3.2 The ‘Ultra-Compressed Catch-Up’
3.2.2 Previous Research on the Rise and Fall
With regard to the reasons for the sharp deterioration of Taiwan’s FPD industry after its achievement of a rapid catch-up, Akabane ( 2010 , 2014 ) sets forth a uniform argument from the perspective of the eff ectiveness and limitations of the Taiwanese FPD industry’s ‘follower strategy’.
As one of the major reasons for Taiwan’s FPD industry’s success in
‘ultra-compressed catch-up’, Akabane ( 2010 , 2014 ) cites that it has become easier to acquire technology necessary for the enlargement of glass substrates both in terms of cost and time as a result of the incorpo- ration of the implicit knowledge on production knowhow of individuals into production facilities.
Akabane provides the following insights regarding the subsequent slowdown mechanism. First of all, the trend toward larger glass sub- strates primarily for use in LCD TVs led to the inevitable rise of costs for R&D and capital investment. However, Taiwanese FPD makers could not form defi nite outlooks on the sales of such panels due to their weak ties with other TV and FPD makers, and their weak branding power of
LCD TVs. For this reason, the Taiwanese companies hesitated to spend on R&D and capital investment, thus slowing down their catch-up pace (Akabane 2010 , 2014 ). In fact, AUO was successful in producing fi fth- generation glass substrates in 2002 along with Samsung Electronics and LG Electronics. However, in the production of 8.5-generation glass sub- strates, AUO succeeded as late as in 2009, two and three years later than Samsung Electronics and Sharp respectively, while AUO was the earliest among Taiwanese makers.
Second, while the spread of LCD TVs and its enlargement served as the driver of the development of the world’s FPD industry, signifi cant shifts in the market structure occurred from around the end of the 2000s such as the saturation of the LCD TV market in the developed coun- tries and the decline of large TV panels’ ability to stimulate demand.
Amid these circumstances, the massive capital investment by Japanese,
Fig. 3.1 Operating margins of major FPD makers (Note: Author’s elabora- tion based on data from Sangyo Times, Inc. ( 2012 , 2014 ) and Innolux web site ( www.chimei-innolux.com/ , accessed on 25 July 2012))
South Korean, and Taiwanese companies, and the market entrance of Chinese companies, led to the sharp drop in price of large panels. On the other hand, the market for high-end small and medium-sized panels grew rapidly along with the rise of mobile devices such as smartphones and tablet PCs (Akabane 2010 , 2014 ). In recent years, there has been a signifi cant rise of the share of small and medium-sized panels (thin fi lm transistor liquid crystal display (TFT-LCD) panels and OLED panels smaller than 10 inches) in global FPD production (in terms of value) from 20.4 % in 2007 to 29.1 % in 2013. 1 However, given the diversi- fi cation of technological progress in directions other than enlargement as well as the diversifi cation of product specifi cations, it has become dif- fi cult to narrow down the technologies to be followed. Amid these shifts in market structure, the FPD makers of Taiwan were unable to cope tech- nologically in an adequate manner (Akabane 2010 ).
Akabane ( 2010 , 2014 ) contributed by setting forth a unifi ed analy- sis on the eff ectiveness and limitations of the ‘follower strategy’, based upon the fundamental stance that the degree of integration of technol- ogy and knowhow in production facilities aff ects the speed of techno- logical catch- up, considering the organizational structure, positioning in value chains, and direction of technological development of Taiwan’s FPD industry.
However, Akabane’s ( 2010 , 2014 ) study lacks a clear analysis regard- ing R&D management. It does not provide an adequate explanation on the Taiwanese FPD industry’s allocation of R&D resources in areas other than the enlargement of TFT-LCD glass substrates. As a result, despite the Taiwanese FPD industry’s use of R&D resources on technologies other than the enlargement of TFT-LCD glass substrates—such as the development of OLED panels—based upon the awareness of a roadmap in view of the diversifi cation of the direction of technological progress and product specifi cations, it is not expressly analyzed that these did not lead to signifi cant results.
As far as the belated response to the shifts in market needs due to the delay in technological catch-up is one of the reasons for the recent
1 Liu and Chao eds. ( 2012 ), material provided by Industrial Economics and Knowledge Center of Industrial Technology Research Institute.
slowdown of Taiwan’s FPD industry, it would be extremely meaningful in the discussion of the failure of the transition from a follower strategy to an overtaker strategy to shed light upon the characteristics of the Taiwanese FPD industry’s R&D management. In particular, it would be important to focus upon the characteristics of independent R&D for the following reasons.
In addition to the introduction of manufacturing facilities, another characteristic of the Taiwanese FPD industry’s technological acquisition channel indicated in previous research is the acquisition of technology through Japanese companies and Japanese engineers (e.g., Wang 2003 ; Akabane 2004 ; Shintaku et al. 2006 ). However, as the catch-up process progresses, it becomes more diffi cult to acquire technologies from these channels because the precursor companies start to perceive its followers as rivals (Sato 2008 ; Ito 2008 ). In fact, Akabane ( 2010 , 2014 ) cites that Sharp attempted to ‘blackbox’ its technology to prevent the FPD compa- nies of South Korea and Taiwan from acting as followers. In addition, it is assumed that the scope for technology acquisition decreases along with the rise of its own technological capability. Furthermore, underdeveloped technology would depend upon independent R&D. Th erefore, it would be necessary to focus upon independent R&D in order to shed light upon the characteristics of Taiwanese FPD companies which are in the fi nal stages of the catch-up process.