Supply chain
Asian Edge: Who will lead in the worldwide ICT industry?
Colley Hwang, DIGITIMES, Taipei

The worldwide ICT industry is formed by supply chains that cooperate with each other. Prior to 2000, the ecosystem was structured simply in linear partnerships between upstream and downstream sectors with US-based first-tier vendors dictating the standards and specifications, and outsourcing manufacturing orders to their Taiwan- and Korea-based partners. At present, the ICT supply chain that has worked for 30 years continues to serve as the key foundation of the global ICT industry.

Of the worldwide top-10 ICT companies that Digitimes identifies, six of them are from the US, two from China, one from South Korea (Samsung Electronics) and one from Taiwan (TSMC). In the world of connectivity, Metcalfe's Law tells us that the more nodes a network has, the higher its value. China's demographic dividend and the US leadership both show us the applicability of Metcalfe's Law in the ICT world.

TSMC, which has a market value of US$177 billion, and Samsung, which has a value of US$223 billion, both have been deeply influenced by Moore's Law that many argue will become irrelevant. The two firms have often faced the question of whether they will also become irrelevant or continue to play leadership roles in the future. However, we can expect Samsung and TSMC to remain important and irreplaceable for the next 10 years. As for the others in the present top-10, with the fast and unpredictable changes in the era of the Internet, none of them can be certain to be staying at the forefront for long.

Meanwhile, the worldwide network market can be divided into two areas: one is China and the other is beyond China. China has been keen competitors in various sectors worldwide, investing in the telecommunication industries of its neighbors and in US electric vehicle firms, and many others.

However, China's local network, telecommunication and cloud computing services have all been strictly controlled by the government citing national security concerns. As a result, China is a closed market that has managed to create its home-grown networking giants such as Alibaba and Tencent.

But China's ICT industry is now facing all types of challenges in its attempt to reach the pinnacle. Not only does it need to catch up with the current step of the semiconductor industry, it also faces an onslaught by the US in the upcoming 5G era. None of the global top-15 semiconductor suppliers is from China, which imported a total of US$312 billion of semiconductors in 2018, and exported a much smaller amount that resulted in a trade deficit of US$227.4 billion in the year. The semiconductor sector remains the weakest link in the superpower's tech industry. And related upstream semiconductor equipment and design tools are also being controlled by US-based firms.

China is known as the world's factory, but its industry prowess is not as strong as imagined. Still far from the peak, China is at a critical point in the development of its ICT industry and its national strengths in general.

(Note: This is part of a series of articles by Digitimes president Colley Hwang on the latest developments of the IT industry in the wake of the US-China trade war.)

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