Globalisation of High Technology Production

Jeffrey Henderson

• Publisher: Routledge
• Year: 2002
• Topic: Business
• eBook ISBN:
  9781134969531
• Subtopic: Business General
• Index: Business

This book analyses how high technology production has shifted from a regional to a global scale. Using the example of semi-conductors it illustrates the interaction of the developed industrial and developing industrialising nations. This book should be of interest to lecturers and students of international economics and international business, professionals dealing with multinationals.

Chapter one
A new mode of industrialisation

The world economy, for the past twenty years or so, has been subject to persistent and ever-deepening crisis tendencies. At the level of the firm, the response to this situation has been the initiation of major processes of organisational and technical restructuring. Now, as in previous periods of crisis, restructuring is predicated on the search for new bases for capital accumulation. Today, however, with the increasing integration of the various units of the world economy, and the growing dominance of the transnational corporation, restructuring operates at the global as well as the national scale. As a result, current restructuring has begun to have far-reaching economic, social, political, and spatial implications for both ‘developed’ and ‘developing’ societies and for the connections between them (Henderson and Castells 1987). Although there is now a significant literature which examines the contours and impact of restructuring in particular territorial units, be those units countries, regions or cities (cf. Blackaby 1979; Bluestone and Harrison 1982; Massey and Meegan 1982; Massey 1984; Newby, et al. 1985), there is so far relatively little work that explicitly examines restructuring in given spatial locations in relation to the dynamics of the changing world economy (see Armstrong and McGee 1985; Walton 1985a; Henderson and Castells 1987, for exceptions). Furthermore, while there is some work which charts global restructuring across a number of industries (cf. Dicken 1986), there is little of it which examines how the dynamics of global economic restructuring produce different, but related effects in globally disparate territorial units.

This study is an attempt to fill these gaps. It is inevitably, however, a limited attempt. Global restructuring operates through and across all circuits of capital (Harvey 1982, 1985; O’Connor, 1984) and all circuits (productive, commodity, money) are composed of separate sectors, branches, and firms organised nationally or transnationally, and subject to different sets of determinants (associated with the nature of markets, technology, the historical and cultural traditions of the territorial units they inhabit etc.)¹ To address global restructuring in its totality, and take account of its dynamics and consequences for various parts of the world, would require, therefore, a series of related research agendas with armies of researchers operating in a variety of countries, regions, and cities. While there are signs that such international networks of scholars with relevant agendas are beginning to emerge,² there are serious constraints on what one scholar, with limited time and resources, can achieve on his or her own.

This study, then, arises out of concerns to understand the relation between economic, social, and spatial change in particular territorial units and the dynamics of global restructuring. It pursues its investigation with particular regard to industrial development in both a (perhaps former) core society, as well as in a number of the developing societies of East Asia.³ Its specific empirical focus, however, is not the industrial economies of those societies in their entirety, nor even one of their sectors. Rather, it concentrates on one important branch of both these and the world industrial economy generally: semiconductor production. While much of what follows in this introductory chapter will attempt to provide a rationale for this focus, it is first necessary to indicate those elements of contemporary restructuring that I take to be historically unique.

The global option

Efforts to deal with current crisis tendencies have relied, in part, on forms of restructuring that have been evident as long as there has been industrial capitalism. So for instance, social relations of production have been altered by means of a reorganisation of labour processes designed to ensure increases in the pace of work and in supervisory control. This, together with reductions in excess productive capacity, has resulted in growing and longer-term unemployment in many core economies (on the British case, see, for instance, Massey and Meegan 1982). These developments, combined with an increased belligerence of some governments towards organised labour, have led to a weakened trade union capacity to control wages and working conditions. As in earlier crises, new technologies (but this time based on microelectronics in the form of CAD/CAM systems, etc.) also have been utilized as part of the restructuring process. Furthermore, a process of capital concentration has taken place associated with the elimination (or incorporation) of weaker competitors.

In previous crises, restructuring was usually confined to the given territorial unit. What is new about the contemporary period, however, is that restructuring ‘internal’ to the territorial unit has been combined with spatial (both intra- and inter-national) shifts in investment and a massive expansion of the radii of organisational control associated with the growth of transnational corporations.⁴ It is precisely this combination of the increased use of space together with the expanded transnationalisation of corporate structures that has given the current restructuring process its global character and dynamic.

To stave-off cut-throat competition and generate new accumulation possibilities, core capital, then, has increasingly turned to this ‘global option’. The emergence of the global option, however, would have been inconceivable without the development of information technologies, and particularly telecommunications. These technologies have been a major material condition for the emergence of the global option in as far as they have enabled particular labour processes, or sometimes entire production facilities, to be dispersed across the globe, while allowing managerial control (and in the case of industrial production, often the most advanced design functions) to remain centralized in the ‘world cities’ of the core societies (Friedmann 1986). So central have been these new microelectronic technologies to the recent development of the international economy, that elsewhere Castells and I have suggested that global restructuring, at root, must be considered as a ‘techno-economic’ process (Castells and Henderson 1987).

A new mode of industrialisation

However important telecommunications might be to the implementation of the global option, they are but one form of the microelectronic (or high technology) ‘revolution’ of recent years. The varied products which constitute the basis of that ‘revolution’, however, have one thing in common. They have the same technological core, and that core is the semiconductor in the form of the transistor or diode, but particularly the integrated circuit (‘silicon chip’). Though semiconductors do not rank among the world’s leading industrial products in terms of the value of production, they arguably constitute the most important industrial branch of the contemporary epoch. Not only are they the central component in the transmission, reception and amplification of electronic signals and as such essential to telecommunications, data storage, retrieval, and manipulation (computers), but they are also basic to home entertainment (TV, video, hi-fi etc.), medical science, military hardware, aerospace etc. Without semiconductors, industrial societies would be unworkable, and social life within them, almost unthinkable.

In addition to their central role in the modern world, high technology industries, but perhaps semiconductors in particular, have been seen by economic analysts and governments as one of the principal solutions to the problems of economic crisis and national development. These beliefs have been spurred on and given popular credence by the media-generated imagery associated with the world’s most important high technology location, Santa Clara County (‘Silicon Valley’), California. For all these reasons, and more, ‘semiconductors are now accorded a strategic role for national economies similar to that of steel fifty years ago’ (Morgan and Sayer 1983:18).

The influence of high technology products on human existence and the strategic role semiconductors in particular play in (some) national economies are insufficient in themselves to warrant my depiction of industrial development, based on microelectronics, as a ‘new mode of industrialisation’. What renders this depiction sufficient, however, is my contention that industrialisation (or reindustrialisation) based on new technologies takes a different form, and may well have different consequences from previous rounds of industrialisation, based as they were on steel, engineering, automobiles, shipbuilding, textiles, and the like. Bearing in mind that semiconductors are not only the heart of microelectronics and information industries generally, but that semiconductor companies themselves constitute a production and organisational form that is a paradigm example of the global option in practice (see Chapters 3–6), we can begin to specify what it is about the manufacture of semiconductors and electronic products more generally, that may have brought into being this new mode of industrialisation.

There seem to be four elements which distinguish electronics industries from those manufacturing processes which formed the basis of the initial industrialisation of the core economies. These elements, therefore, are the defining characteristics of the new mode of industrialisation:

1. Electronics industries utilise a distinctive raw material: knowledge. They have relied not only on highly creative scientific and engineering expertise for their initial development (that much has been true historically for most manufacturing industries), but also they have depended on continuing technological innovation as perhaps the primary basis of their competitive ‘edge’. Arguably then, knowledge, embodied in a particular form of labour power, has been the principal factor of production. That form of labour power, however, is not evenly distributed within territorial units, nor across the globe (only unskilled labour power is), and this, in concert with other factors, as we shall see (in Chapters 3–7) has had significant consequences for the spatial distribution of production facilities.
2. A fundamental task of electronic products is to process information. As all social relations are predicated on the need to communicate, then electronic products, as I have sugggested on p. 3 have a singularly important utility to almost the entire realm of human activity in contemporary industrial and industrialising societies. Only the production of food, shelter, and clothing can now be seen as more basic to human existence.
3. Electronics production, as we shall discover later (in Chapters 3–6), has generated social and technical divisions of labour, that in combination are quite unlike those of most other manufacturing industries. Specifically, electronics employs relatively large numbers of engineers and technicians and very large (but because of the automation of assembly processes, declining) numbers of unskilled workers. Unlike the steel, automobile, and engineering industries, however, electronics now employs very few skilled manual workers (even taking into account the taylorisation of labour processes in the former industries). Paralleling its peculiar technical division of labour is a particular social division of labour. Specifically, while the overwhelming majority of its scientific, engineering, and technical labour (not to mention senior management) are male, the bulk of its unskilled labour force are young, female, and in many cases migrants (rural-urban migrants in the case of East Asia), or racially or ethnically distinct immigrants (as in the case of the United States).
4. Electronics production, along with a small number of other forms of production (textiles and automobiles for instance), is organised in terms of a combination of ‘technically disarticulated’ labour processes. Under certain conditions, therefore (which we explore in Chapter 3) particular labour processes can be dispersed to selected locations within the home country or overseas, in order to take advantage of specific combinations of production factors (usually particular forms, qualities, and cost of labour power), or, as in the case of Europe, penetrate the major markets which exist there. With modern telecommunications and transport systems linking dispersed production units to the centralised control function, the ‘world factory’ phenomenon emerges. More than any other industrial branch, semiconductor manufacture, since the early 1960s, has constituted the prototypical example of a production system organised on the basis of ‘world factories’.

These four elements combined, in articulation with historically specific factors such as state-development strategies internal to the given territorial units themselves, have produced the economic, social, and spatial transformations which we analyse in this study. They have produced, for instance, the economic and technological dynamism, but social and spatial polarization evident in the industry’s best-known territorial base, Silicon Valley (Saxenian 1981, 1983a, b). They have led, also, to the industrialisation of previously non-industrial parts of core societies, such as in the case of the ‘M4 Corridor’ in Southern England (Hall 1985; Breheny and McQuaid 1987) and Toulouse and other parts of Southwest France (Pottier 1987). In addition, and especially significant for this study, they may constitute (it is still too early to tell) part of the basis for the reindustrialisation of an older, rapidly deindustrialising society such as Scotland (see Chapter 6), as well as providing a key motor force for the industrialisation of a number of peripheral societies, such as those of East Asia (see Chapters 4 and 5).

Things to come

For the reasons explained above, this study uses the semiconductor industry as its empirical vehicle to expose some of the social and spatial dynamics of industrial change in the contemporary world economy. More particularly, however, it focuses on the American semiconductor industry. It does so for the following reasons:

1. American companies totally dominated world semiconductor production until the early 1980s. Although they had been overtaken by Japan in terms of total semiconductor production by the middle of the decade, as Table 1.1 shows, US companies are still the leading producers of the more technologically advanced products, integrated circuits.
2. American companies were, and still are, the technological powerhouses of the world semiconductor industry. Of the 52 major innovations in semiconductor technology between 1947 and 1981, American companies were responsible for 48 of them, including such key breakthroughs as the transistor, the ‘planar’ manufacturing process, the integrated circuit and the microprocessor (UNCTC 1986, Annex V: 455).
3. American companies internationalised aspects of their production far earlier than their Japanese or European counterparts, and to this day they dominate production in those territorial units where semiconductor manufacturing takes place, with the exception of Japan, parts of Western Europe (but not Scotland) and the socialist societies (Grunwald and Flamm 1985: Chapter 5; UNCTC 1986). US companies, then, are by far the most important semiconductor producers (in terms of both output and employment) in all the territorial units with which this study deals.

Table 1.1 Semiconductor production: Selected leading national producers, 1985–7 (By value: billions of US $)

The theoretical arena in which this study is set, and to which it hopes to contribute, is that which is concerned with the analysis of the dynamics and consequences of the changing international divison of labour. We begin work in Chapter two, then, with a critical interrogation of some of the principal bodies of literature which seek to explain territorial development, but particularly industrial change as one aspect of that, in both Third World and advanced capitalist societies. Having identified, in the abstract, some of the serious analytic problems embedded in the current literature, we move, in Chapter three, to an account of the development of the US semiconductor industry in its principal domestic base, Santa Clara County, California. There we discuss in concrete form some of the elements of the new mode of industrialisation identified above. We also analyse the determinants of the industry’s initial internationalisation of parts of its productive capacity.

In Chapter four we begin our analysis of some of the principal developing societies that have been recipients of US semiconductor investment in labour-intensive assembly processes: those of East Asia. In this chapter, however, we are particularly concerned to analyse the historical evolution of the production processes in that part of the world, in order to explain why some territorial units, rather than others, have been up-graded in terms of their technological bases and control functions, and why, therefore, a distinct regional division of labour seems to have emerged.

In Chapter five we continue the analysis begun in the previous chapter, by examining (in a more rounded fashion than has been possible in our other case studies) the emergence of one of the ‘cores’ of the East Asian division of labour: Hong Kong.

In Chapter six, we turn our attention to Europe to analyse some of the problems and possibilities associated with the development of its principal semiconductor production complex: the central belt of Scotland. In that chapter we recognise that, historically, Scotland has been a recipient of more technologically advanced labour processes than have any of the East Asian countries and hence it plays a very different role in the industry’s international division of labour than any of the latter.

In Chapters four to six, we try to understand the development of semiconductor production in each territorial unit, in relation to both the international division of labour and the internal dynamics of the respective societies. In each case, we try to accord relevant explanatory weight to the respective determinants of development. The methodological basis on which we adjudicate between the determinants is sketched towards the end of Chapter two.

In Chapter seven, we attempt to indicate the principal processes currently affecting the international semiconductor industry in various parts of the globe, including in those territorial units which we have had under particular scrutiny, and indicate the prospects for development that appear to be associated with them. Finally, in the concluding chapter, we reverse the direction of our analytic process in an attempt to assess what our study of semiconductor production and of the territorial units in which it has taken root, have to contribute to the evolving theory of the international division of labour.

Chapter two
The international division of labour, industrial change, and territorial development: Theoretical and methodological issues

In the previous chapter, I argued that one of the key elements which distinguished current attempts to cope with economic crisis was the recourse to spatial shifts in investment, and hence the emergence of depressed deindustrialising regions on the one hand and newly industrialising (or, in the case of Scotland, reindustrialising) areas on the other. The use of international space in this way, for the purposes of new rounds of accumulation, I referred to as the ‘global option’. In this chapter, I explore some of the general theoretical issues which underlie attempts to explain the ‘global option’. These issues will structure our discussion of the globalisation of semiconductor production developed in Chapters three to six. We will return to them, more abstractly, in the concluding chapter, for my aim in this study is not merely to assess the dynamics of the international semiconductor industry, but also to assess the significance of the empirics of that industry’s development, for the theory of the international division of labour.

Territorial development

In seeking to analyse the emergence and evolution of a particular mode of industrialisation in particular parts of the world, it is necessary to understand the spatial form wherein that industrialisation takes root, and which is altered ultimately by its development. This is so because, as Doreen Massey (1984:51) reminds us, ‘the world [does not exist] on th...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• List of figures and tables
• Foreword
• Preface
• Acknowledgements
• Chapter one: A new mode of industrialisation
• Chapter two: The international division of labour, industrial change, and territorial development: Theoretical and methodological issues
• Chapter three: Semiconductor production: Labour processes, markets, and the determinants of globalisation
• Chapter four: East Asia: The emergent regional division of labour
• Chapter five: Hong Kong: The making of a regional core
• Chapter six: Scotland: The European connection
• Chapter seven: Prospects for globalisation and development
• Chapter eight: Semiconductors, development, and the changing international division of labour
• Notes
• Bibliography