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

Abstract

With reference to the case studies of Shanghai, Suzhou, and Wuxi, in the Yangtze Delta, China, this paper demonstrates the local possibilities and various development paths for developing an indigenous semiconductor industry, using the government support within foreign direct investment (FDI)-dominated clusters for the New Industrializing Countries (NICs). Two important policy lessons are identified. The first is that the government may attract FDI and develop high-tech clustering by using policy support, but it does not necessarily provide conducive and positive influences on the sustainable development of domestic semiconductors. The second lesson is that the sustainability of the domestic semiconductor industry in the FDI cluster may start from three connected elements: (1) a pragmatic goal of government support; (2) complementarities of the domestic semiconductors with international leading firms in the market, technology and equipment linkages; and (3) a sustainable capacity of technical learning to drive local developments.

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