Asia's New Competitors
Korea and Taiwan
The personal computer revolution created opportunities for new countries to become integrated into the production network of the PC industry. The most notable entrants were the newly industrializing economies (NIEs) of Asia: Korea, Taiwan, Singapore, and Hong Kong. The NIEs' economies had grown at exceptional rates on the strength of labor-intensive manufacturing and rising exports, but by the late 1970s, labor costs were going up and new competition was developing from lower wage countries in the region. The governments of Korea, Taiwan, and Singapore were convinced that their economies needed to "graduate" to more capital- and technology-intensive industries. In the electronics industry, the governments promoted production of more advanced consumer products, such as VCRs and microwave ovens, and sophisticated components such as semiconductors. They also laid the groundwork for computer production by encouraging foreign investment and technology transfer, and by developing domestic technical and manufacturing capabilities.
As U.S. PC companies looked for low-cost suppliers and subcontractors, they created opportunities for Asian companies to enter the PC industry without having to master a wide range of technologies or develop their own marketing and distribution channels. A company could produce a cable, power supply, keyboard, or monitor based on IBM's architectural standards and sell the components to any PC maker. Or it could assemble PCs or circuit boards for U.S. companies that preferred to outsource some parts of the production process. The barriers to entry were low, and East Asian producers flooded into the market.
The direct investment and outsourcing by multinational computer makers and efforts by local companies to become part of the supply chain combined to create a boom in computer production in East Asia. The mix was different in each case. Singapore depended heavily on production by foreign multinationals, Taiwan and Hong Kong had a mix of foreign and domestic producers, and Korea's industry was led by domestic firms. During the 1980s, each of