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Production Networks in Asia : A Case Study from the Hard Disk Drive Industry

  • Daisuke Hiratsuka

    (Asian Development Bank Institute (ADBI))

Production networks have been extensively developed in East Asia. Previous studies on production networks used international trade data or input–output tables, but such aggregate data cannot explain how the networks actually operate. With the aim of understanding the features and characteristics of East Asian production networks, this paper examines the procurement system of a HDD assembler operating in Thailand. This micro-level case study found that this particular production network consists mostly of arm’s-length suppliers, who are independent and on an equal footing with the assembler. These arm’s-length suppliers are mostly located in the assembling country, but some are located in neighboring countries. This proximity is necessary to establish good relationships between customer and suppliers and allows problems to be solved as soon as they occur. The arm’s-length suppliers engaged in each country’s leading industries, such as the electronics industry in Malaysia and Singapore and the automobile industry in Thailand, have extended their business to supply the HDD industry. These suppliers have formed an industrial cluster in each country within a two- or three-hour drive area. Each cluster that spans different countries is linked by a well-developed logistic network that employs the just-in-time production method that prevails in East Asia. On a regional level, these separate clusters tend to form international production networks that connect to each other across neighboring countries within a distance that provides a quick response time for problem solving. This study also found that American HDD assemblers outsourced indigenous suppliers in Malaysia and Singapore because American suppliers did not follow the assemblers’ move to the region. However, since Japanese suppliers did follow the Japanese HDD assemblers to the Philippines and Thailand, indigenous suppliers were not outsourced.

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File URL: http://www.eaber.org/node/23235
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Paper provided by East Asian Bureau of Economic Research in its series Microeconomics Working Papers with number 23235.

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Date of creation: Jul 2011
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Handle: RePEc:eab:microe:23235
Contact details of provider: Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
Web page: http://www.eaber.org

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  1. Hiratsuka, Daisuke, 2011. "Production Networks in Asia: A Case Study from the Hard Disk Drive Industry," ADBI Working Papers 301, Asian Development Bank Institute.
  2. David Hummels & Jun Ishii & Kei-Mu Yi, 1999. "The nature and growth of vertical specialization in world trade," Staff Reports 72, Federal Reserve Bank of New York.
  3. Gordon H. Hanson & Raymond J. Mataloni & Matthew J. Slaughter, 2003. "Vertical Production Networks in Multinational Firms," NBER Working Papers 9723, National Bureau of Economic Research, Inc.
  4. Hillberry, Russell & Hummels, David, 2008. "Trade responses to geographic frictions: A decomposition using micro-data," European Economic Review, Elsevier, vol. 52(3), pages 527-550, April.
  5. Grossman, G.M. & Helpman, E., 2002. "Outsourcing in a Global Economy," Papers 218, Princeton, Woodrow Wilson School - Public and International Affairs.
  6. Mitsuyo Ando & Fukinari Kimura, 2003. "The Formation of International Production and Distribution Networks in East Asia," NBER Working Papers 10167, National Bureau of Economic Research, Inc.
  7. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers 986, University of California, Davis, Department of Economics.
  8. Kei-Mu Yi, 2000. "Can vertical specialization explain the growth of world trade?," Staff Reports 96, Federal Reserve Bank of New York.
  9. Deardorff, A.V., 1998. "Fragmentation in Simple Trade Models," Working Papers 422, Research Seminar in International Economics, University of Michigan.
  10. Fukunari Kimura, 2010. "The Spatial Structure of Production/Distribution Networks and its Implication for Technology Transfers and Spillovers," Chapters, in: Input Trade and Production Networks in East Asia, chapter 8 Edward Elgar.
  11. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
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