Several factors make electronics a leading industry in South East Asia: 1. Possibilities of application – greatly impact the growth of economy and society of one particular country 2. The drop in the prices of important hardware
Electronic industry is divided into two main category: industrial electronics and consumer electronics.
3. Video, Music & Media Players
4. Cell Phones
5. Tablet PCs and Laptops
Risk in Electronics Industry mainly in high obsolescence (limited product life-cycle).
Electronics production in ASEAN is mainly in the field of consumer products and components. The industry underwent considerable growth in 1970s and Singapore, Malaysia, and Philippines had become important production bases.
Main reasons that contribute development of electronic industry in ASEAN, from 1960s to 1980s:
1. Import Substitution
Starting from 1960s to 1980s there were many import bans (protective barriers) for consumers in ASEAN countries. This also includes electronic products such as Televisions (B&W and Color), Audio Stereo and Radio Cassette. Hence, Japanese corporations like Sony and Toshiba started to setup production plants, namely in Singapore and Malaysia in the early history of electronic industry in ASEAN.
2. Competition between Japanese & States manufacturers.
Earlier, due to quality control reasons, American manufacturers such as GoldStar (now bought over by LG) were reluctant to relocate their production plant to Asia. However, due decreasing component cost (especially production of electronic diode and cathode ray – important components for TVs at that time) from ASEAN Countries, they decided to create new plants in ASEAN – as a result, more schools in ASEAN are starting to open basic electronic education (unique opportunity for technology and knowledge transfer for ASEAN countries)
3. Changing in Industrial Policies
The most pronounced change happened in Singapore after breaking up with the Federation of Malaysia in 1965. EDB was formed with the mission to find investors from US and Europe. Within 3 years, Singapore became the largest semi-conductor assembly in Asia. Electronic industry employed 2,400 people in 1968 to 35,000 in 1976 and 60,000 in 1984. In Malaysia, there was a New Economic Policy. Electronic industry was given a priority status – tax exemption was given in the first 7 years of business.
Since Malaysia had more manpower as compared to Singapore, it took over the leading position in 1985 (General Electric employed 38,000 labour in West and East Malaysia). In Thailand, more and more citizens were exposed to Television and Radios. Hence, export of electronic goods represented up to 13% of annual exported products. In Indonesia, export-processing zone was opened in North Jakarta, however the ‘boom’ was not as huge as garment production over that period of time.
4. The growing demand for computer related equipment
More government and private offices required Personal Computer and its equipment such as disk drives.
Interestingly, contrary to popular belief, low wages alone do not create comparative advantage. In fact, countries that earned major foreign investments were Singapore and Malaysia, where wages, still are the highest in the region. In our findings, we believe that infrastructural environment in terms of transport & telecommunications played an important role. In addition, political stability and industrial environments in terms of supporting firms in plastics, machinery, as well as the quality of manpower were crucial for the offshore production of new electronic products such as micro and minicomputers.