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Global Competitive Strategy Assignment Number 2 29th October, 2011 Amir Mehmood Bilal Ahmed Muzzamil Saqlain Zainab Majeed The Taiwan Computer & Semiconductor Manufacturing Industry Summary: Taiwan has pursued aggressive investments in the computer & semiconductor industry over the last twenty years. As a result Taiwan is one of the leading manufacturer and exporter of computers, semiconductors and related products in the world. We are using Michael Porter’s Determinants of National Competitive Advantage, to analyze the success of Taiwan in the semiconductor manufacturing industry.
One of the key factors in determining the synergies from the various conditions are the policies of the government of Taiwan. Taiwan’s Success & National Competitive Advantage: The computer & semiconductor industry, including IC manufacturing, design, and packing, forms a major part of Taiwan’s exports. Due to its strong capabilities in OEM wafer manufacturing and a complete industry supply chain, Taiwan has been able to distinguish itself from its competitors. The sector output reached US$39 billion in 2009, ranking first in global market share in IC manufacturing, packaging, and testing, and second in IC design.
Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC) are the two largest contract chipmakers in the world. Porter’s Diamond of National Advantage as Applied to Taiwan In “The Competitive Advantage of Nations”, Porter has featured the Diamond of National Advantage with four major categories. We have used these categories to analyze the potential of Taiwan in the computer industry. Porter’s Diamond lists the factors as displayed in the figure below. Porter’s Diamond Model Factor Conditions 1. Highly Specialized Workforce
The universities in Taiwan have a high focus on engineering studies with a focus on computer related studies and as a result Taiwan has a highly specialized work force trained for the computer & semiconductor industry. 2. Large amount of intellectual Capital As a result of the time spent in building up the computer & semiconductor manufacturing industry in Taiwan the main companies have gained a lot of intellectual capital and now lead the global industry. Demand Conditions 1. Very High Global Demand for Products Over the past few years the demand for computers, semiconductors and the related products has grown by a very large amount.
This is a major factor in the success of Taiwan as a leading exporter in the computer & semiconductor industry. 2. Excellent linkages with other firms & markets The main market for computer & semiconductor exports from Taiwan has been the US. There are excellent linkages of the firms in Taiwan with global industry brands based in the US (Dell, HP etc. ) and with distribution networks in the US. Related and Supporting Industries 1. Well Developed Industries in Components The various components used by the computer & semiconductor manufacturing industry have extremely well developed production and distribution in Taiwan.
This is a major advantage and a contributor to the success of the companies associated with the Taiwanese computer & semiconductor manufacturing industry. 2. Well Developed Industries in Secondary Products The related products which are created based on the semiconductor technology again have extremely well developed production and distribution in Taiwan. The are many high tech firms which have their plants based in Taiwan and are reaping the benefit of the strength of the Taiwanese computer & semiconductor manufacturing industry.
Firm Strategy Structure & Rivalry 1. Innovation and Investment in R&D There is a substantial amount of investment in the R&D from the Taiwanese companies in order to innovate and keep the technological advantage. This is a field in which innovation and staying on the cutting edge is extremely important and therefore there is high focus in R&D from the Taiwanese computer & semiconductor manufacturing industry to maintain the top position ahead of the rivals. 2. Flexibility and Adaptability
Another facet of the strengths of the Taiwanese computer & semiconductor industry has been the flexibility, adaptability and the continuous upgrading of the technical capabilities. The companies concerned with the production have not been limited to one product or one field. They have also kept their production capacities up to meet the huge growth in demand for their products. Role of Government 1. Industrial Parks in Taiwan The government of Taiwan has built industrial parks devoted to the computer industry to facilitate the companies in the computer & semiconductor manufacturing industry.
Taiwanese companies in turn have benefited from government-sponsored industrial parks and have become famous for their continual upgrading and innovation. 2. Policies to Support Computer & Semiconductor Manufacturing Industry The focus of the government of Taiwan’s policies has been to promote and facilitate the growth of companies in the computer ; semiconductor manufacturing industry. This has enabled very high and sustained growth in the sector. Conclusion
The global computer ; semiconductor industry is both very complicated and very dynamic which makes it a challenge to any players in that industry. Taiwan has shown great growth and skill in computer, semiconductor and related technology industries despite this challenge. Based on the various factors as seen in the light of Porter’s Diamond model, we conclude that Taiwan has a clear national competitive advantage in the computer & semiconductor manufacturing industry. The policies of the Government of Taiwan are also one of the major factors in enabling & sustaining the national competitive advantage.
The policies have allowed the companies in the Taiwanese computer & semiconductor manufacturing industry to maintain the competitive edge in the global market and sustain growth at the same time. Bibliography & References * The Competitive Advantage of Nations by Michael E. Porter * Wikipedia: Economy of Taiwan * Statistical Information Network of the Republic of China * Taiwan Economic Journal * Taiwan Economic Data Center * Taiwan Economic Association * Research Center for Taiwan Economic Development