Related yet diverging sectoral systems: telecommunications equipment and semiconductors in China

Abstract

This study examines the evolution of the telecommunications equipment and semiconductor industries in China from 1978 to 2012 using the sectoral systems framework. The article advances research on sectoral systems by examining the diverging evolution of two vertically related industries from a common starting point. In one case, system factors worked to foster global competitiveness, while in the other case, system factors slowed the formation of a competitive industry. The findings contribute to research on industrial dynamics and catching up by suggesting that the characteristics of vertically integrated industries may be seen as two sectoral systems that interact and influence the speed and direction of innovation and industrial development of each other’s industries.

Keywords:

• Telecommunications equipment
• semiconductor
• China
• sectoral systems
• industrial dynamics

Acknowledgements

This work was supported by the Natural Science Foundation Program of China [Funding No. 71373256] and the Social Science Foundation Program of China [Funding No. 12&ZD205]. The authors wish to thank these organisations for their support.

Notes

¹ It is interesting to note that one manager from Huawei noted in our interview that the training of a junior engineer that is able to lead a small research team takes two to three years in the telecommunications industry, while it takes much longer in the semiconductor industry.

² The TD-SCDMA Alliance (TDIA), which sought to create a complete value chain for the commercialisation of the new standard in China (source: interviews). See http://www.tdscdma-alliance.org.

³ This opinion was voiced by interviewees in both China Mobile and the Ministry of Information Industry.

⁴ As an example, it has been reported that the average salary in Huawei was one-seventh the size of the average salary paid in Cisco in 2007 (Song, Yu, and Shi 2011).

⁵ See: http://www.en.zte.com.cn/en/press_center/news/200907/t20090730_350873.html.

⁶ Clinton gradually relaxes export control to China. Retrieved from http://news.china.com/zh_cn/international/1000/20010111/86117.html.

⁷ According to an interviewee at SMIC, research in China’s universities was meaningful, but was focused on pure basic research. The interviewee further noted that basic research and studies in the literature needed long time periods before they were able to be applied in manufacturing processes.