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

joint R&D. 71 These advantages of locating near the customer create a challenge for
ASEAN’s export competitiveness in computer components. This challenge is evident
from the relative market shares of the two regions. Between 2004 and 2008, China’s
share of exports of computer components grew from 27 percent to 35 percent of the
world total, with the share growing in each year during the five-year period. Meanwhile,
ASEAN’s share of global exports was flat throughout the period, remaining between 20
and 21 percent each year.
In addition to competing with China’s growing computer components industry, ASEAN
exports are also affected by competition between countries within the region. For
example, labor cost differences within the region were a major factor in the HDD
industry’s shift of production from Malaysia to Thailand. 72 Similarly, Vietnam’s
increasing export competitiveness has come, to some degree, at the expense of exports
from other countries in the region. As one analyst has pointed out, within the broader
electronics sector, “Indonesia experienced a contraction in exports and Philippines a
slowdown in the 2000–2006 period following the emergence of Vietnam as a
competitor.” 73 This suggests that as individual ASEAN countries strive to improve their
export competitiveness, production may shift from one ASEAN country to another, and
total exports from the region may not necessarily grow.
Inbound Investment
Several ASEAN countries provide attractive investment environments for computer
components firms. Because, as noted, a country’s competitiveness in the computer
components industry depends in no small part on investment from multinational firms
that provide links to global markets, countries actively compete to attract FDI and
generally do not place restrictions on investment. Production of most types of computer
components is dominated by a few large firms that exercise “control over critical
resources and capabilities that facilitate innovation and . . . [possess the] capacity to
coordinate transactions and the exchange of knowledge” 74 in the global computer supply
chain. Location decisions by this relatively small set of multinational components firms
drive production in the countries where they invest because these firms are the direct link
to the major computer assemblers, which are the customers for components. In 2009, the
top two HDD manufacturers together accounted for over 60 percent of the market. 75 In
CPUs, production is even more concentrated: Intel accounted for nearly 82 percent of the
microprocessor market in 2008, and its nearest competitor, AMD, accounted for over
17 percent, for a combined market share of over 99 percent. 76 Competition between
countries for investment from these firms is therefore intense, especially given that many
countries worldwide are equipped with the skilled labor, infrastructure, and other
necessary factors to participate in electronics assembly. These firms choose production
locations based on many competitive factors, and most of them have operations in more
than one ASEAN country, as well as in China. Negotiating power regarding the terms of
investment favors the firms holding the technology for computer components, not the
countries where production takes place. As such, at present, none of the ASEAN
71 BLS, “Computer and Electronic Product Manufacturing” (accessed March 23, 2010).
72 Rasiah, “Expansion and Slowdown in Southeast Asian Electronics Manufacturing,” 2009, 125;
industry representative, interview by USITC staff, Bangkok, Thailand, March 16, 2010.
73 Rasiah, “Expansion and Slowdown in Southeast Asian Electronics Manufacturing,” 2009, 126.
74 Ernst, “Global Production Networks in East Asia’s Electronics Industry and Upgrading Prospects in
Malaysia,” 2004, 94.
75 ISuppli, “Seagate Maintains Top Ranking in Hard Disk Drive Market in Q4,” March 22, 2010.
76 Montevirgen, “Industry Surveys: Semiconductors,” November 2009.
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