Supply chain
Asian Edge: Hard tech and soft power
Colley Hwang, DIGITIMES, Taipei

Nvidia CEO Jen-Hsun Huang has claimed that software is eating the world, but AI is going to eat software. The concept of machine learning has somehow infinitely expanded people's imagination about software. The biggest difference compared to hardware is that software offers high added value that incurs very low cost in making copies of the software. But each software developer needs to develop its own unique business model.

Hardware is a different story. The costs for copying hardware are very high, but its business models can be easily duplicated. Products with different specifications and prices can all find their own business opportunities. Since hardware manufacturing requires a lot of manpower, hardware's connection with the manual labor market remains very high though many of the production processes have already been automated.

At the end of 2018, Foxconn still had a total of over one million workers worldwide. For governments worldwide, how to create non-technical job openings for their citizens has always been one of their major challenges and is also the reason behind Taiwan manufacturers' strong popularity among governments around the world.

In addition to China, India and countries in ASEAN have also been keen on seeking foreign investments into their hardware manufacturing industry to create more jobs. The governments of Taiwan, South Korea and Japan have also been keen on preventing their existing manufacturing industries from moving out and affecting employment.

On the other hand, with the rapid advancement of semiconductor technologies, the need to allocate huge sums of capex has created high barriers for many firms in the semiconductor sector. This is clearly seen from Japan, Taiwan and South Korea semiconductor players' heavy spending in the equipment market. The semiconductor industry is capital intensive and carries very high technological barriers, which makes it prohibitive for many countries. We think hard tech may still become hot tech in the future.

(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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