UNIVERSITY OF ECONOMICS, PRAGUE
BACHELOR THESIS
2020 Jilun Zhu
University of Economics, Prague International Business
Foreign Direct Investment in Electronic Industry in Southeast Asia
Author: Jilun Zhu
Thesis instructor: Ing. Jaroslav Halík, MBA, Ph.D.
Scholar year: 2020/2021
Declaration:
I hereby declare that I am the sole author of the thesis entitled “Foreign Direct Investment in Electronic Industry in Southeast Asia“. I duly marked out all quotations. The used literature and sources are stated in the attached list of references.
In Prague on ...30/4/2021... Signature
Jilun Zhu
Structure
Introduction...
11.FDI and Economic situation in Southeast Asia...4
1.1. FDI and Economic development in founding member of ASEAN...4
1.2. FDI and Economic development in Myanmar, Laos, Cambodia, Vietnam...6
1.3. The threat of the Asian financial crisis...8
1.4. Conclusion...9
1.5. FDI and economic development in some important places in Southeast Asia9 1.5.1. Vietnam...9
1.5.2. Indonesia...10
1.5.3. Taiwan...11
1.6. Conclusion...12
2. Electronic industry in southeast Asia...14
2.1. Electronic industry in southeast Asia...14
2.2. FDI in electronic industry in three particular countries...21
2.2.1. Vietnam...21
2.2.2. Indonesia...25
2.2.3. Taiwan...27
2.3. Analysis and comparison of FDI in electronic industry in three countries..29
3. Problems and opportunities of FDI during development...33
3.1. Opportunities or threats?...33
3.1.1. Covid-19...33
3.1.2. U.S.-China trade war...36
3.2. Future...37
Conclusion...
39Reference...
42Introduction
Since the end of World War II, many former colonial countries in the world have successively launched national liberation and independence campaigns, which of course also include Southeast Asia. From the declaration of independence and liberation of Vietnam, Indonesia and other countries in 1945 to the declaration of independence of East Timor in 2002, Southeast Asian countries have got rid of the persecution of colonial rule one after another, established independent governments, and took national sovereignty in their own hands. At the same time, Southeast Asian countries began to introduce their own national policies and guidelines, and began to independently carry out national economic construction. Although during this period, Southeast Asia (especially Vietnam) was affected by the Cold War between the US and the Soviet Union and its economic construction was hindered, it still achieved very good economic construction results and attracted a large amount of foreign investment. And although Southeast Asia suffered heavy losses during the Asian economic crisis in the late 1990s, after a series of economic reforms, Southeast Asia’s economic development began to gradually return to the right track. Especially in recent years, as the United States has resumed its emphasis on the Asia-Pacific, as well as the economic recovery of Japan and South Korea and China ’ s economic development, Southeast Asia has become more and more popular for foreign investors, and the economic growth rate is gradually increasing.
In order to safeguard their national security and promote economic development, Southeast Asian countries have created the ASEAN since the Cold War. With the accession of Vietnam, Laos, Cambodia and Myanmar in the 1990s, ASEAN now has ten member states and is the most important governmental international organization in Southeast Asia. ASEAN has made great contributions to safeguarding the security of Southeast Asian countries and promoting the improvement of the international status of Southeast Asia. In 2010, ASEAN and China established the "China-ASEAN Free Trade Area", forming a "10+1" free trade area structure. It is the largest free trade zone in developing countries with the largest population in the world. At the
same time, Japan and South Korea have also joined the ASEAN Free Trade Area. At present, the ASEAN Free Trade Area has formed a "10+3" pattern, which has greatly promoted the trade exchanges between ASEAN and China, Japan and South Korea, and promoted the economic development of ASEAN countries.
The electronics industry emerged in the 20th century and is one of the largest industries in the world today. The electronics industry in Asia developed rapidly after World War II. Japan achieved a breakthrough in the electronics industry in the 1970s and 1980s and even surpassed the United States. At that time, Japanese companies such as Toshiba and Fujitsu monopolized the global electronics market. South Korea's electronics industry also achieved rapid development in the 1990s, and Samsung is still one of the world's largest electronics manufacturers. After entering the 21st century, the development of China's electronics industry has gradually accelerated, and excellent electronics companies such as Huawei and Xiaomi have emerged.
Nowadays, Southeast Asian countries are following the trend of further transfer and adjustment of the global industrial chain, and are also striving to attract large electronic product companies to invest in Southeast Asia and promote the development of the electronics industry in Southeast Asia. So far, Intel, Samsung, LG and other companies have invested and built factories in Southeast Asia. The development of the electronics industry in Southeast Asia presents a bright future.
The electronics industry in Southeast Asian countries is in a period of upward development, and it has also attracted the attention of a large number of electronics companies, which is why I am interested in the topic of this paper. This paper will focus on studying the current economic and industrial environment in Southeast Asia, and find out the future and trend of FDI in Electronic Industry in Southeast Asia. At the same time, it will study the future development direction of the electronics industry in Southeast Asia, and evaluate and predict the benefits and benefits of electronics industry investment in Southeast Asia. possible problems. This may also provide some experience for other emerging electronics industry countries in the future. This paper will focus on discussing the impact of the electronics industry on Southeast Asia's economy, using data to prove and compare and draw conclusions.
This paper is divided into three different parts. The first chapter mainly discusses the definition of FDI and the current FDI in Southeast Asia, as well as the impact of these FDI on Southeast Asian countries, as well as the current economic situation and market conditions in Southeast Asian countries. In this chapter, I will focus on the three places: Vietnam, Indonesia and Taiwan, and compare them, because they are generally considered to be the three most influential places in Southeast Asia and the places with the most development potential. The second chapter will focus on the current development of the electronics industry in Southeast Asia and FDI to the electronics industry, which will include the inward and outward of FDI. This chapter will also describe the industrial layout of some large electronics industry companies in Southeast Asia and the competition and cooperation between these companies (including their investment and employment in Southeast Asia, as well as new product development), and analyze the development of the electronics industry in Southeast Asia from the perspective of these large companies. This chapter will also continue to focus on introducing and analyzing Vietnam, Indonesia and Taiwan. The third chapter will mainly discuss the current problems caused by FDI in the electronics industry in Southeast Asian countries and the potential problems that may arise in the future, as well as the obstacles and opportunities that may be encountered in Southeast Asian electronics industry investment, as well as the future development prospects of the electronics industry in Southeast Asian countries. In this chapter, I will put forward some hypotheses and conjectures and demonstrate them, and finally draw my conclusions.
1. FDI and Economic situation in Southeast Asia
FDI is a category of cross-border investment in which an investor resident in one economy establishes a lasting interest in and a significant degree of influence over an enterprise resident in another economy.(Chen, 2020)
1.1. FDI and Economic development in founding member of ASEAN
Before World War II, most Southeast Asian countries were colonies of European and American countries. At that time, European and American countries used Southeast Asia as their commodity sales market, raw material production area and colonial rule, and promoted a single commodity economy (such as forcing Myanmar and Vietnam to grow rice, Malaysia to produce tin and rubber) and cruel colonial oppression (such as forced Long hours of high-intensity labor and only low remuneration, employing child labor). This deformed and single colonial economic structure and the ruthless and violent rule of colonialism greatly damaged the local natural resources and prevented the local industrialization. It is also the root cause of the long-term economic backwardness in Southeast Asia.
After Southeast Asian countries gained independence one after another, Southeast Asian countries also began their own industrialization process. The first country to start industrialization was the Philippines (because its independence was basically the earliest and the Philippines did not have a civil war), but Singapore was the first country to achieve rapid economic development (because of its superior geographical conditions and relatively good external environment). Although Singapore only declared independence in 1965, Singapore’s economy began to develop rapidly in the 1970s and began to become an important manufacturing and export base in the world, an international trade and financial center, an international shipping center, and a regional tourism center. It has become a newly industrialized country in Asia, and by 1997, it has become the only developed country in Southeast Asia.
Figure 1.1
(IMF, 2020) source available at:
https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC
In addition to Singapore, in the late 1950s and early 1960s, Indonesia, Malaysia, the Philippines, and Thailand implemented an industrialization strategy based on import substitution. Beginning in the mid to late 1960s, these countries shifted to the stage of export-oriented industrialization. However, these countries really achieved rapid economic development after the 1980s, especially from the mid-1980s to the mid-1990s. From the mid-1980s to the mid-1990s, most Southeast Asian countries maintained rapid economic growth. Singapore and Brunei became high-income countries. The per capita GDP of Indonesia, Malaysia, the Philippines, and Thailand exceeded US$1,000 (of which Malaysia exceeds US$3,000 and Thailand exceeds US$2,000), industrial output value exceeds agricultural output value (the manufacturing output value of Malaysia, Thailand, and the Philippines exceeds agricultural output value). Basically, the proportion of agricultural labor force in each country has declined, and the proportion of industrial manufactured exports exceeds that of primary products. The proportion of exports. According to statistics, Thailand’
s manufacturing output exceeded agricultural output for the first time in 1985, and Indonesia ’ s manufacturing output exceeded agricultural output for the first time in 1991. In 1983, the proportion of manufactured exports from the Philippines surpassed that of primary products for the first time. In 1987, Thailand’s industrial system The proportion of finished products exports exceeded that of primary products for the first time. In 1990, Malaysia’s exports of industrial products accounted for more than 50%
for the first time. In 1993, Indonesia’s exports of industrial products accounted for
more than half for the first time.(2013) At this stage, the sources of investment in Southeast Asian countries mainly came from the United States and Japan. The United States was under Cold War strategic considerations to gradually invest in Southeast Asia, while Japan invested in Southeast Asia for post-war economic reconstruction and development. In addition, Southeast Asia Japan's important strategic geographic location and economic status are also the main reasons for Japan's vigorous investment in Southeast Asia. The massive investment in Southeast Asia has also promoted the rapid development of Japanese enterprises and helped Japan's economic
“take-off”.
1.2. FDI and Economic development in Myanmar, Laos, Cambodia, Vietnam Due to the bad external environment of the Cold War between the United States and the Soviet Union, Vietnam, Laos, Cambodia, and Myanmar were still damaged by the war for a long time after World War II. Until the 1970s and 1980s, these countries were unified and Peace, the situation began to improve. In the mid-1980s, these countries successively implemented economic opening and reform policies and began the process of industrialization. At the end of 1986, the “Six National Congress” of the Communist Party of Vietnam established a new policy of economic opening and innovation, formulated and implemented a series of economic policies, including the agricultural contracting system, state-owned enterprises' independent management and self-financing, domestic price reform, financial system reform, and foreign investment attraction. Major reform measures to promote the gradual transition from a planned economy to a market economy(THAYER, 1987). After the "Fourth National Congress" of the Lao Party in 1986, Laos actively implemented the reform and opening-up line, adjusted the economic structure, implemented the agricultural contracting responsibility system and state-owned enterprise reorganization, implemented multiple forms of ownership, expanded opening up, and promoted Laos’
original natural and semi-natural The economy will transition to a market economy, and a market economy mechanism managed by the state will be established(Yamada, 2018). After the Burmese military government came to power in 1988, it abolished the "socialist planned economy", implemented economic system reform aimed at
establishing a market economy, encouraged the development of private enterprises, actively introduced foreign capital, adjusted agricultural policies, and established a diversified financial system(Wallace, Kate Kramer, & Richman, 2013). After the establishment of the new Cambodian government in 1993, it began to implement a market economy system. The new government took economic development, poverty eradication, and improvement of people’s living standards as the focus of its internal policies, and prioritized agriculture, infrastructure construction, and personnel training.
Open to the outside world and actively attract foreign investment(Chhair & Ung, 2016). At this stage, foreign direct investment in Vietnam and other countries still mainly originated from Japan, but in addition to Japan, other emerging countries and regions such as South Korea, Taiwan and some other Southeast Asian countries (such as Singapore, Thailand) have also begun to vigorously carry out Foreign investment, so countries such as Vietnam have received more foreign direct investment than Malaysia, Indonesia and other countries that have begun industrialization earlier. This makes Vietnam and other countries have a superior external environment and conditions and sufficient "" Starting capital", so the economic development speed of Vietnam and other countries surpassed these other Southeast Asian countries that started industrialization earlier. Although these countries started late in industrialization and marketization due to the impact of the war, they are still developing rapidly on the road of economic opening and industrialization and showing great development potential. At present, they also have a very important economic position in Southeast Asia. And huge regional
influence. .
(Wo Figure 1.2
rld bank, 2020) source available at:https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2005&locations=VN-BN-KH-ID -MY-TH-PH-MM-TL&name_desc=true&start=1961&view=chart
1.3. The threat of the Asian financial crisis
After experiencing the glory of the 1980s and 1990s, Southeast Asia ushered in the most serious economic crisis in the history of Southeast Asia in the late 1990s. On July 2, 1997, Thailand announced its abandonment of the 13-year fixed exchange rate system. As a result, the Thai baht depreciated sharply, which led to the rapid depreciation of currencies of other countries, which started a serious financial crisis.
The current financial crisis was characterized by the intertwining and concurrency of currency, banking, debt, and credit crises, and triggered political fluctuations and social unrest in certain countries. The Southeast Asian financial crisis interrupted the process of sustained and rapid economic growth in various countries, and there have been sharp economic fluctuations since then. In 1998, the economies of Southeast Asian countries generally fell into a severe recession. In 1999 and 2000, there was a rapid recovery and a strong rebound. By 2001, the economies of most countries fell sharply and even experienced negative growth. After 2002, Southeast Asian economies gradually showed a trend of recovery. Thailand and Indonesia paid off their loans from the International Monetary Fund ahead of schedule, and the economies of all countries basically emerged from the shadow of the financial crisis.
During this period, Southeast Asian countries actively implemented domestic economic restructuring and adjustment. After the outbreak of the financial crisis in 1997, countries were first forced to adopt economic austerity policies. From September 1998, they began to generally implement expansionary economic policies to promote domestic economic recovery; countries continued to implement technological upgrading of traditional industries and vigorously develop emerging industries. In order to accelerate the adjustment and upgrading of domestic industrial structure, governments of various countries have accelerated the reorganization of domestic financial institutions, implemented the merger of banking and financial institutions, and actively dealt with non-performing financial assets. Although the
financial crisis has caused great damage to Southeast Asia, and it took about ten years for the Southeast Asian economy to recover almost completely, the financial turmoil also improved the financial security capabilities of Southeast Asian countries and gave them a response. The experience of the financial crisis has made the development of Southeast Asian countries more stable and safer, thus increasing their attractiveness to foreign investment.
1.4. Conclusion
In short, in recent decades, Southeast Asia has now become a hot spot for world economic growth after experiencing national independence, economic opening and industrialization. At present, as a regional organization in Southeast Asia, the ten ASEAN countries have a territory of 4.436 million square kilometers, a population of 600 million, a gross domestic product of more than 2 trillion US dollars, and an import and export trade of approximately US$2.4 trillion, making it the third most populous country in the world. And the region (after China and India), the sixth largest economy in the world (after the EU, the United States, China, Japan, and Brazil), the third largest economy in developing countries (after China and Brazil) and Asia's third largest economy (after China and Japan), the world's fourth largest import and export trade region (after the United States, China and Germany), and one of the regions that absorb the most FDI among all developing countries.(Asian Regional Integration center, 2020)
1.5. FDI and economic development in some important places in Southeast Asia In the process of modern industrialization and economic construction in Southeast Asia, some countries and regions with particularly outstanding achievements have emerged. They currently have a pivotal position in Southeast Asia and are generally regarded as the region with the most potential for future development in Southeast Asia.
1.5.1. Vietnam
After experiencing a long war of independence and civil war, Vietnam, which has gained independence and unity, hopes to quickly restore the national economy and develop production, and has begun to actively attract foreign investment. On April 18,
1977, the Vietnamese government promulgated the first "Foreign Investment Regulations" to attract foreign investment in Vietnam and use of machinery and equipment, production of transportation vehicles and other capital, as well as to attract foreign investors to establish new enterprises or transform existing Vietnamese enterprises (PHUONG & TURKSEN, 2010). In December 1986, Vietnam formally proposed the “reform and open” policy, which truly opened the door to foreign investment. In November 2006, the WTO officially approved Vietnam's accession to the WTO, opening another new stage of Vietnam's investment promotion. Vietnam’s investment environment has many advantages, but disadvantages still exist. The advantages include superior geographical conditions and abundant natural resources, as well as the continuous expansion of economic open areas, low labor costs, low tariffs and huge development potential. But the shortcomings are also obvious.
Vietnam ’ s infrastructure is relatively weak, government corruption is relatively serious, and workers’ knowledge and technical quality need to be improved. In recent years, Vietnam has been continuously reforming to solve these shortcomings and problems, but it seems that the Vietnamese government still needs to make greater efforts.In recent years, Vietnam has further lowered the threshold for foreign investment, especially in the fields of high-tech technology and labor-intensive fields.
Vietnam has offered great preferential policies to foreign investors. Currently, the top ten countries investing in Vietnam are mainly East Asia and ASEAN countries and regions. What is worth mentioning here is the United States. After the Vietnam War, the United States imposed a trade embargo policy on Vietnam, blocking and suppressing Vietnam’s economic development. In recent years, the United States has returned to Vietnam, and its economic and trade exchanges with Vietnam have continued to expand. It has developed into one of the top ten countries for investment in Vietnam. However, along with Japan ’ s economic recovery and China ’ s technological development, the investment from East Asia gradually became more important.
1.5.2. Indonesia
Indonesia is one of the earliest Southeast Asian countries to gain independence, and
its industrialization development time is also earlier. It is also one of the founding members of the WTO. At the same time, as the largest country in Southeast Asia, Indonesia has always occupied an important role in Southeast Asian affairs. Although it suffered heavy losses during the Asian financial crisis in the late 1990s, Indonesia still plays an important role in Southeast Asia by virtue of its huge size advantage.Indonesia’s investment advantages have many similarities with Vietnam, but it is particularly important to mention its special geographical location. Due to its important position in the Strait of Malacca, investors here can enjoy the advantages of extremely convenient transportation, and The oversupply of its oil and gas resources makes the conditions for the development of many modern industries here very superior.At present, Indonesia is also increasing its efforts to attract foreign investment, and the number of foreign investment in Indonesia is currently the first in ASEAN. In particular, Japanese investment in Indonesia accounts for most of Indonesia's FDI. However, it is worth noting that due to the geographical conditions and mountainous terrain of its archipelago countries and the harsh natural conditions of volcanic earthquakes, Indonesia is particularly difficult to develop infrastructure construction, which is also a big obstacle for Indonesia to attract foreign investment.
And this obstacle is difficult to solve through human intervention.
1.5.3. Taiwan
Taiwan had been reduced to a colony of Japan before World War II and returned to China after the end of World War II. However, due to the Chinese civil war, Taiwan is currently in a state of "one country, two systems" with mainland China, and has greater autonomy in economic development. From the 1960s to the 1990s, Taiwan was known as one of "The Four Asian Dragons" because of its rapid development.
Later, although it was also affected by the Asian financial crisis, its damage to Taiwan was not very deep. In recent years, Taiwan is considered to have great development potential because of its excellent electronic processing industry.
Taiwan’s investment advantages are obvious. Its excellent infrastructure construction makes transportation more convenient, and due to its emphasis on education, Taiwan has a large number of high-quality labor, and Taiwan ’ s excellent geographical
location makes its trade position also very important. Advantages have enabled Taiwan to be favored by many large foreign capitals, and it has also led to a continuous increase in foreign investment in Taiwan. For Taiwan, its relationship with mainland China has always been a very important topic. When the relationship between mainland China and Taiwan is good, Taiwan ’ s attraction to foreign investment will increase; when the relationship deteriorates, Taiwan ’ s attraction to foreign investment will often decrease due to the risk of instability. In addition, the current increasingly serious population aging trend is also haunting Taiwan's development.
1.6. Conclusion
It can be seen from the situation of the above three countries that although the development potential of these three countries is high, there are still many problems.
Among them, for Vietnam, its relatively abundant labor force and relatively good topographical conditions have created very favorable conditions for foreign investment in setting up factories, etc. According to statistics, Vietnam's population aging rate in 2019 was only 7.6% (Focus Taiwan, 2019), compared with Taiwan (14.94%) (Xinhuanet, 2019) and Indonesia (6.05%) (statista, 2020), it is still at a low level, which means that the number of laborers in Vietnam is still considerable, followed by Vietnam’s The agricultural output value is also very abundant, and its agricultural export value has exceeded 30 billion U.S. dollars in the first three quarters of 2020 (Economic and Commercial Office of the Chinese Embassy in the Socialist Republic of Vietnam, 2020), which also laid a foundation for the development of Vietnam ’s industry. A very good foundation. However, due to the late opening and reform of Vietnam, and many remnants of the old system, many foreign investors are still skeptical of the Vietnamese market. In addition, the problem of corruption in the Vietnamese government is relatively serious, which makes foreign investors may face many administrative obstacles when entering the Vietnamese market. The same problem also occurs in Indonesia. Although Indonesia has joined the global market system early, its industrial development and attracting foreign countries The ability of high-quality investment is not strong. One of the
important reasons is that the efficiency of the Indonesian government has been relatively low and corruption is more serious. In addition, Indonesia's poor transportation infrastructure has always been criticized. This problem is particularly serious in Indonesia, which has rugged terrain. In contrast, Taiwan and Vietnam have relatively better infrastructure, especially Taiwan. Among these three countries, Taiwan still has the best comprehensive conditions for attracting foreign investment.
Compared to Vietnam and Indonesia, the only thing Taiwan needs to worry about is its aging problem. The serious aging problem will seriously affect Taiwan’s future development. In the future, the lack of its labor force may cause foreign investors to decrease their interest to this place. Vietnam and Indonesia, which have relatively younger populations, are less affected by population aging. In addition, these three countries also have a common issue that needs to be handled properly, that is, their relations with mainland China. At present, these three countries get a large amount of investment from mainland China, but their relationship with mainland China has not been stable. In particular, Vietnam and Taiwan have had many armed conflicts with mainland China in history. If they fail to properly handle their relationship with mainland China, they may have a relatively serious impact on their foreign investment attraction.
2. Electronic industry in southeast Asia
The electronics industry emerged in the 20th century and is today one of the largest global industries. Contemporary society uses a vast array of electronic devices built in automated or semi-automated factories operated by the industry. The electronics industry is composed of various sectors. The main driving force of the entire electronics industry is the semiconductor industry. As of 2018, the industry’s annual sales exceeded US$481 billion. The largest industry is e-commerce, which generated more than $29 trillion in revenue in 2017(Wikipedia, 2021).
2.1. The development of Electronic industry in southeast Asia
Since the end of the Second World War, the electronics industry has flourished, and a large number of electronic products have begun to circulate around the world. The supply chain of the electronics industry has also begun to flow into the global market in the form of division of labor. In the past few decades, the global electronic information industry has been migrating along the path of the United States → Japan
→ South Korea/Taiwan China → Mainland China → Southeast Asia/South Asia, and is currently migrating from mainland China. To Southeast Asia and South Asia.
Therefore, this is also the climax of the development of the electronics industry in Southeast Asia. Since the electronics industry is booming in the United States, Japan and other countries, the investment environment in Southeast Asian countries is better than that in Latin America and Africa. Therefore, they have undertaken more production links in the electronics manufacturing industry of developed countries, but the production process is still controlled by the United States and Japan. Corporate control in other countries. Compared with the United States, the Japanese electronics industry is more dependent on Southeast Asia, especially after the Plaza Agreement(Wikimedia Project Contributor, 2007) was signed in 1985, the appreciation of the yen increased the production costs of Japanese companies.
Therefore, Japanese companies have gradually moved their production plants to
countries with lower manufacturing costs, first in South Korea, Taiwan, Singapore, and then Malaysia, Thailand, Indonesia and the Philippines. Currently, Japan's electronics industry accounts for more than 60% of its overseas investment in Asia, of which Southeast Asia accounts for 24% (Liu, 2017). It is one of the most important parts of Japan's overseas investment in the electronics industry. Under this unique condition and opportunity, the electronics industry in Southeast Asian countries is developing very rapidly. At present, a large number of consumer electronics products in the world, such as televisions, radios, computers and mobile phones, are manufactured in ASEAN. Even more than 80% of the world's hard drives are manufactured in ASEAN. Under the special circumstances of Southeast Asian countries, due to the different levels of economic development of ASEAN countries, the development of the electronic information industry in various countries is not balanced. There are countries with relatively developed electronic information industries, such as Singapore, Malaysia, Thailand and the Philippines. There are also some countries where the development of electronic information industry is slow and there is almost no industrial competitiveness, such as Myanmar, Laos and other places. Singapore is one of the world's important electronics industry production centers. Almost all the world's famous electronics giants have their bases in Singapore. Malaysia’s electronics exports now account for about half of the country’s total exports. At the same time, Malaysia has grown into one of the major global manufacturing centers, with multiple electronic manufacturing service (EMS) companies. From the development of only four companies in 1970 to today, the electronics and electrical industry in Malaysia has grown to more than 1,695 companies with a total investment of approximately US$35.5 billion and more than 600,000 employees. At the same time, taking advantage of its close proximity to Singapore, Malaysia has gradually begun to invest more and more funds in research and development, and has explored the outsourcing of non-core businesses in China as part of its efforts to enhance the value chain. In Thailand, the electronic component industry is the largest export industry. Thailand is one of the largest electronics assembly bases in Southeast Asia, with more than 2,300 companies and 400,000
employees. As a global leader in the production of hard disks, integrated circuits and semiconductors, Thailand has a very important position in the current international electronic product market. The top manufacturers that have invested in Thailand include European companies such as Philips, Electrolux, and Schneider; and American companies such as Western Digital, Seagate, Honeywell and Carrier. Other major companies are Japanese brands Sony, Nikon, Pioneer, Panasonic, Sharp, Hitachi, Mitsubishi and Toshiba. South Korean companies LG and Samsung and Taiwan’s Acer. Currently, the Philippines is the largest semiconductor and microprocessor assembly plant in ASEAN. The electronics industry has become the Philippines' most important export industry. Many multinational companies also have bases in the Philippines. Including seven of the world’s top twenty chip manufacturers: Texas Instruments (TI), Philips, Fairchild, Analog, Sanyo, On Semi ) And Rohm. And the four largest hard drive manufacturers: Hitachi, Toshiba, Fujitsu and NEC. The main products of the Philippines are hard drives and semiconductors.
It provides 2.5 million hard drives to the world every month and accounts for 10% of the global semiconductor manufacturing service supply (Shenzhen Institute of Standards and Technology, 2018) (Invest in ASEAN, 2018). The common market has also increased the production capacity of integrated production lines in the region, and can often cause some chain reactions. For example, when Malaysia begins to gradually invest more and more funds in research and development, it will cause its original labor-intensive industries to turn to Indonesia, Thailand, Vietnam and other places, and when the electronics industries in Indonesia and other countries begin to gradually move upstream in the industrial chain, underdeveloped countries such as Myanmar and Laos are expected to use their low staff costs to compete in labor-intensive industries. Ultimately, with the continuous maturity and development of the integrated industrial chain, the electronics industry in the entire ASEAN region will be relatively greatly improved, and the competitiveness of each of its member states in the international electronic product market will continue to increase.
After entering the 21st century, with the continuous improvement and development of the international electronics market, the electronics industry has gradually become the
main force in the rapid development of the ASEAN economy, and the upward trend is very hot. In 2010, ASEAN’s total exports of electronic products exceeded US$195 billion, accounting for 18% of the region ’ s total exports. Last year, the export of electrical and electronic (E&E) products from East Asia Pacific (EAP) countries (Among EAP countries, developing countries account for 31%) of total exports) increased by 9.2%, higher than 7.8% in 2012 and 8.7% in 2011(Briefing, 2014).
ASEAN takes advantage of its advantageous geographical location and gives full play to its close proximity to important East Asian economies (China, South Korea, Japan, etc.) and Oceania's important economies (Australia, New Zealand, etc.), making the development of its electronics industry very smooth. Traditionally, the low-end parts produced by the four ASEAN countries (Indonesia, Thailand, Malaysia, and the Philippines) will be directly shipped to China for assembly and production (because traditionally China has a large and cheap labor force), and finally in Japan and New Zealand. With funding from EAP high-income countries, the final product will be shipped to the rest of the world. However, China's recent rise in the value chain of export markets from large-scale manufacturing to high-tech products and rising labor costs have caused a large amount of foreign direct investment to be transferred to the Mekong countries of ASEAN (Myanmar, Thailand, Cambodia, Vietnam).
Figure 2.1
(Briefing, 2014)source availiable at:https://www.aseanbriefing.com/news/key-industries-investment-asean/
Vietnam in particular has become an important exporter of electronic products. As
Figure 2.2
shown in the picture, its electronic and electrical products have surpassed coffee, textiles and rice, becoming the country ’ s largest export commodities in 2012 and occupying the computer and telecommunications equipment market. 6% of the share (this value was previously 0). The country has recently attracted substantial investment from multinational giants such as Samsung and Mitsubishi. Analysts predict that once Thailand moves up the value chain, Vietnam will replace Thailand.
As for Thailand, its electronics industry has always had a very important position in ASEAN. It can be seen that its FDI related to electronic products has more than tripled in 2010. Therefore, Thailand’s current main goal should be to gradually start to develop upstream of the industrial chain in order to improve the quality of its products. In addition, as the only developed country and de facto business center in ASEAN, its well-educated workforce, reliable business environment and transparent legal and taxation system ensure that Singapore remains a popular destination for global electronics companies. Many electronics companies set up R&D departments in Singapore, and take advantage of Singapore as a commercial center to assemble and produce in other ASEAN countries. In the future, Singapore will continue to leverage its advantages in developed countries and commercial centers, continue to strengthen its research and development capabilities, and expand its advantages in the
electronic product
market.
(Briefing, 2015)source available
at:https://www.aseanbriefing.com/news/sparking-excitement-investment-opportunities-in-aseans-elect ronics-industry/
Until 2014, the production of capital-intensive electronic products accounted for the majority of ASEAN exports (Briefing, 2015). The key industries of electronic products, such as integrated circuits and micro-components, have achieved strong growth and will continue to develop in the next few years. In addition, as can be seen from the above figure, production lines with medium capital requirements are being repositioned. In addition, in the face of more competitive alternatives, such as TV cameras and radio receiver components, the growth rate of traditionally dominant production lines is slowing. Although products in labor-intensive areas of electronics production account for a small share of ASEAN exports, their growth rates have continued to explode in recent years, and they have provided new investment opportunities in several key markets. In addition, in the field of product consumption, exports are still the main destination for electronic products produced in ASEAN countries. Although the growing consumer base and integrated value chains of ASEAN countries provide many future sources of demand, most consumers of electronic products are now located outside of Southeast Asia. As of 2014, China had the largest share of electronic product imports, purchasing 17% of ASEAN electronic products. The Asian Development Bank said that China plays a vital role in the ASEAN electronics industry, not a competitor, but a market. China is an assembly base that imports some parts and components from several Asian countries (for example, ASEAN member states), and then exports them to markets outside the region after assembly and production. Moreover, according to research by Credit Suisse, as a downstream producer of Japan, ASEAN economies may benefit from Japan's deflation due to cheap imports of intermediate products (Invest in ASEAN, 2018). It seems that ASEAN’s integrated production network has promoted the improvement of trade with larger Asian economies such as China and Japan, and has further benefited ASEAN’s electronics industry. Although the decline in imports from Asia’s largest economies that should be closely watched in recent years, consumption growth from Western markets in recent years has been sufficient to
provide net demand growth. Major import markets (such as the United States and Germany) have become increasingly important, with imports increasing by 5% and 6% respectively in 2014 (Briefing, 2015). However, the good news for ASEAN is that the global demand for electronic products provides investors with multiple export destinations and enables investments to be tailored to individual investors’ existing risks. This will enable ASEAN countries to have many very stable export customers, and will help ASEAN countries to further integrate their industrial chains to further improve production efficiency. Moreover, under the different conditions of industrial development in Southeast Asian countries, the division of labor in the industrial chain of different types, levels and sectors will be clearer. For example, in Southeast Asia, the industrial structure of Singapore (upstream capital-intensive industrial chain)→Malaysia, Thailand, Philippines, Indonesia and Vietnam (downstream labor-intensive industrial chain) has basically taken shape. Driven by Singapore’s strong R&D capabilities in electronic products, Singapore continues to attract more and more multinational companies to set up R&D and design institutions and cross-border trade financial services here to give full play to its capital and technological advantages. Then these multinational companies invested in large factories in Indonesia, Vietnam and other Southeast Asian countries, and set up low-end assembly line production departments in these countries in order to take advantage of the large amount of cheap labor in these countries. A clear division of labor will further deepen and strengthen the production cooperation relationship between Southeast Asian countries, which is conducive to the common development of Southeast Asian countries' electronic industries.
In addition, although most Southeast Asian countries (such as Indonesia, Vietnam, etc.) are still located in the middle and lower reaches of the electronic industry chain, in recent years, the traditional electronic information industry in these Southeast Asian countries is moving towards emerging mobility, cloud services, big data and social commerce. Especially in terms of social commerce, the electronics manufacturing industry in Southeast Asia is developing at an alarming rate with the help of these auxiliary industries. With the help of emerging industries such as social
commerce, cloud services, and big data, the traditional electronics manufacturing industry can save a lot of costs in production, logistics, sales, management, etc., and improve work efficiency. At the same time, the development of cloud services and the big data industry has also increased the demand for general broadband infrastructure and electronic communication equipment, thereby stimulating the progress and development of the electronic manufacturing industry in these new areas.
According to statistics from the Global Association for Mobile Communications, from 2020 to 2025, the equipment investment of communications companies in ten Southeast Asian countries will reach US$66 billion. Moreover, analysts from the British Omdia Company pointed out that the Southeast Asian market has great potential for growth, and Southeast Asia may become some Companies in East Asia (such as China’s Huawei) are the main areas where they expand their business. For example, in Indonesia recently, China's Huawei Technologies and the Indonesian government reached an agreement on cooperation in high-speed communications and standard 5G related fields. According to the memorandum signed between Huawei and Indonesia, Huawei will assist in the cultivation of 100,000 digital talents such as cloud technology and 5G technology, and Huawei will also conduct technical cooperation with Indonesia Satellite Communications-Qatar Telecom Corporation on the construction of 5G infrastructure in the Jakarta capital area. In addition, in Thailand, since September 2018, Huawei has been making strategic investments in
"Huawei Cloud" in Thailand and has become a major supplier of cloud technology in Thailand. Huawei will launch its third local data center in Thailand in 2021 with an investment of more than 700 million baht (Sina finance, 2020).
2.2. FDI in electronic industry in three particular countries
In the history of the electronics industry in Southeast Asia, there are also some countries that have made very outstanding achievements and demonstrated strong potential. They are now showing an increasingly important position in the world's electronic product market, and they continue to attract more and more foreign investors to invest here.
2.2.1. Vietnam
Since the Sixth National Congress of the Communist Party of Vietnam launched reform and opening up in 1986, Vietnam has been vigorously attracting foreign investment in its electronics industry. The development of Vietnam's electronics manufacturing industry is catching up with the third wave of industrial migration:
labor-intensive manufacturing is accelerating to transfer to South and Southeast Asian countries. Vietnam seized this opportunity to use preferential foreign investment policies and cheap labor to attract a large number of world leading electronics companies such as Samsung, Intel, LG, and Panasonic.
Figure 2.3
(The Center for Development and Integration,
2019)source available at:
https://electronicswatch.org/regional-risk-assessment-electronics-industry-vietnam-august-2019_2564 000.pdf
Driven by a large amount of foreign investment, Vietnam's electronics industry has also been developing rapidly. At present, the Vietnamese electronics industry has become one of the important industries in the Vietnamese economy. Vietnam has become one of the world's 12 countries with first-class electronics manufacturing plants, ranking third in the ASEAN region. In 2017, the total exports of the electronics industry reached US$71 billion, and the electronics industry is now Vietnam’s main export industry. Most of Vietnam’s export growth is the result of foreign direct investment inflows from various electronics companies such as Samsung, LG, Canon, and Nokia that have built assembly lines for their products.
According to news, Intel’s IC packaging and testing has been stationed in Vietnam,
and recently announced that it will add a new factory in Vietnam, mainly used to package Intel's tenth-generation Core CPU, alleviating the problem of CPU shortage.
Key component companies in the mobile phone supply chain in China, such as Luxshare Precision, Goertek, Lens Technology, etc., have acquired or built factories, and have successively entered Vietnam (Sophie, 2020). Attracted by tax incentives and some of the largest export processing zones in ASEAN, these foreign companies have become the cornerstone of Vietnam's electronic product exports (Briefing, 2015).
From 2012 to 2017, the number of electronic manufacturing companies in Vietnam has doubled. In 2015, the number of electronic manufacturing companies in Vietnam has reached 1,237. At the same time, the number of workers in this industry has tripled, from 238,800 in 2011 to 2017. 611,429 people in the year (Vietnam News Agency, 2018). At present, the world's major electronics production groups have continued to expand their production scale in Vietnam, and Vietnam is gradually becoming one of the global electronics production centers. As of July 2014, foreign companies directly accounted for more than 80% of Vietnam's domestic market share and more than 90% of Vietnam's electronics industry exports. The world's leading electronics companies such as Samsung, Intel, LG, Panasonic, Microsoft and Jabil have all invested in Vietnam to set up factories. Among them, Samsung Group's investment in Vietnam is particularly strong. As of 2014, the production sector invested by Samsung alone accounted for about 20% of Vietnam’s total exports. As of March 2016, Samsung Group has invested 14 billion U.S. dollars in Vietnam. By 2018, Samsung ’ s total investment in Vietnam was US$17.3 billion. Samsung currently has four production subsidiaries across Vietnam (Samsung Bac Ninh (SEV), Samsung Thai Nguyen (SEVT), Samsung Display Vietnam (SDV), and Samsung Electronics HCMC CE Complex (SEHC)), with more than 100,000 employees, and the total sales of the four companies are approximately US$64.5 billion, which is equivalent to 24.5% of Vietnam’s GDP. Samsung subsequently announced that it is expected to hire 3,000 local engineers at the R&D center opened in Vietnam in 2022.
On March 3, Samsung Electronics has officially announced that it will build a research and development center in Vietnam that belongs to Southeast Asia, with a
total investment of up to 220 million U.S. dollars (Sophie, 2020). Samsung is now the largest company in Vietnam (MacroMicro, 2020). At the same time, clusters are formed in Vietnam's electronics manufacturing industrial parks to increase economies of scale in the use of public facilities and material supply. For example, Canon, Panasonic and Samsung have formed an industrial cluster specializing in electronic products, which has attracted many parts suppliers from Japan, South Korea and Taiwan to invest in northern Vietnam. In addition, some emerging electronic technology companies have gradually begun to show a relatively strong interest in Vietnam. For example, manufacturers from China such as TCL, Huawei, and ZTE have set up factories in Vietnam, established sales networks, and participated in project contracting. They are now well-known in Vietnam and are also one of the main bases for ASEAN (Song, 2017). However, although Vietnam ’ s electronics industry currently attracts a large amount of foreign investment, most of the foreign investment is concentrated in the lower reaches of the value-added industrial chain, making it difficult to achieve a qualitative breakthrough in the development of Vietnam’s electronics industry. Most foreign investors do not want to invest in some high value-added industrial chain. There are probably three reasons why they are unwilling to invest in a high-value-added industrial chain in Vietnam. The first is a relative lack of high-tech talents with high knowledge and technology in Vietnam, which makes these large-scale electronics companies not invest in these high-value-added industries. For a high-value-added industrial chain, it will be more difficult to recruit enough high-tech employees; the second is that Vietnam’s current foreign investment is mostly motivated by the Vietnamese government’s policies, and large electronics companies worry that investors may move away when the investment incentive period ends. But the transfer of high value-added industrial chains will add a lot of additional costs; the third is due to the inadequate incentive policies in Vietnam, and the theft of intellectual property rights occurs from time to time. Therefore, foreign investment in high value-added industrial chains is riskier.
Some technical secrets are easily stolen. Based on the above three reasons, if Vietnam wants to improve further the quality of attracting foreign investment, it needs to make
more efforts in scientific research and education, policy stability and legal improvement.
2.2.2. Indonesia
Since the establishment of ASEAN in the last century, Indonesia has been vigorously attracting foreign investment in its own electronics industry. Due to its earlier opening of the domestic market and attracting foreign investment, its electronics industry has a long history of development. However, due to its natural resources like crude oil and coal are wealthy, so the electronics industry is not a very important part of Indonesia’s national industrial system for a long time. Especially in the 1990s, due to the huge impact of the Asian financial crisis, Indonesia’s national industrial system was also hit hard, but fortunately, like Vietnam, Indonesia also caught up with the third wave of industrial migration and the great development of the electronics industry and began to use preferential national policies, a large amount of cheap labor, and a relatively large domestic market to vigorously attract Foreign investment in the domestic electronics industry. Slightly different from Vietnam, a large part of Indonesia's electronics industry is not an export-oriented industry but focuses on developing the domestic electronics market. In the past ten years, as international electronic product manufacturers have used Indonesia’s consumer market as an entry point into the ASEAN region, as the main manufacturing base of these international electronic product manufacturers and the country with the largest consumer population in ASEAN, Indonesia It also gradually rises with this trend. With the increase in per capita purchasing power and consumer taste, Indonesia's domestic electronic information market has shown a trend of rapid growth. As an electronic product manufacturing base, Indonesia provides foreign investors with very attractive conditions, such as a huge consumer market and competitive labor costs. However, the proportion of electronic products in the national economy is still small. Despite the presence of multinational electronic product manufacturers, Indonesia's electronic products account for only 5% of total exports. However, although there are many obstacles that affect the development of the electronics industry, multinational companies have recently renewed their investment interest in this field, which shows
that Indonesia is still attractive as a long-term investment goal. According to data from the Indonesian Ministry of Industry, there are currently 250 electronics and component manufacturers nationwide. The high-end digital electronics field is dominated by international brands. These international brands usually establish joint ventures with local manufacturers, and these local manufacturers mainly import parts and components from abroad, assemble them in Indonesia, and then sell them to domestic and foreign markets. Through the establishment of a distribution network through a variety of retail networks, Sony, Panasonic Indonesia, Toshiba Consumer Products, LG Electronics and Samsung Indonesia, and many other internationally renowned brands have become well-known throughout Indonesia (Shenzhen Institute of Standards and Technology, 2018b). On December 5, 2019, Global Sources Indonesia Electronics Show opened at the Jakarta Convention Center, Indonesia.
Buyers from Indonesia can negotiate with more than 350 verified suppliers from Mainland China, Hong Kong, Taiwan, South Korea and other countries and regions. , Develop electronic product procurement channels and carry out further cooperation.
At the same time, the Indonesian government also plans to plan the Batam Special Economic Zone as a special zone for the development of the electronics industry, and some Taiwanese electronics manufacturers also have related investment plans. In recent years, foreign investment in Indonesia's electronics industry has continued to expand. In 2015, foreign companies invested more than US$2.5 billion in Indonesia's electronics industry, with an average annual growth rate of 43% since 2010. In 2016, Indonesia's electronics industry exported 5.86 billion U.S. dollars, accounting for 5.34% of total manufacturing exports (Financial Times & Financial Times, 2018).
Like Vietnam, Indonesia is currently in the downstream low-value-added industry chain position in the electronics industry chain. In addition to the relatively backward infrastructure and rugged terrain, the lack of high-quality technical personnel is also the reason that restricts Indonesia from attracting foreign high-value-added industrial chains. In addition to these, the corruption and inefficiency of the Indonesian government also hindered foreign investors. In addition, the protectionism of the Indonesian government is slightly serious, which makes many foreign investors often
Figure 2.4 restricted in the Indonesian market.
2.2.3. Taiwan
Since the 1960s, Taiwan has been paying great attention to the electronics industry and has achieved great results. This period was the initial stage of Taiwan’s electronics industry. A large number of American and Japanese investors opened factories in Taiwan to carry out some relatively low-end electronic parts processing industries in Taiwan. During this period, Taiwan became the processing plant of the United States, Japan and other countries’ electronic parts.
(Takatoshi, 1992)source available at:
https://www.nber.org/system/files/chapters/c8522/c8522.pdf
Until 1974, Pan Wenyuan, director of the Research Office of the Radio Corporation of America (RCA) in Taiwan, convened overseas scholars in the United States to form an electronic technology advisory committee, and chose RCA as a technology transfer partner, and decided to introduce the " Complementary Metal Oxide Semiconductor" (CMOS) technology of integrated circuits. At the same time, the Electronic Industry Research and Development Center (later expanded to become the Institute of Electronics Industry) was established in the Industrial Technology Research Institute as the executive unit for the development of the "Integrated Circuit Project" (Electronic Engineering World, 2018). At this time, Taiwan’s electronics industry has entered a stage of rapid development, and its domestic electronics industry chain has also begun to progress to a higher value-added industry chain
rapidly. Many of the world’s leading electronic technology companies in Taiwan (such as Foxconn, TSMC, Gigabyte Technology, Acer) Etc.) were established in this period. Later, as the strength of Taiwan's electronics industry continued to increase, more and more foreign investors (especially Japan) became interested in Taiwan's electronics industry. As of 2019, foreign direct investment in Taiwan’s electronics industry accounted for a quarter of Taiwan’s total foreign direct investment. Among them, Japan’s direct investment in Taiwan is relatively strong. In 2019, Japan’s electronic components in Taiwan The amount of direct investment in manufacturing exceeded NT$700 million (approximately US$25 million) (One Mizuho, 2021).
As the strength of Taiwan's electronics industry continues to increase, Taiwan has not only begun to receive direct investment from foreign countries, but also some electronic technology companies in Taiwan have also begun to vigorously invest in foreign countries vigorously. For example, the "Vietnam Economic Times" reported on November 26 that Foxconn plans to invest approximately US$270 million in Vietnam to expand production in Vietnam (Economic and Commercial Office of the Chinese Embassy in the Socialist Republic of Vietnam, 2020). At the beginning of this year, Foxconn stated that it would invest another 700 million U.S. dollars in Vietnam and set a revenue target of 10 billion U.S. dollars in Vietnam this year (VIR, 2021). Besides, TSMC recently announced that it would invest 3.5 billion U.S.
dollars in Arizona to set up a 5-nanometer chip factory. TSMC has also recently recruited various electronic engineers to prepare for investment and construction of the factory. This is also Taiwan's single largest foreign investment in the past 8 years (uschinapress, 2020). Taiwan's electronics industry has gradually matured and has firmly grasped the higher value-added parts of the electronics industry chain. These are very beneficial to the development of Taiwan's electronics industry. However, there are still some problems and hidden dangers in the development of Taiwan's electronics industry. First of all, Taiwan’s electronic products are characterized by an export-oriented economy, so they rely on the global economy and are particularly vulnerable to influence from major trading partners, China and the United States.
Moreover, the relationship between Taiwan and mainland China has been vacillating,
which has virtually added many potential risks to the development of Taiwan's electronics industry. Moreover, because many Taiwanese electronic technology companies have invested heavily in overseas foundries, there is a danger of
"hollowing out" Taiwan's internal elementary electronics industry. Finally, Taiwan’s increasingly serious population ageing problem has also slowed down the development of Taiwan’s electronics industry. At present, the Taiwan government is also using many preferential policies to attract more high-value-added foreign investment and encourage some electronic industry chains to return to the local area, and other policies to encourage childbirth are also being introduced one after another.
However, although the Taiwanese government is currently actively responding to the problems encountered by Taiwan's electronics industry, whether these policies are effective requires people to continue to observe.
2.3. Analysis and comparison of FDI in electronic industry in three countries In general, although the development status of the electronics industry in these three countries is not the same, they are generally relatively good at present. In comparison, since Vietnam has only gradually introduced foreign investment since 1986, its electronics industry has developed relatively late compared to Indonesia and Taiwan.
Therefore, it is relatively late in some aspects (such as market rules, property rights protection, and industrial workers’ human rights, etc.). There are many shortcomings, but in recent years, the Vietnamese government has vigorously promoted many preferential policies to attract foreign investment, especially for the electronics industry. In addition, Vietnam’s relatively stable society, relatively young population, and relatively cheap wages and other development niches, the current more More and more major electronics industry companies (such as Samsung, LG, Panasonic, etc.) have invested in Vietnam to set up factories, and Vietnam's electronics industry is also developing rapidly. From 2010 to 2017, the pre-tax profit of Vietnam's computer and electro-optical companies increased by an average compound annual growth rate of 74.5%, accounting for 38% of the total pre-tax profit of Vietnam's manufacturing industry, becoming the main source of profit contribution to the Vietnamese manufacturing industry(CICC, 2020). Among them, foreign direct investment
(especially South Korea) is the main reason for growth. In contrast, foreign investment in the electronics industry in Indonesia and Taiwan does not seem to be that great. As mentioned in the previous data, even though multinational electronics manufacturers have invested in Indonesia, in 2016, Indonesia's electronics industry exported 5.86 billion U.S. dollars, accounting for only 5.34% of total manufacturing exports. In Taiwan, although Taiwan's foreign direct investment in Taiwan's electronics industry has been increasing since the 1960s, the proportion of foreign direct investment in Taiwan's electronics industry in the total foreign investment in Taiwan has been shrinking. In addition, in foreign-invested electronics factories, Vietnamese workers seem to be more popular than Indonesian workers. Because a large number of Vietnamese are willing to engage in the production of electronic products, and the Vietnamese government also welcomes foreign investors to invest in Vietnam's electronics industry, although the total population of Vietnam is much smaller than that of Indonesia, Vietnam has now become the world's second largest smartphone Exporting country (far more than Indonesia) (Schaag, 2020). There are three main reasons why foreign countries lack enthusiasm for investment in Indonesia's electronics industry: The first point is the low efficiency of the Indonesian government. Although Indonesia gained independence very early and began to attract foreign investment, its government efficiency has always been low, and because Indonesia ’ s democratic political system lacks sufficient supervision departments to supervise the government, the corruption problem in the Indonesian government has always been serious. This further reduces the efficiency of the government. This problem has caused many foreign investors to waste a lot of unnecessary time in the investment process. The second point is poor infrastructure. Due to the inefficiency of the Indonesian government and the weak ability of Indonesian national enterprises, Indonesia’s infrastructure construction has always been poor, and Indonesia’s terrain is mountainous, which makes foreign investors need to spend more transportation cost when investing in building factories and transporting goods. The third point is that the Indonesian government does not pay enough attention to the electronics industry and foreign investors. Since Indonesia is a country rich in natural resources,
the Indonesian government has devoted much of its energy to other industries (such as oil and coal), and its emphasis on the electronics industry is far less than that of Vietnam and Taiwan. And as mentioned above, the Indonesian government ’ s protectionism is a bit serious, and many foreign companies have been unfairly treated in the Indonesian market. These three reasons are the main reasons why many foreign investors are unwilling to invest heavily in Indonesia to build factories and hire workers. As for Taiwan, since Taiwan ’ s electronics industry has begun to develop rapidly and with high quality since the 1970s, its electronics industry has gradually moved to the high value-added industry chain, and a large number of high-tech companies have emerged. Therefore, Taiwan’s domestic electronics industry is now mainly It is dominated by high-tech R&D departments. With the improvement of electronic technology, labor prices in Taiwan are also rising, so these high-tech companies are also constantly relocating many low-end assemblies and processing industrial chains to other countries. And because Taiwan’s electronic industry chain has high added value, it is also the main competitor of electronic giants in some other countries in the world (such as Samsung, Panasonic, etc.). Therefore, many foreign electronic investors will not regard Taiwan’s electronic industry as a major target for investment. In addition, Taiwan ’ s labor prices are relatively high, and its ageing population is more serious, which has also caused many investors to lose their investment interest. However, because Taiwan is currently in the upper reaches of the electronic industry chain and has strong electronic technology capabilities, many investors are still willing to invest in Taiwan's electronic technology research and development department. In summary, although foreign direct investment in the electronics industry of these three countries is increasing, their growth rate and investment proportion are different. Among them, Vietnam has the fastest growth rate.
This is because Vietnam's cheap labor force, government's vigorously promoted preferential policies and relatively good infrastructure have attracted a large number of foreign investors, and foreign investment in Vietnam is still mostly low-end industrial chains. This type of industrial chain is expanding quickly, but it will also quickly become saturated with the market. The slower growth rate in Indonesia is
mainly due to the lack of attention of the Indonesian government and the poor infrastructure construction in Indonesia. And because Taiwan’s domestic electronics industry chain is mostly high-end industry chains, most of which are high-tech R&D departments, which require a lot of funds and have a long payback period, the growth rate is not very fast. If forecasting based on current data, for Vietnam, the excessive and rapid foreign investment has kept Vietnam's electronics industry chain at the low end, which makes it more difficult for Vietnam's electronics industry to make a qualitative leap. However, if foreign direct investment in Vietnam's electronics industry continues to grow at the current growth rate, Vietnam is likely to become the largest medium and low-end electronic product parts foundry in Southeast Asia in the future. For Taiwan, if it can continue to make breakthroughs in the field of high-tech research and development, the added value of Taiwan's electronic industry chain will be upgraded to a new level in the future, and it has the hope of becoming a leader in high-tech electronics in Southeast Asia.
3. Problems and opportunities of FDI during development
Although the current foreign direct investment in Southeast Asia's electronics industry is generally relatively good. However, foreign investors still encounter some problems and threats in the process of investment. These problems and threats have hindered the development of Southeast Asia's electronics industry and foreign investors continue to expand investment in Southeast Asia to a certain extent. And there are some potential problems and risks in the future waiting for the development of the electronics industry in Southeast Asia. However, for Southeast Asia, whether these problems and risks are dangers or opportunities, it is still necessary for Southeast Asian countries to deal with and grasp them.
3.1. Opportunities or threats?
3.1.1. Covid-19
Since the large-scale spread of the covid-19 pandemic at the beginning of 2020, nearly 150 million people worldwide have been infected with covid-19, and the number of infected people is still increasing every day. The covid-19 pandemic not only threatens people's lives, health and safety but also has a huge impact on the daily production and life of the world. As a result, a large number of production activities cannot proceed smoothly. The same is true in Southeast Asia. As most Southeast Asian countries are developing countries with low medical conditions, low levels of social security, and large informal economic sectors, the initial impact of this epidemic was relatively large. Fortunately, the governments of most Southeast Asian countries responded on time to the epidemic. Since mid-to-late March 2020, Vietnam, the Philippines, Malaysia, Singapore and other countries have successively announced "city closures" ranging from half a month to a month. Under timely epidemic prevention measures, the epidemic in most Southeast Asian countries has been relatively effectively controlled, but the situation still cannot be overly optimistic. At present, more than half of the countries in Southeast Asia are at risk
