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Industry watch: The growing importance of electronics in car industry

Colley Hwang, DIGITIMES, Taipei 0

In the 19th century, energy brought about the transportation revolution. Coal and steam brought us power allowing trains to connect the transportation between urban and rural areas. One hundred years ago, the arrival of cars resulted in horse carriages disappearing on the streets of New York in just a few years. Ford's invention of assembly lines, coupled with the growing spread of telecommunication systems, have facilitated communication among people, thus changing life style and production structure of mankind. The tide of urbanization was overwhelming. Efficient management and capital financing were becoming important. In the first half of the 20th century, we were gradually progressing out of the agricultural society. After World War II, US president Eisenhower built a highway running through the American continent. The oil economy started to drive a drastic change in the industrial development.

The two oil shocks in the 1970s inspired our perception of the value demonstrated by gasoline during the times. Fossil fuels are not only the elements of transportation, but the most essential ingredient in the electric power structure. For efficient control, a centralized and streamlined production system seemed indispensable. Nevertheless, production and sales still need to reflect the value of the localities. The initial markets were concentrated in advanced regions like Europe, the US and Japan. In 1990, 40% of the global PC market was in the US, 30% in the 14 major West European countries, 10% in Japan, and 20% in all other regions including China. At this stage, American PC brands dominated the global market demand, which was fulfilled by the supply chain of rising Taiwanese firms. Since its inception, Taiwan's IT industry has established the most efficient industrial clusters around areas that could be reached within a one-hour drive in northern Taiwan. It has constructed an unparalleled management model of production efficiency.

After that, Taiwanese firms moved to the Pearl River Delta and the Yangtze River Delta in China and introduced the whole management knowledge to China. Thirty years later, the industrial opportunities were switched from PC to mobile communications. Chinese vendors capitalized on mobile phone business opportunities with its demographic dividends and constructed their own production system. Taiwanese firms played the role of a mentor facilitating the development of China's IT industry. Taiwanese firms still mattered but BYD, China's home-grown company, saw its annual revenues exceed US$10 billion. Even so, during this phase large US brand market leaders were the real winners. HP and Dell took a big portion of the profits from the computer market. Apple particularly was the biggest winner of the mobile phone market.

But after 2020, Internet of Things (IoT) and electric vehicles (EV) are sending shockwaves across the global market. The new forces in the car industry are expected to compete head to head with the traditional carmakers in Europe, the US and Japan. If we believe that EVs encompass business opportunities of traditional manufacturing and Internet services, the value of the local enterprises and demand in hardware and software integration can't be overlooked. We believe that Vietnam, India and Indonesia all aspire to develop EV industry. Thailand is keen on breaking bonds with the Japanese car makers to become "Detroit of Asia." The next-generation car industry will be a combination of the carmaking and electronics sectors.

There are plenty of unicorn enterprises in ASEAN and South Asia. Seeking to link with these Internet service companies is indispensable. 5G and EVs will generate decentralized production systems. In the new game under the US-China tensions, business opportunities and challenges as a result of the regional division of labor coexist. Taiwan won't be absent in the new game of unlimited business opportunities.

Credit: DIGITIMES

(Editor's note: This is part of a series of analysis of Taiwan's role in the global ICT industry.)

Colley Hwang, president of DIGITIMES Asia, is a tech industry analyst with more than three decades of experience under his belt. He has written several books about the trends and developments of the tech industry, including Asian Edge: On the Frontline of the ICT World published in 2019, and Disconnected ICT Supply Chain: New Power Plays Unfolding published in 2020.
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