Scaling-Up Microelectronic Production: Multinational Corporations Under Moore's Law

Abstract

Microelectronics is a special type of General Purpose Technology (GPT), bringing disruptive innovations, not in one shot, but by successive waves for 40 years. Rational innovators maximize present value, over product cycles, before the anticipated obsolescence under Moore’s Law.

Among the multiple local maxima, the proven best dynamic option may be a two-phase, scaling-up plan at two-sites: high-skill workers improvise in pilot production, and debug the production process; low-wage labor mass-produce by prepared routines, on costly equipment. This study yields new insights: outsourcing to multiple sites can be complementary, inter-temporally; multinational corporations excel in coordinating the unilateral, product-specific, cross-border information transfers, hierarchically.

This analysis is deduced from the documented practice of two dominant firms: Seagate Technology in the vertically integrated hard-disk-drive (HDD) industry; the Hon Hai-Foxconn Group, with more than half of the world market share of the electronics manufacturing service (EMS) industry. This framework may help to interpret the economic co-evolution of America, China, Japan and Taiwan – the intermediary in between.

Keywords: Trade, High Technology, General Purpose Technology, Outsourcing, Coordination, Multinational Corporation, Electronic Manufacturing Service

JEL Classification: F12, F23, O31, O33