This study aims to compare the current situations and characteristics of the computer and semiconductor industries of Korea and Taiwan, and to use the analysis to determine in which sector the two countries have comparative advantages..
The computer industries of Korea and Taiwan began by copying models of Apple, the American computer producer, and started to mature in 1984 when Korean and Taiwanese producers made their first entry into the U.S. market with their own IBM PC compatible models. The semiconductor industries of the two countries began in 1966 by assembling transistors, and went into full-blown maturity as the two countries’ producers succeeded in developing 64K DRAM, Korea in 1983 and Taiwan in 1984 respectively.
Regarding technology development, Korean firms poured 8.6% of their revenues into R&D, leading by far their Taiwanese counterparts investing only 1.5% of their revenues. Whereas foreign-funded enterprises and public policy research centers played a central role in technology development in Taiwan, private major corporations carried out the function in Korea. With regard to production structures, small and medium-sized enterprises have been relatively more important in Taiwan, while major corporations played bigger part of production in Korea. Relevant industrial policies also showed different patterns, as Taiwan put strategic emphasis on discrete devices and materials, and Korea on small-sized final products. In the aspects of the level of production and export, Taiwan led Korea in overall computer industries, while, in semiconductor sectors, Korea surpassed Taiwan, due in large part to its predominance in Integrated Circuits (IC) and transistors.
Both computer and semiconductor sectors in the two countries have exported over 90% of their products. In 1986, Taiwan exported about $2.2 billion worth of their computers, three times as much as Korea, but the amount of Taiwanese export of semiconductors was just $700 million, about half that of Korea. Both countries heavily rely on the U.S. market for exports of the products. The U.S. accounted for 52% of the total computer exports of Taiwan, while the country took 65% of the total semiconductors exported by Korea. On the level of export concentration to top 3 trade partners, Taiwan scored lower than Korea in both computer and semiconductor sectors, while the level amounted to as high as 85% in Korean semiconductor industry.
This report concludes that Taiwan has a comparative advantage in the computer industry, while Korea has a comparative advantage in the semiconductor sector.
Keywords: Taiwan, computer industry, semiconductor industry, technology development, comparative advantage