Electronics Industry, Geography of

The electronics industry manufactures the suite of information and communications technologies that harness the processing capacity of semiconductors, or microchips. In practical terms, the core set of electronics industries includes chip design and fabrication, computers, consumer electronics, and communications equipment (e.g., cell phones). The boundaries of the sector could reasonably be drawn to include a range of associated industries such as advanced computer-numeric controlled machinery producers or robotics (though not software) industries that rely substantially on electronic engineering. Advances in electronics have had a pervasive impact on virtually all facets of economic activity over the past 50 years. Given this almost singular importance, the industry has proven especially crucial in driving regional development in the places where it locates. The following paragraphs discuss the industry's evolving spatial dynamics by emphasizing the roles of states, lead firms, and informal routes to skill formation.

Several key patterns define the geographical evolution of the electronics sector. The United States and in particular key regions such as Massachusetts’ Route 128 and California's Silicon Valley are acknowledged as the crucibles of the electronics revolution, their emergence coinciding with the first commercial applications of the transistor in the 1950s. Silicon Valley persists as the world's leading electronics industrial district. It is home to key firms such as Intel, Hewlett-Packard, and Apple and derives additional advantage from its proximity to Stanford University, the sine qua non model for university technology transfer. The positive externalities of Silicon Valley act as a magnet for American and international talent, making it virtually imperative for the world's leading electronics firms to have a presence there too.

Apart from the United States, Japan has been perhaps the biggest foreign beneficiary of the early advances in American electronics technology. Indeed, the transfer of American technology and basic science to Japan, most famously exemplified in Sony's purchase of the Bell Labs/Western Electric transistor technology in 1954, provided the foundations for the Japanese consumer electronics firms, whose brands continue to dominate the industry. More generally, the emergence of Japan signaled the ascendance of East Asia as the center of gravity for electronics manufacturing.

The diffusion of the electronics sector within East Asia reflects shifts in the industry's increasingly elaborate division of labor. Most basically, the electronics industry can be categorized into, on the one hand, high-value-added and specialized functions, such as chip design/production, that require significant economies of scale and state support—capital costs for new chip fabrication plants run upward of $3 billion to $4 billion. On the other hand, more routine functions such as component assembly for consumer electronics are attracted to low-labor-cost locations. An overwhelmingly female labor force persists as the constant characteristic of factories in these latter contexts.

The precise spatial articulation of this division of labor results from the twin motivations of firms and states. Electronics firms generally conduct higher-order functions such as R&D and pilot manufacturing in their home markets. This means that most R&D and patenting in electronics are concentrated in a relatively narrow set of advanced industrial nations with significant basic scientific capabilities (the United States, Japan, Germany, Finland, South Korea, etc.). In contrast, the routine production of electronics that occurs at later stages in the product cycle almost inevitably takes place in lower-cost locations. States that host multinational electronics firms therefore have a powerful incentive to enhance the skills of their workforce so that they can capture the investment of increasingly more sophisticated functions that are likely to spawn a domestic electronics sector.

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