Explaining Geographic Shifts of Chip Making toward East Asia and Market Dynamics in Semiconductor Global Production Networks

Abstract

Few recent geographic studies have focused on how market dynamics might explain macroregional shifts in industrial production. This article examines the pivoting of semiconductor manufacturing toward East Asia during the 2010s, drawing upon proprietary data sets and interviews with leading semiconductor firms. Building on the existing conceptions of user-producer collaborations in economic geography, I conceptualize the relevance of market dynamics for explaining industrial-geographic change. In particular, I specify how customer intimacy in intermediate markets and demand responsiveness in end markets, as two critical dimensions of market dynamics, create strong demand for new chip-making capacity, and how spatial and relational proximity can strengthen interfirm collaboration and customer intimacy in semiconductor production networks. Empirically, market dynamics prompting massive growth in East Asian chip-making capacity are manifested in new product transition and chip demand from global lead firms in the information and communications technology sector and their manufacturing partners mostly located in East Asia. Demand responsiveness to new lead firms and end markets within East Asia has also induced chip design and new capacity to be colocated in the region. Customer intimacy between chip design firms and their foundry providers has led to massive growth of outsourced wafer fabrication in East Asia. Complementing supply-side explanations, such as state support and technological leveraging, this article’s core findings on demand-led market dynamics in explaining geographic shifts in semiconductor manufacturing contribute not only to the studies of global production networks in high-tech industries but also to the renewed interest among geographers in market dynamics and their consequences for uneven development.