The distribution of value added among firms and countries the case of the ICT manufacturing sector

The information and communications technology (ICT) manufacturing sector is one of the key employers worldwide and has undergone dramatic evolutions in the last decades. These evolutions stem from massive reconfigurations in the industry (vertical disintegration, specialization, outsourcing and relocation of production to cheaper countries) which began in the early 1980s leading to a deep transformation in the international division of labour. This paper investigates the evolutions of the supply chain in the sector since 2000 and discusses the impact of these evolutions in terms of distribution of the value added across firms and across countries. During this period, most of the production activities have migrated to East Asia and particularly China, and firms in developed economies have specialized in more strategic activities such as design, development or marketing. Data show large relocations of jobs across countries which have not been accompanied yet by an equivalent change in the distribution of value added. This apparent paradox is largely explained by the vertical specialization of firms and countries as shown by different products case-studies. Hence, economic development depends more on the position in the value than on the simple participation to it. The opportunities and conditions for economic upgrading in the ICT value chain are discussed through the two examples of Taiwanese contract manufacturers and Chinese mobile phone companies. We show that the high modularity of the sector lowers the entry barriers for newcomers but might also turn out to be a disadvantage for less technologically capable firms in the longer term.