Global Technology Sourcing in China's Integrated Circuit Design Industry: A Conceptual Framework and Preliminary Findings

East-West Center Working Paper No. 131

30 Pages Posted: 7 Feb 2014

See all articles by Dieter Ernst

Dieter Ernst

East-West Center; Centre for International Governance Innovation (CIGI)

Barry J. Naughton

University of California, San Diego - Graduate School of International Relations and Pacific Studies (IRPS), Economics; University of California, San Diego (UCSD) - 21st Century China Center

Date Written: August 1, 2012

Abstract

The paper examines the role of global technology sourcing, and its drivers and impacts in China’s integrated circuit (IC) design industry . IC design is one of the priority targets of China’s innovation policy, as codified especially in the “Strategic Emerging Industries” initiative. At the same time, however, China’s IC design industry is deeply integrated into the vertically disintegrated global semiconductor industry, through markets, investment and technology. The paper highlights a fundamental challenge for China’s innovation strategy: How can China reconcile its primary objective of strengthening indigenous innovation with the benefits that it could reap from its deep integration into international trade and into global networks of production and innovation?

We show that the process of global technology sourcing is changing in important ways as it becomes possible to “source” technological services in an increasingly fine division of the value chain, even compared to what was possible a few years ago.

The paper describes how globalization has transformed the distribution of scientific and technical knowledge; explores possible effects on technology sourcing; and examines the tension between these global changes and China’s indigenous innovation policy. Focusing on IC design for wireless communications, the most dynamic part of China’s country’s IC design industry, we examine how changes in markets and technology create new strategic opportunities for Chinese IC design companies, and discuss tentative findings of case study research.

Global technology sourcing describes a small but important segment of China’s innovation system that is very different from the government-sponsored innovation of the strategic emerging industries and indigenous innovation. This raises an important policy question: Can China combine the benefits of both innovation strategies?

Keywords: Innovation Policy, Technology Transfer, China, Integrated Circuit Design

JEL Classification: L63, N65, O14, O31, O32, O38, O53

Suggested Citation

Ernst, Dieter and Naughton, Barry J., Global Technology Sourcing in China's Integrated Circuit Design Industry: A Conceptual Framework and Preliminary Findings (August 1, 2012). East-West Center Working Paper No. 131. Available at SSRN: https://ssrn.com/abstract=2390980 or http://dx.doi.org/10.2139/ssrn.2390980

Dieter Ernst (Contact Author)

East-West Center ( email )

1601 East-West Road
Honolulu, HI 96848-1601
United States

Centre for International Governance Innovation (CIGI) ( email )

57 Erb Street West
Waterloo, Ontario N2L 6C2
Canada

Barry J. Naughton

University of California, San Diego - Graduate School of International Relations and Pacific Studies (IRPS), Economics ( email )

United States

University of California, San Diego (UCSD) - 21st Century China Center ( email )

9500 Gilman Drive #0519
La Jolla, CA 92093-0519
United States

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