ASEAN: Regional Trends in Economic Integration, Export ... - USITC

Supporting industries
Another important competitive factor in the computer components industry is the
existence of a base of suppliers capable of working with multinational firms. When firms
are located very close to a competitive base of suppliers, such as in a cluster, it
“facilitates the sharing of information, speeds logistics, minimizes plant inventory, and
ensures a ready supply of locally produced parts and components.” 41 The degree to which
ASEAN countries have adequate supplier bases to meet components firms’ needs varies.
Singapore has a number of indigenous firms focused on supplying a wide range of
services and advanced technology components to multinationals. 42 A competitive
network of suppliers also exists in the Penang region of Malaysia, which is an electronics
cluster. 43 One HDD company operating in Thailand reported that they have been satisfied
with the availability of competitive suppliers from Singapore and Malaysia, but that Thai
firms generally lack the capital to compete with larger suppliers from other countries. 44 In
Vietnam, an industry group noted that local firms’ capacity to act as suppliers to
multinationals is generally very low due to inadequate basic infrastructure and lack of
experience producing to export standards. 45 Jabil Circuit’s experience 46 in Vietnam
confirms this. The company has found the supporting local electronics industry to be
underdeveloped and, as a result, has had to import 80 percent of its inputs. 47 In the future,
the company hopes to be able to source more of its inputs locally in order to speed
production. To address this gap, governments in Thailand and Vietnam are both pursuing
policy initiatives to develop the local electronics supplier base. At present, Vietnam has
created a master plan to develop the supporting industry in electronics, but lacks funds to
implement these measures. 48 Developing supplier networks is especially important to
ASEAN countries’ relative competitiveness in this industry because it is an area in which
China excels. 49
Other competitive factors
Beyond the availability of labor and existence of supporting industries, there are several
other competitive factors that affect the computer components industry. While they were
mentioned by industry representatives less often, they clearly affect the region’s overall
competitiveness in this industry. They include:
Transportation infrastructure. Some computer components are shipped by air,
while others are shipped by ocean. In either case, speed to market is important in
this industry, so competitiveness depends on adequate infrastructure.
Transportation infrastructure remains a major challenge in Vietnam, which just
opened its first deepwater port in 2009 and lacks adequate roads in many areas. 50
41 Foster et al., Technology and Organizational Factors in the Notebook Industry Supply Chain, 2006, 14.
42 Doner and Ritchie, “Economic Crisis and Technological Trajectories: Hard Disk Drive Production in
Southeast Asia,” 2001, 6.
43 Ibid., 7.
44 Industry representative, interview by USITC staff, Bangkok, Thailand, March 16, 2010.
45 Industry representative, interview by USITC staff, Hanoi, Vietnam, March 9, 2010.
46 Jabil Circuit’s plant in Vietnam assembles printers for Hewlett-Packard. While printers are a computer
accessory rather than a component, their experience with the local base of electronics suppliers is applicable
to components firms.
47 Martin, “For Jabil Circuit, Vietnam Is the New China,” June 8, 2008.
48 Industry representative, interview by USITC staff, Hanoi, Vietnam, March 9, 2010.
49 Parsons et al., “An Investigation into the Measures Affecting the Integration of ASEAN’s Priority
Sectors (Phase 2),” June 2007, 36.
50 Industry representative, interview by USITC staff, Ho Chi Minh City, Vietnam, March 10, 2010.
3-7