Over the past quarter of a century, the pattern of world investment, production and trade has changed radically with the development of international sourcing (i.e. international purchasing of intermediate product and service inputs) both within firms and between firms in the same industry (i.e. intra-firm and intra-industry trade). The ICT sector plays a major role, as it is highly globalised and enables the globalisation of other sectors. This section explores some features of globalisation compared with domestic production and market growth, and examines trade specialisation as one important feature of the globalisation of the ICT-producing sector.
Global ICT production
Globalisation of ICT and electronics has been characterised by the rapid development of new production locations and markets in emerging economies. This section analyses changes in electronics production as a proxy for ICT production based on data from Reed Electronics Research (Figure 2.22). The overall pattern has been for electronics production to move towards lower-cost OECD or non-OECD economies, as illustrated by the patterns of trade discussed above. Whereas the Asia-Pacific region (and China in particular) has been the main beneficiary, Brazil, Central and Eastern Europe, India, Mexico and others have also seen very significant increases in electronics production.
Figure 2.22. Electronics production, 2005 and 2009
USD billions, top 25 economies
Note: 2005 data are current figures at current exchange rates. 2009 data are forecasts at 2008 constant values and exchange rates (i.e. inflation is not included). The base year is 2007.
Source: OECD, based on data from Reed Electronics Research.
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2009 2005
China United States
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China is still the leading and among the fastest-growing producers of electronics products over the 2005-09 period (USD 412 billion) (Figure 2.22). It is followed in terms of the value of production by the United States (USD 240 billion), Japan (USD 185 billion), Korea (USD 85 billion), Germany (USD 65 billion), some leading Asian producers (Malaysia, Chinese Taipei, Singapore), Mexico (USD 43 billion) and Eastern Europe (notably Hungary and the Czech Republic). ICT production locations such as Brazil (USD 33 billion), Thailand (USD 25 billion) and India (USD 18 billion) are also gaining in importance. India’s growth rate has exceeded that of China, but from a relatively low base. For their part, Hong Kong (China) and Singapore have seen their production fall, while Chinese Taipei’s production has stagnated (Table 2.A2.10).
Among OECD countries, growth is rapid in the eastern European group of the Czech Republic, Hungary, Poland and the Slovak Republic, along with Mexico, as reflected in their exports and trade performance. Most OECD countries have however shown declining production over 2005-09. The United Kingdom has had the largest decline, followed in order by Sweden, Korea, Canada, Ireland, Finland, the United States, France Italy, Japan and the Netherlands. In addition to the assembly locations listed above, Germany and Switzerland have experienced growth.
The countries in which electronics production increased by 10% a year or more is led by the Slovak Republic (more than 25% annual growth); others are Brazil, China, the Czech Republic, India, Poland, the Russian Federation and Viet Nam (Figure 2.23). The data show two clear trends: the rapid increase in production in some new assembly locations (Eastern Europe, Viet Nam, Egypt) and continuing expansion in established assembly locations (China, Mexico), combined with growth in some emerging economies (Brazil, the Russian Federation). Taking into account the decline in production in most OECD countries, it is clear that production is progressively shifting to growing markets and to export locations.
Figure 2.23. Growth in the value of electronics production, 2005-09
Percentage annual growth in current prices, top 25 economies
Note: 2005, 2006 and 2007 are current figures at current exchange rates. 2008 and 2009 are forecasts at 2008 constant values and exchange rates (i.e. inflation is not included). The base year is 2007.
Source: OECD, based on data provided by Reed Electronics Research.
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India Poland Czech Republic China
Brazil Greece
Romania Croatia Egypt
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Patterns of trade, production and sales
One indicator of the continuing globalisation of the ICT sector is the relatively rapid growth of trade compared with production and sales. Total trade in all major regions has been higher than production or market growth, showing that globalisation is continuing at a steady rate. As one would expect, production growth rates in Eastern Europe and emerging economies have been higher than domestic market growth rates, as these countries are export-led; in western Europe and the Americas, production is lower than domestic market growth, as a significant share of consumption comes from imports (Table 2.3). Between 1995 and 2007, western European production of electronics goods increased only by 0.8% a year (slowed by declines in the production of electronic data processing equipment and telecommunications) but trade increased by 6.5% a year. Similarly, the production of electronics goods in the Americas and the Asia-Pacific region increased by only 0.5% a year whereas trade increased by 5.2%.
Specialisation in ICT production
Globalisation and the international rationalisation of production might also be expected to lead to increasing specialisation. One indicator is the share of ICT goods in total merchandise exports, which varies significantly from country to country (Annex
Table 2.3. Growth in electronics goods production, trade and sales, 1995-2007
Annual percentage Electronic data
processing equipment
Radio
communication Telecommunications Other Total
Western Europe
Imports 6.9 14.5 6.6 5.6 6.8
Exports 5.8 12.2 3.9 5.7 6.2
Trade 6.5 13.2 5.2 5.6 6.5
Production –1.9 4.7 –3.1 1.6 0.8
Market 3.1 5.3 –1.4 2.2 2.5
Americas and Asia-Pacific
Imports 6.0 13.2 7.5 5.3 6.2
Exports 2.3 12.1 2.9 4.4 4.3
Trade 4.1 12.6 5.1 4.8 5.2
Production –1.6 6.1 –3.9 0.6 0.5
Market 1.3 6.4 –1.5 0.8 1.6
Eastern Europe
Imports 13.9 26.8 8.9 17.1 16.6
Exports 39.9 34.7 17.5 25.2 28.3
Trade 19.1 29.5 11.1 19.7 20.0
Production 23.4 22.8 8.7 15.7 17.3
Market 10.8 20.5 6.4 12.9 12.5
Emerging economies
Imports 21.7 16.1 5.9 18.9 18.4
Exports 28.2 30.0 20.1 17.9 22.2
Trade 25.9 24.4 12.8 18.4 20.5
Production 26.1 26.8 17.4 14.8 19.9
Market 20.8 17.9 7.4 15.7 16.4
Note: The annual growth for emerging economies trade data is for 1995-2007.
Source: OECD, based on data provided by Reed Electronics Research.
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Table 2.A2.11). In 2008, ICT goods accounted for 27% of Korea’s merchandise exports, and between 15% and 25% of merchandise exports from (in descending order) Hungary, Mexico, Ireland, the Slovak Republic, Finland and the Czech Republic (Figure 2.24). Among OECD countries, Iceland, Australia, New Zealand, Turkey and Norway are the least specialised in the production of ICT goods for export. Countries such as the Netherlands act as transport and distribution hubs and exhibit relatively high levels of trade in ICT equipment and a larger share of ICT equipment in merchandise trade than domestic production would suggest, with re-exports making a substantial contribution to exports.
Trends since 1996 show a number of aspects of globalisation, with rapid increases in the share of ICTs in merchandise exports from Hungary, the Czech Republic and the Slovak Republic, owing to the establishment of manufacturing facilities in these countries.
There has also been increasing specialisation among already relatively specialised countries (e.g. Korea, Finland and Mexico) (Figure 2.24). While 11 OECD countries increased their specialisation in ICT production between 1996 and 2008, 19 reduced theirs. In general, those specialising in ICT production do so increasingly, while those not specialising are becoming even less specialised. Nonetheless, some very highly specialised countries decreased specialisation considerably, most notably Ireland and Japan, and the number of countries specialising in ICT goods exports is declining compared with earlier periods (between 1996 and 2006 16 countries increased their specialisation, see the OECD Information Technology Outlook 2008), possibly as a result of early impacts of the economic crisis on the ICT sector and the associated slump in trade (see above).
Specialisation in the manufacture of ICT goods for trade can also be captured in
“revealed comparative advantage” (RCA) indices which show whether the ICT manufacturing industry performs better or worse in a given country than the average throughout the OECD area.9 In 2008, 11 OECD countries had a comparative advantage in ICT manufacturing, the same number as in 2006. They were led by Korea, and followed by Hungary, Mexico, Ireland,
Figure 2.24. Share of ICT goods in total merchandise exports, 1996 and 2008
Note: No data for the Slovak Republic prior to 1997. Belgium includes Luxembourg prior to 1999.
Source: Joint OECD-UNSD ITCS (International Trade by Commodity Statistics) Database, December 2009.
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the Slovak Republic, Finland, the Czech Republic, the Netherlands, Japan, the United States and Sweden (Figure 2.25 and Annex Table 2.A2.12). Recent trends suggest increasing specialisation; countries with an increasing advantage include those that already had a high level of specialisation (e.g. Korea, Mexico and Finland), and countries with relatively recent investment in ICT manufacturing (e.g. Hungary, the Slovak Republic, Czech Republic and, increasingly, Poland). With the continuing global rationalisation of production, the focus of ICT production is clearly in Korea and elsewhere in Asia, and in Ireland, Mexico and Eastern Europe.
Intra-industry trade
With greater specialisation, countries will increasingly trade products of the same industries. This enhances gains from trade by focusing specialisation on a more limited number of products in particular industries and underpins the global redistribution of production activities to the countries and regions with the most competitive production factors. In the ICT sector, intra-industry trade is typified by exports of advanced semiconductor components from more research-intensive locations for assembly into final computer communication or consumer products in locations with lower labour costs for export back to component-producing countries.10
Among OECD countries, the Czech Republic, Germany, Mexico, the Netherlands, the Slovak Republic and Sweden all have relatively high levels of intra-industry trade in ICT goods (Annex Table 2.A2.13). In 2008, 17 countries recorded higher levels of intra-industry trade than in 1996, compared with 15 for 1996-2006. Eastern European countries – the Slovak Republic, the Czech Republic, Poland, and Hungary – experienced the fastest increases in their intra-industry trade index because of imports of electronic components for assembly into computer, communication and consumer electronics equipment.
Figure 2.25. Revealed comparative advantage in ICT goods, 1996 and 2008
Note: No data for the Slovak Republic prior to 1997. Belgium includes Luxembourg prior to 1999. See Methodology and Definitions, Annex A, for more details.
Source: Joint OECD-UNSD ITCS (International Trade by Commodity Statistics) Database, December 2009.
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Overall these different indices clearly show the ongoing rationalisation of ICT production and trade, with countries specialised in ICTs becoming more specialised and less specialised countries becoming less so. They also capture the rapid rise of eastern European countries as significant exporters of ICT goods, driven by the relocation of assembly-intensive activities for export to the rest of Europe.