Global Linkages, the Chinese High-tech Community and Industrial Cluster Development

Abstract

The development of industrial clusters in China has become a subject of international interest, but attention has primarily focused on government efforts to attract FDI to promote industrial clusters and regional development. The local process which supports the rise and growth of clusters driven by the domestic firms has been relatively ignored in this debate. Thus, this article considers the analytical framework of strategic coupling and uses a case study of the Wuxi semiconductor industry to investigate the cluster formation, dynamics and effects driven by domestic, rather than FDI, firms with the mediating role of the transnational Chinese technical community, the state and domestic firms. It concludes that the rise and growth of the semiconductor domestic-led cluster in Wuxi is not dependent on FDI, but instead results from the dynamic interplay of several elements. Effects of technology spillover from the government-funded research institutions, as well as mutual competition and co-operation in technological emulation among domestic firms are important elements for the development of the domestic-led cluster. Moreover, all these elements lie within the strategic coupling of the regional assets and the transnational Chinese technical community, mediated by the state. It is the the state that has mobilised regional assets to negotiate with overseas technology talent for strengthening global linkages and facilitating the entrepreneurial knowledge absorption of domestic leading firms—a feature which has not been theoretically observed in Western countries.

Government Support, FDI Clustering and Semiconductor Sustainability in China: Case Studies of Shanghai, Suzhou and Wuxi in the Yangtze Delta

“…In the Yangtze Delta, the local governments of Shanghai, Suzhou, and Wuxi put great efforts in developing huge areas of ETDZ, and in providing special preferences to attract FDI clustering towards their territories [40]. These major high-tech shifts are often credited with the industrial infrastructures of Shanghai's Zhangjing Science Park, Suzhou's New District and Science Park, and Wuxi's New District [41,42]. All of these strategic areas were thus constituted as major regions for FDI clusters.…”

“…The FDI cluster in Wuxi was primarily constituted by three distinct groups-Taiwanese firms, domestic firms, and Korean, and Japanese firms-accounting for 10%, 25%, and 55% respectively [42]. In 2001, the Wuxi New District was further designated by the central government as the national design base for IC development, and a government-run company was set up to provide services for investors.…”

“…Nevertheless, with the FDI-led ICT clustering and semiconductor growth in the Yangtze Delta, a semiconductor technology community across the Taiwan Strait was dramatically formulated and played an increasingly critical role in knowledge flow and learning about the construction and development of an indigenous semiconductor industry [33,42]. The formation and flow of the technological community have helped to overcome this obstacle of insufficient technology talent.…”

“…In 1999, CSMC and Huajing jointly set up Wuxi CSMC-HJ Semiconductor, in which CSMC obtained 51% of the stock share for its technology talent inputs and Huajing received 49% for its factory and equipment investments, and then it was reorganized as the China Resources CSMC, enjoying strategic support from the Wuxi city government, such as free land and ensuring water and electricity supply in Wuxi New District. Moreover, as Chou et al [42] has pointed out, local resources were also mobilized to support CSMC operations, including spin-offs from the state-owned enterprises and research institutes. Examples include Wuxi i-CORE Electronics, a spin-off of the No.…”

“…The external linkages, however, are multi-faceted ones, which not only include market linkages, but also contain complementary flows of technology, equipment-embodied knowledge and managerial labor. As Chou et al [42] observe, what CSMC gained through the equipment linkage was far more than cost saving, because through purchasing the second-hand equipment, they also obtained the learning effect of equipment-embodied technology transmission, consumer base and market share. In other words, the acquisition of old equipment, and connected technology licenses, customer resources and market shares, especially from the Singapore Chartered Semiconductor, thus enabled CSMC to build up its overseas connections and test platform for furthering market expansion.…”