in the late 1960s with a number of research advances by such major firms as RCA, Westinghouse, Exxon, Xerox, AT&T, and IBM.6 Of those firms, only IBM invested in high-volume manufacturing—through a joint venture with Toshiba in Japan.7 In contrast, all the major Japanese electronics firms invested in high-volume manufacturing. Manufacturers of TFT LCDs face primarily two strategic decisions: when to invest in the construction of a new fabrication facility and whether to move to the next generation of substrates. In 1996, greater than 95 percent of all TFT LCDs were produced in Japan. By 2005, fewer than 11 percent were made in Japan, and the top two production locations were Korea and Taiwan, each of which produced roughly 40 percent of total output. The main reasons for the shift in production location were the lower engineering and labor costs in Korea and Taiwan and the ability of first Korea and then Taiwan to raise the large amounts of capital needed for investing in state-of-the-art fabrication facilities. The window of opportunity for Korean entry occurred in 1991 when Japanese firms were unable to raise the capital needed for investing. Similarly, the window of opportunity for Taiwanese entry came during the Asia crisis of 1997-1998 when Korean firms experienced difficulties in financing new plants.8 (See Figure 7.1.)
Although the successful integration of each generation of production equipment depended on investment in high-volume production, new materials and equipment were not necessarily developed in the same countries that invested in manufacturing. Figure 7.1(b) shows the changing proportion of U.S. versus total U.S. Patent and Trademark Office (USPTO) patents in LCDs. Although it might be tempting to focus on the United States’ declining share of total worldwide LCD patents, it is important to note both that this represents only LCDs, not the next big thing in display technologies, and that even in LCDs the share of patents fails to show a full picture.9 Thus, in addition to IBM’s joint effort with Toshiba for TFT LCD manufacturing, a number of important U.S. firms participated in the industry—most notably, Corning (in substrate materials), Applied Materials (in chemical vapor deposition equipment), and Photon Dynamics (in test, inspection, and repair equipment). These firms remained key players in the market through their ability to acquire knowledge by working collaboratively with manufacturers outside the United States. At the global level, liquid-crystal materials were developed
6 National Research Council. 2008. Innovation in Global Industries.
7 National Research Council. 2008. Innovation in Global Industries.
8 National Research Council. 2008. Innovation in Global Industries.
9 The data described above are based on the U.S. versus other nations’ shares of patents in the USPTO database. Past research suggests that U.S. patents are a reasonable measure of unique inventive activity worldwide by internationally competitive companies. Notably, the patents described in this data are in no way weighted by their scientific or market value. Thus, there is no way to tell which patents described in Figure 7-1b may be highly incremental additions to existing knowledge rather than revolutionary.