communications
technology
New manufacturing technologies
Distribution and transport
Environment
Business support
Marine business
Home care, care equipment, home health,
telemedicine, advanced medical equipment
Community business, continuing education, leisure
travel, apparel
E-commerce, content, GIS (geographical
information systems), electronic government
Next-generation new materials, advanced
production control robots, maintenance-free
equipment
Internet mail order, third-party logistics (3PL),
distribution information services
Low-pollution vehicles, recycling, environmental
equipment, environmental creation and restoration
Outsourcing, authorization business, solutions
business
Mega-float project (ultra-large floating structures),
fishing industry infrastructure
Source: Nomura Research Institute, from Review of the “Action Plan for Economic Reform”, Ministry of International Trade and Industry, March 1998.
II. Conventional Thinking, Targeted
Industry
Fifteen New Growth Areas: New Products and Services
Examples of new products and services
Biotechnology
Pharmaceuticals, food, chemicals,
energy/environment
Urban environmental facilities
New traffic systems, cable burying
Aerospace (private demand)
Next-generation aircraft, hub airports, testing
aircraft limits
New sources of energy and energy
conservation
Solar energy, wind energy, waste-to-energy
systems, clean energy, energy service
companies (ESCOs)
Human resources
Temp staffing, vocational training, recruitment
agencies
Internationalization
International transport, foreign companies,
international business consulting, support for
expatriates
Housing
Renovation, previously owned housing market,
new building materials
Source: Nomura Research Institute, from Review of the “Action Plan for Economic Reform”, Ministry of International Trade and Industry, March 1998.
II. Conventional Thinking of Industrial
Development
Ambiguity:
• Commodity Vs. Service
Newspaper--Broadcasting--TV--Internet
R&D, an industry?
• Market and Industry
Where is a market, there is an industry.
But market and production may not be at the same
place--production fragmentation.
II. Conventional Thinking of Industrial
Development
• Vertical Disintegration
Emerging small and medium-sized business
• Production Fragmentation
International division of labor in line with
comparative advantage
In pursuit of dynamic advantage--changes in the
“Flying-Geese” pattern of development
• Target Industry and Industrial Policy
III. Alternative Thinkings
• Knowledge-Based Activities
• Knowledge Creation and Integration
“… modern economic growth could best be
viewed as a process based on a change which
raises greatly the stock of technological and
social knowledge … When the … knowledge
is used, it becomes the source of … increase in
output and structural shifts that characterize
modern economies.”
Simon Kuznets
Modern Economic Growth-Rage, Structure
and Spread, 1966
Knowledge Creating Industries
Industry Society
Means
production
Agriculturalization Land
Industrialization
Machines
Computerization
Computers,
ICT networks
Creation
Conceptors,
intensification=
idea
knowledge creation engineering
Form of
production
Management
National
power
Small
quantities of a
few products
Large
quantities of
few products
Small
quantities of
many products
Unique items
of many
varieties
Cooperation
Military
Standardization
Political
Computerization Economic
Networking
Cultural
Source: Sozo no Senryaku [ Strategy for Creation ] , Nomura Research Institute, 1990.
Innovation as Problem Solving
• Capability of problem solving is related to
knowledge base.
• Knowledge comes from experience, publicly
available information and the uncodified
character of innovators, e.g., capability and
tacitness.
Innovation as Problem Solving
• Technological Paradigm affected by and
including three elements:
l. the needs to be fulfilled;
2. the scientific principles to be utilized for the task;
3. the material technology to be used.
III. Alternative Thinkings: Knowledge
Integration
• Functional
Knowledge Integrating Industries
Petaloid Industry
T. Murakami, Encouraging the
Emergent Evolution of New
Industries, Nomura Research
Institute, 2000
IV. Impacts and Implications: Infrastructure
Knowledge-Based Economy Paradigm
National Competitiveness
Demand Side
Other Industries
Market
Dom
.Gov.
Exp.
Supply Side
Factor Market
Foreign
V.C.
B2B
B2C
G.L.
New
Activities
in
Existing
Business
Capital
New
Enterprises
Banking
Manageme nt
New Business/Investment
Livelihood
Other Labor
R&D
Personnel
Innovations
Hardware
Financial
Market
Software
IT Infrastructure
Labor
Market
III. The Foundation of the New Economy
The Foundation of the ICT Industry
ICT
Capital
Labor
Venture Capital
R&D People
Institutional Setting
New
Economy
Knowledge
-Based
RuleBased
IV. Impacts and Implications:
Government Role
Infant industry or infant entrepreneur?
Are government officials smarter?
Will the state-owned company be necessary?
Are means at hand, --tariff, subsidies, and
regulations--still available or necessary?
Limits of fiscal and monetary policies.
Global Logistics: A New
Business Model
• Changes in business environment,
production fragmentation
• New technology available
• A knowledge creating and integrating
business
Production Sharing of Taiwan’s
Information Industry
%
1999*
1995
1996
1997
1998
100.0
100.0
100.0
100.0
100.0
Taiwan
72.0
67.9
62.6
57.0
52.7
China
14.0
16.8
22.8
29.0
33.2
Thailand
5.0
5.5
5.9
5.4
5.3
Malaysia
7.2
7.4
5.6
4.5
4.0
Other
1.8
2.4
3.1
4.1
4.8
Total
* Estimates.
Source: Market Intelligence Center, Institute for Information Industry.
Taiwan as a Global Logistics
Center
China
1. DELL sends a request to Taiwan upon
a Singaporean client order
U.S.
2. The U.S. firm sends CPU to Taiwan
2 CPU
7
DELL
4
9
3
3. China sends cases and power supplies
to Taiwan
Order 4. China sends semi-assembled parts to
1
Taiwan
5. Malaysia sends PCB to Taiwan
Singapore
8
6
Taiwan
PC
5
PCB
Malaysia
6. Taiwan sends DRAM mainboard and
semi-assembled parts to Singapore
mainboard 7.China send monitors to Singapore
DRAM
8. Singapore assembles and sends the
finished PC to the client
9. DELL sends the payment to Taiwan
Source: Compiled by CEPD.
Steps 1 to 8 take 2 to 5 days to complete
Operation Characteristics in Taiwan: from
OEM to GL
Before the mid1980s
R&D
Manufacturing
Marketing and
Distribution
OEM
In the late 1980s
and early 1990s
R
D
Mfg
Marketing and
Distribution
ODM
After the mid1990s
R
D
Mfg
ODL/GL
: Local operations
Logistics
M
Taiwan’s International Division of Labor
from Triangle to Diamond
I:
M:
Q:
S:
Japan
SQ
I&M
I&M
Q
Q
S
Taiwan
I&M
M
U.S.
Q
ASEAN
China
Investment
Materials/Intermediates
Finished product/commodity
Strategic alliance
Q
Before the mid-1980s
Late 1980s and early 1990s
After the mid-1990s
From APROC to Global Logistics Center
全球運籌中心
資
金
流
資
訊
流
電信中心
建立網路系統，便
捷資訊傳遞與處理
物
流
商
流
製造中心
海、空運中心
累積科技及製造能力，
使台灣成為國際市場的
主要貨品供應者
改善通關作業，縮短運
送時間及提升配送能力
總體經濟調整
建立符合國際規範之經營環境，減少人員、
資金、資訊進出障礙，改善兩岸經貿往來
金融中心
協助跨國資金調度
及支付
Conclusions
“The true heroes of our time are those who
bring to all society the tools for a better and
fuller life. In the last decade, their
achievements have been more amazing than
in any other period of human history.” In
the coming decade, it will be more so.
Henry O. Dormann