Role of Science and Technology Institutions in Limited Catch-up

Abstract

Chapter 4 analyzes China’s semiconductor industry from the sectoral systems of innovation perspective. The industry remained limited in terms of catch-up in market shares and technology. The chapter explains the reasons for the limited catch-up in terms of the characteristics of the technology regime of the industry. In the semiconductor industry, innovations are frequent and technologies are highly cumulative, which places the latecomer in a disadvantageous position in terms of entry possibility. Furthermore, the market for standard integrated circuit chips is not segmented but highly integrated, which implies no low-end niche market for latecomers to enter first. Therefore, latecomer firms encounter difficulty in seizing a market opportunity through differentiated marketing. The situation worsens with the continued increase of the required investment and shortening of life cycles. Furthermore, the existing practice of Western countries restricting the transfer of core technologies to Communist countries, such as China, amplifies the difficulties faced by Chinese firms.