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Innovation and learning in the integrated circuits industry in Taiwan and China

Using the evolutionary framework of inductive screening, this paper seeks to examine the drivers of technological catch-up in the integrated circuits (ICs) industry in Taiwan and China. The paper shows that IC manufacturing began with multinationals relocating export-oriented assembly operations in the 1960s in Taiwan and in the 1980s in China, but serious technological catch-up took place when, with the assistance of the government, local firms began to participate in wafer fabrication and designing activities. While foreign ownership and export markets were critical in initiating connections in the global IC value chain, the paper argues that the role of the government through funding, research and development laboratories and development of human capital were critical in local firms’ technological catch-up process in both the countries.