In the 1960s, the Taiwanese government identified the semiconductor
industry as the most strategically important of the high-tech industries for the focus of development. Starting with a few downstream assembly plants in this period (1960s), the industry has since developed into a comprehensive industrial system that demonstrates both vertical and horizontal divisions of labour. The development of the industry can be traced through 5 primary stages, characterized by certain processes: o Initiation stage foreign-capital based assembly Emergent role of universities as part of the NIS in supporting the industry. Overall, there was a focus on labor-intensive downstream assembly due to low labour costs which attracted foreign capital. Consequently, that brought in technology for IC packaging, testing and quality control. o Burgeoning Stage manufacturing technology transfer Government labs (Electronics Research and Service Organisation ERSO) led this process, by brining in process technologies through government-sponsored research units, and assistance from foreign experts. Aim: to build industry from scratch o Diffusion Stage growth of local plants Government continued to support development of semiconductors, in order to support local companies. Mature technologies were transferred from government labs into the private sector through spin-off companies Therefore, this stimulated private investment in related industries to build a complete system of sub-industries hence, the vertical division of labour. o Growth Stage industrial system expansion Stage of industrial growth that was supported by strategic alliances between domestic research institutes and foreign leaders to maintain momentum of development Government role was reduced o Transformation stage upgrading by industrial cooperation Marked by withdrawal of government involvement Research institutes move from being providers of assistance to experienced partners, And the industry looks at establishing collaborative networks and research consortia. As the table from the case demonstrates, we can follow Taiwans progression through these stages, from zero industrial technology capability, through to catching up in the transformation stage. And as this has occurred, the role of the government has decreased, while the role of industrial players has increased.