Crisis and Adaptation in East Asian Innovation Systems: The Case of the Semiconductor Industry in Taiwan and South Korea

In recent decades, both South Korea and Taiwan have made remarkable leaps in the development and production of semiconductors-the core element in burgeoning global telecommunications, computer, and computer equipment industries. Although many aspects of their sectoral industrial strategies have differed, both countries are now moving aggressively to adapt their semiconductor industries to turbulent global markets. In the wake of the severe regional financial crisis that began in 1997, this case study compares and contrasts continuing processes of adaptation among primary semiconductor manufacturers in the two countries. The crisis had observable effects, especially in Korea, but it was not deep enough to force fundamental adjustments in either country. In the early days of the industry in both places, a sense of vulnerability-the need to come from behind-gave rise to quite different corporate structures and attendant strategies. Remarkable differences persist in the ways in which the South Korean and Taiwanese semiconductor firms are seeking new advantages in rapidly changing regional and global markets. Strategic change and structural continuity mark the attempt of two relatively small countries to stay competitive in a key industry.