Annals of Business Administrative Science 6 (2007) 35–70
Available at www.gbrc.jp

Online ISSN 1347-4456 Print ISSN 1347-4464©2007 Global Business Research Center

An Investigation into Collaborative Novel
Technology Adoption in Vertical Disintegration:
Interfirm Development Processes for System
Integration in the Japanese, Taiwanese, and Chinese
Mobile Phone Handset Industries

Masanori YASUMOTO
Yokohama National University and the University of Tokyo
E-mail: yasumo@ynu.ac.jp

Jing Ming SHIU
Graduate School of Economics, the University of Tokyo
E-mail: kyokeimei@yahoo.co.jp

Abstract: The study attempts to elucidate how novel technologies are introduced into
products through interfirm collaboration under vertical disintegration drawing on thecases of the Japanese, Taiwanese, and Chinese mobile handset industries. The
global surge of vertical disintegration enhances the interfirm modularity ofdevelopment processes. Nevertheless, the adoption of a novel technology platform
requires collaborative development processes between a technology platform vendor
and a product developer. The level of collaborative processes is relevant to system
integration of nested modules, which is driven by the necessity of system knowledge,
rather than technology integration. These findings show that effective systemknowledge management through intefirm collaboration plays a critical role in theassimilation of novel technology platforms into products even in modularized interfirm
development processes. The collaborative process could even secure the systemic
evolution of technologies and products under vertical disintegration.
Keywords: novel technology adoption, vertical disintegration, modularizeddevelopment processes, technology platform, product design, system knowledge,
system integration
35

Yasumoto and Shiu

The industrial shift seems to blur the role of

1. Introduction

close coordination within and between firms, which

In the past decade, interfirm modularity and related

was once regarded as one of the most critical factors

open interfirm networks have drawn our attentionin effective product development (e.g., Japanese(e.g., Berger & MIT Industrial Performance Center,automobile firms; Clark & Fujimoto, 1991; Dyer &2005; Chesbrough, 2003; Chesbrough, Vanhaverbeke,

Nobeoka, 2000; Yasumoto & Fujimoto, 2005).

& West, 2006; Christensen, Verlinden, & Westerman,

Especially in the digital electronics industries, open

2002; Iansiti & Levien, 2004; Sturgeon, 2002).

interfirm networks based on product modularity

Product modularity, which is based on standardized

could upset existing knowledge that has been

product

enables

accumulated in close coordination within anddesignrules

andelements,

manufacturers

todecomposecomplexbetween firms, and thus threaten the competitivenessproblem-solving

into

a

localizedof incumbent firms (Berger & MIT Industrial

problem-solving steps (Baldwin & Clark, 2000;

Performance Center, 2005; Christensen, et al., 2002).

set

of

Langlois & Robertson, 1992).

Firms take advantage of external complementary

The shift to modular product architecture has

resources in open interfirm networks, so that theenhanced interfirm modularity. Every specialized

industrial

vendor covers a specific component/technology(Chesbrough, 2003; Chesbrough, et al., 2006).

development while manufacturers focus on productPlatform vendors which develop and provide

development

outsourcing

standardized

manufacturing. A variety of component/technology

knowledge

vendors and manufacturers have shaped the global,

arranging proper development environments foropen, interfirm development networks so that evensuppliers and manufacturers (Gawer & Cusumano,

emergent firms may rapidly provide products at a2002).

bysometimes

relatively low cost by adopting novel technologies

shiftenhances

technologies
lead open

open

with

interfirm

innovation

basic

systemnetworks

byAmong a variety of element technologies,

from specialized vendors.

technology platforms consisting of the chipset, basic

For instance, wireless handset manufacturers insoftware, reference design, and related technological

China have taken full advantage of the global

supports play a critical role in shaping open interfirm

interfirm network in which specialized vendors

networks (Gawer & Cusumano, 2002; Iansiti &providewireless

Levien, 2004; von Hippel, 2006). A technology

cores/platforms) to enable handset manufacturers toplatform is a set of core technologies, which defines

quickly release a variety of new models: almost 1,500

the interdependencies within and between different

models were reported to be on the market in 2006.

technologies and components.

elementtechnologies(e.g.,

36

Collaborative novel technology adoption in vertical disintegration

The platform provides the condition of productdevelopment firm can easily exploit them. The reality

modularity which secures architectural stability.

of vertical disintegration shows that processes from

Manufacturers may easily develop products by using

technology development to manufacturing are

the platform that provides standardized architecturalmodularized into quasi-independent processes so thatknowledge to define interdependencies between

different firms can specialize in each process

technologies/components and realize a set of basic(Jacobides & Billinger, 2006; Sturgeon, 2007).

product functions. When product architecture isstabilizedasmodular,open

Typically, vertical disintegration is characterizedtransactions

by

the

federationofmodularizedinterfirm

within/between firms can serve as a forum for productdevelopment and manufacturing processes such as

development (Cusumano, 2004; MacCormack &technology platform development, product design,

Verganti, 2003). The stability enables firms toand manufacturing, each of which is implemented byrefurbish modular products by realigning or replacing

independent

a part of element technologies without changing theknowledge could be provided by specialized vendors,architectural configurations of elements.

such as technology platform vendors, independent

Such technology platforms thereby shapedesignspecialized

houses(IDHs),

firms.

andEven

original

systemdesignecosystems that are available to any firm interested in

manufacturers (ODMs), in the modularized interfirm

thenetworks.

concerned

products(Chesbrough,2003;

Chesbrough, et al., 2006; Iansiti & Levien, 2004: vonHowever,theinterfirm

modularityofHippel, 2006). Firms enrolled in the ecosystem aredevelopment processes is not necessarily secured as

not assumed to span both the task and knowledge

presumed. A study of automobile development

boundaries

thoughreveals that existing knowledge boundaries between

technology/product development capabilities havefirms are blurred due to the necessity of bothbeen thought to rely on the ability to span thecomponent and system knowledge when new

boundaries of firms (Henderson & Cockburn, 1994).

technologies

Rather, firms can do nothing but provide and/or take(Takeishi, 2002). The problem can also occur in theadvantage of standardized components/modules

industries of vertical disintegration (e.g., digital

based on the platform.

product industries) in spite of the differences in the

between

them,

even

The traditional idea of such interfirm modularity

levelsofareintroduced

product

intomodularity

automobiles

andverticalrelies on the presumption that the processes of

disintegration from the automobile industry (Takeishi

technology development and product development& Fujimoto, 2003).

are mutually independent as technologies are

Particularly, at the beginning of the adoption of astandardized to the extent that any productset of novel core technologies, typically a technology
37

Yasumoto and Shiu

platform, the platform is not sufficiently stabilized asprocesses. The study hopes to contribute toa part of a product system. The technology platform

elucidating how and why collaborative novel

development as well as product development would

technology adoption is enhanced in modularized

require at least system knowledge in order todevelopment processes under vertical disintegration.

reconcile the novel core technologies with productIn section 2, we review past research in order tosystem design(s), even though the technology

propose our perspective. In section 3, we attempt toplatform’s

andtechnologies’describe successful collaborative interfirm processes

componentknowledge

enclosedinfor novel technology adoption to product systems

specialized vendors in the modularized technology

drawing on three cases in the Japanese, Taiwanese,development processes. The fluctuating knowledge

and Chinese mobile handset industries. In section 4,

boundary would make it difficult to develop a novel

we discuss the findings and their implications fortechnology platform into a distinctive product designnovel

withoutthedevelopment process modularity. Finally, in section 5,

concerned technology platform vendor and productwe summarize our findings and implications anddeveloper(s).

point to future research issues.

relatedinterfirm

elementareeachcollaborations

betweentechnology

adoption

underinterfirm

Previous studies focused mainly on the role ofexisting platforms in business ecosystem formation

2. Research perspective

and open innovation by presuming modularizedinterfirm

core

Modular architecture products are characterized bytechnologies. However, we still do not have sufficient

lower interdependencies of functions and components,

knowledge of how the adoption of novel technology

so that product developers can easily divide theplatforms, a set of core technologies, is enhanced

development activities into relatively independent

underelements (Baldwin & Clark, 2000; Langlois &theprocesses

basedmodularizedonstabilizedinterfirm

development

processes.

Robetson, 1992). Standardized knowledge of productWe attempt to explore how specialized firms

technologies,

which

is

independentofparticipating in modularized interfirm development

firm/product-specific contexts, enhances productprocesses collaborate with each other when themodularity, and eventually, the open interfirm

technologies become unstable. More specifically, thisdivision of labor.

study will examine how technology platform vendors

Nevertheless, product modularity does not

and product development firms develop newnecessarily provide definite architectural systemtechnology platforms into product systems throughconfigurations sufficient for modular product designs,

collaboration in modularized interfirm development

and thus product modularity per se would not ensure38Collaborative novel technology adoption in vertical disintegration

the openness of interfirm component sourcing

configurations are provided.

networks: interfirm modularity. A modular system

The reality of interfirm modularity shows that

often does not contain complete knowledge of thecompetitive

component configuration of a product system.

requires system knowledge to properly arrange

Even a digital product composed of mutuallytechnology/productdevelopment

various elements in consistent systems. Even though

independent modules is not regarded as a complete

processes

modular system, and thus product development is not

manufacturing are modularized by specialized firms,

necessarilyofeach of manufacturers and vendors needs tostandardized components/modules (Staudenmayer,

assimilate various technologies into their products

Tripas,&attributed

Tucci,

tothetechnology

development

to

Firms

often

face

with paying attention to the uneven changes ofasstandardized

various components and the interdependencies

component/module supplies do not automaticallybetween them (Brusoni & Prencipe, 2001; Brusoni,

secure system consistency of the product concerned.

Prencipe, & Pavitt, 2001). Firms without essential

At the same time, incomplete modularity

system knowledge cannot shape, even exploit,

system-related2005).

combination

fromproblems

provides firms with room to develop proprietary

standardized component/module supply chains.

technology platforms and product designs. The
availabilityofstandardized

technologies

The criticality of system knowledge in productalso

development

indicates

encourages firms to develop proprietary distinctive

technologies,

technology

systems. Standardized technologies which can be

automatically secure sufficient system knowledge totransferred and/or shared between firms do not ensure

realize product modularity and related interfirm

the firms’ competitiveness (Pil & Cohen, 2006).

relationships. Rather we may predict that specialized

As is reported in many of the cases from thethatstandardized

platforms,

do

core
not

vendors and firms under vertical disintegration

Chinese industries, the availability of standardized

collectively

technologies in open product development networks

modularized interfirm development processes.

is liable to cause harsh competition between firms

carryTechnology

systemknowledge

development

andthroughproductthat adopt the same/similar components/modules anddevelopment are conducted separately by different

core product technology bases (i.e., technology

firms in modularized development processes inplatforms). Thus, firms are encouraged to shapevertical disintegration. Core technology development

proprietary designs (e.g., proprietary softwarefrom technology planning to platform development is

platforms,&

covered by specialized vendors while products are

Verganti, 2003), even though standardized core

designed by product developers such as brandtechnologies

manufacturers, ODMs, and IDHs. In modularized

Cusumano,

and

2004;

MacCormack

modulararchitectural
39

Yasumoto and Shiu

Figure 1. System integration in modularization of interfirm development processes
IP/Element
Technology
Development

Technology
Platform
Development

Product/ProductPlatform
Development

SystemIntegration

SystemIntegration

Components

IPs/Element
Technologies

interfirm processes, each of these vendors and firms

platform vendors, attempt to encapsulate a variety ofplays a different role.

element technologies into their technology platforms.

Upstream vendors and downstream firms eachTechnology platform vendors, who attempt toattempt to integrate diverse knowledge acrossexamine and secure both platform stability andcomponents or technological disciplines at theirconsistency with product systems, monitor andfocused levels. These vendors and firms implement

integrate element technology knowledge (e.g.,“system integration” assimilating various elements

intellectual property: IP) in order to devise prominent

into consistent systems at each stage from technology

platforms (Iansiti & Levien, 2004).

development to product development in modularized

Product development processes are in generalinterfirm development processes (Figure 1). Systemcharacterized

integration at each stage yields standardized systemproblem-solving (Clark & Fujimoto, 1991; Iansiti,

knowledge available at downstream stages. Such

1997; Takeishi, 2002). In the context of a series ofefforts in each vendors and firms together enablesystemic problem-solving, firms at least need to haveprocess modularity of value chains (Sturgeon, 2007),

system integration capabilities to implement thewhich is called modular “vertical architecture”

evaluation,(Jacobides & Billinger, 2006).

components/technologies and product designs.

Product developers build information channels

by

test,

interlinked

andsystemic

selectionofThe scope of system integration may expand

to monitor components and technological changes

eventhat could influence their product systems, so thatmodularized interfirm processes. Drastic changes inthey can shape consistent and distinguished productcore technologies, such as technology platforms, candesigns by integrating a variety of product elements

have a more radical impact on coordination within

into consistent product systems. On the other hand,and between firms. The adoption of novel core

core technology vendors, such as technology

technologies, technology platform, may lead to40

beyondinterfirmboundaries

betweenCollaborative novel technology adoption in vertical disintegrationinterdependent changes of functions and components

technological changes occur (Takeishi, 2002).

to the extent that the existing decomposability

Systemic problems are hardly examined before

between system designs and elements is upset. Suchtechnologies are applied to real product. Dim

technological changes may not any longer secureknowledge boundaries within and between upstream

interfirm product modularity as the knowledge onvendors and downstream firms call for intra/interfirm

modular architectural configurations turns unstable.

coordination (Brusoni, et al., 2001; Prencipe, 2003;

Moreover,thedegreeofTakeishi, 2002). Such knowledge overlapping

product-level functions and technologies into a

accordingly calls for overlapping problem-solving

technology platform may also have a drastic impact

processes across technology platform vendors andon

product developers.

architecturalofintegration

configurationofcomponents/technologies. Continuous improvement

Interfirm development process modularity canof the advanced technology of the semiconductor

not be automatically ensured in novel technology

process fosters the convergence of product functions.

platform introduction. Rather problem-solving in

Accordingly, specialized chipset vendors (i.e.,

novel technology adoption will drive firms to span

technology platform vendors) offer technology

interfirm boundaries over deeper system knowledge,

platforms as nearly total solutions that encapsulate

so that close coordination between firms is

product-level functions and technologies into one

indispensable

chip. Higher degree of encapsulation reduces productdevelopment process modularity. Thus, even indesignvertical

activities.

The

progressoffunction

in

spite

disintegration,ofinterfirm

collaboration

product

betweenencapsulation built on SOC (System on Chip)technology vendors and product developers willcontinuously

contribute to reducing systemic problems in advance

redefines

thearchitecturalinterdependencies of functions and components.

and enhance development performances.

These drivers will shake interfirm development

Yet, here we should note that novel technology

process modularity even though task boundaries

adoption in the modularity of interfirm productbetween upstream vendors and downstream firms aredevelopment

obviousEach“technology integration” (Iansiti, 1997) within aissingle firm (Yasumoto, 2006). Technology integration

completed within each firm as both task andis liable to require a single firm to have vast

knowledge boundaries correspond to interfirm

knowledge, even scientific knowledge, to select andboundaries. However, both upstream vendors as wellrefine new technologies. Technology integration isas downstream firms need to mutually exchange

mostly dedicated to cope with high technologicalrelated knowledge in intensive contacts when such

uncertainty.

inverticaltechnology/productdisintegration.

development

process

41

processes

isdistinguishedfromYasumoto and Shiu

A firm needs to enhance experiment capabilities

downstream firms would require such overlappingto generate knowledge which can simulate productcoordination. The system knowledge helps project

development situations at technology development

feasible configurations between core technologies

stage (i.e., knowledge generation), to retain the stockand components/devices. The knowledge is a deeperof past technology integration experiences which canlevel of knowledge beyond the architectural levelcomplement(Prencipe, 2003).

theresultsofexperiments(i.e.,

knowledge retention), and to team up a dedicated

Novel core technology adoption should cause

group which can analyze technical feasibility before

fundamental system instability due to core productthe beginning of project (i.e., knowledge application).

technology newness, and thus would require system

On the other hand, novel technology adoption

knowledge which is deeper than specific architectural

under interfirm development process modularity

systemrather focuses on system integration that makes novel

platform/product design. Unless such deeper systemtechnologies suitable for product system designs.

knowledge is available, the application and/orCollaborative

independent

exploitation of new basic technology systemvendors and product developers cannot directly copeknowledge on underlying core technologies andwith both technological uncertainty and productproduct system knowledge on product designs is out

system complexity. Rather, the processes are orientedof the question.

processes

betweenknowledge

of

each

technology

to mediate between basic technology system

Many novel technologies become available inknowledge on underlying core technologies andthe form of standardized components and IPs in open

product system knowledge on product designs. A

interfirm networks (Chesbrough, 2003; Iansiti &

novel

the

Levien, 2004). Technology transfer may help firms

overlapping of basic technology system knowledge

collect external advanced scientific/technologicaland product system knowledge, as both are relevant

knowledge

totechnologies.

technology

systemplatform

integrationencourages

acrosstheplatform

andtherebyHowever,chooseapt

assimilation

externalof

thesedevelopment and product system design. Thus, thetechnologies into product systems requires ripe andscope of the interfirm process overlapping undersophisticated system knowledge.

interfirm development process modularity would be

Modularized interfirm processes have blurred

largely restricted to system-related problem-solving

how such basic system knowledge contributes toprocesses while technological uncertainty is high in

product/technology evolution.

novel core technology development.

modularity, the lack of sufficient system knowledge

The necessity of a deeper level of “systemknowledge”

across

upstream

vendors

In

the

age

of

due to technology platform renewals could beandcompensated for with close interfirm coordination, in
42Collaborative novel technology adoption in vertical disintegration

place of vertical integration, between technology

developed separately.

platform vendors and product developers.

The process modularization raised a new issue
in the mobile phone handset industry, namely, howto

3. Case studies

effectively

refineandintroduce

a

novel

technology platform into handsets. Many vendors

3.1. Research focuses and data collection

renew their technology platform every 1 to 2 years,

The study focuses on the adoption of novel

depending on the evolution of applications andtechnology platforms to handset designs in Japan,

technologies. Yet, it has not been easy to design print

Taiwan, and China. Handset developers in all thesecircuit boards (PCBs), particularly high frequency

countries have increasingly exploited externaland power management circuits, based on a novel

technology platforms from vendors, though the leveltechnology platform. A novel technology platformof vertical disintegration of handset development

does not sufficiently secure product modularity andprocesses may differ from country to country. All

can cause quite a few problems in PCB design due tohandset developers in these countries attempt tothe lack of both core chipset stability and verified

shape proprietary product designs, particularly

architectural

product platforms, based on standardized technology

configurations. Moreover, the necessity of extended

platforms. However, several technology platform

PCB design for application devices and mechanicalvendors and prominent handset developers are in

designs has invited design problems in handset

cooperation with each other for novel technology

development activities.

consistencyonhandsetdesignA mobile handset product is characterized withplatform adoption to handset systems in spite ofa system of nested modules (Dosi, Hobday, Marengo,

modularized interfirm development processes.
According to Funk (2002), in the initial period& Prencipe, 2003). A system of nested modulesof the introduction of second generation (2G) mobile

consists of several levels (Figure 2) corresponding tophones from the early 1990s to the mid 1990s (2Gdevelopment

processes

digital services began in Europe, Japan, and US indevelopmentto1992 or 1993), mobile phone handset manufacturers

components, a BB chipset with basic software (i.e.,internally developed mobile phone handsets using

drivers, protocol stack, operating system, etc),

customized core components. However, specialized

execute decoding and transferring signals tovendors started to offer standardized core baseband

telecommunication infrastructures.

(BB) chipsets from 1996 to 1998 and technology
platform

solutionsaround

2000.

After

from

productcore

design.

technology
The

core

C1 level consists of basic components, such as

that,several chips (i.e., radio frequency: RF chip, power

technology platforms and product designs weremanagement IC, memory, etc) and related circuits.
43

Yasumoto and Shiu

modified.
Figure 2. A system of nested modules
The interdependency of technology platform
and product design has a critical impact on
coordination
Core Components

C1

C2

between

upstream

vendorsanddownstream handset developers. Interdependencies

C3

may often occur in the handset development process,even though upstream vendors provide standardized
technology

platforms

todefinemodularized

C2 level arranges devices (i.e., camera, imaging

configurations between handset components/devices.

sensor, speaker, etc) on PCBs and related upper layer

However, novel technology platform adoption

software (i.e., middleware, library, application

would drastically increase process interdependency

manager/interface, etc). All components, specificbetween technology platform development andapplications,handsetandrelateddevicesshouldbedevelopment,

mostlybecausetheintegrated into handsets at C3 level. A technology

consistency between technology platform, handset

platform may cover not only core technologies but

system design, and other components/devices has

also C1, C2, and C3 levels according to the

not been sufficiently examined and verified. These

integration degree.

interdependencies

A novel BB chipset changes the relationships

will

encourage

coordination

between the technology platform vendor and its

between the BB chipset and C1, C2, and C3 levels,

customer handset developers.

and thus cause system-level stability problems acrossThis study explains how handset developers

all the levels. For instance, data accessing timing

collaborate with technology platform vendors in

between BB and external particular memory device

handset product platform development drawing on(C2 level) needs to be restricted through interface

three cases. More specifically, we explore interfirm

which is defined by BB chipset vendor. However,collaboration processes for system integration ofsometimes, product developers choose the devices

nestedthat has not verified by BB chipset vendors, so thatinterdependencies between core components, C1, C2,

these devices cause unstable data accessing timing

and C3 levels’ systems and related problem-solving

and interrupt other software commands or programs.

of systemic issues.

Once a BB chipset is stabilized, the interfaces of themodules

payingattention

The research issues related

to

to

the

interfirm

BB chipset should be verified in the usage of various

collaboration for novel technology adoption in

devices. Yet, in novel technology platform adoption

vertical disintegration still lack references thatprocesses, even the interfaces are required to beprovide sufficient information as these issues have44Collaborative novel technology adoption in vertical disintegration

emerged with recent interfirm modularization. The

2007). Yet, we should note that country differencescase study method is useful for exploration andare not our primary focus as the industry is based on

explanation (Yin, 1994) and theory building

the global interfirm networks as is the cases of other(Eisenhardt, 1989; Glaser & Strauss, 1967) for suchelectronics industries (Berger & MIT Industrial

issues. New research issues that are not fully

Performance Center, 2005).

consistent with or explicated by past studies may call

More

than

50

firms,

includinghandsetfor exploratory approaches to lively sources ofmanufacturers, mobile service carriers, wirelessprimary data relevant to new research issues.

technology platform vendors, software vendors,

The case study method is appropriate forcomponent vendors, and IDHs were involved in theobtaining primary data about such new issues, andstudy. These firms also include manufacturers andtherebyexplanation

platform vendors from Europe and US. We focus onframeworks (Glaser & Strauss, 1967). In addition,a relatively competitive handset developer in eachcase studies shed light on the contradictions between

country, who develops proprietary handset designs incases and existing perspectives, and urge researchers

close

to shape new frameworks to reconcile themvendors. We examine three handset developers since(Eisenhardt, 1989). In particular, multiple-caseeach has participated in the development of a leading

studies

different

novel technology platform, which has significant

backgrounds help further excavate and/or refine

impacts on the handset business and market in eachresearch issues (Glaser & Strauss, 1967).

country and even in the world (Merrill Lynch, 2006;

helps

that

explorecompareconsistent

cases

with

Novel technology adoption in modularized

collaboration

withtechnology

platform

Techno Systems Research, 2007).

development processes may call for new frameworks

About 70% of third generation (3G) handsets ofas it is neither sufficiently explicated by product

NTT DoCoMo, the largest Japanese operator, werearchitectureinterfirmbased on the series of the sample platform in 2007.

technology/product development studies. These

The second platform series is one of the top-selling

advantages

low cost platforms for the European, US, and leading

frameworksofmultiple-case

nor

study

approachencourage us to examine three cases in this study.

Chinese manufacturers in the low-end segments of

The data on handset development was collected

emerging markets, particularly in China, in 2006.

by semistructured interviews from 2005 to 2007, in

The series of the third sample platform is mostly forJapan, Taiwan, and China. We can assume that

the Chinese/Taiwanese manufacturers, but accounts

handset business firms in these countries havefor more than 40% of the Chinese handset market indifferent

industrial

2006. These achievements make us infer that thesedevelopment paths and structures vary (Imai & Shiu,

samples could provide generalized implications ofbackgrounds

as

their

45

Yasumoto and Shiu

novel technology adoption even in the global

communication processing. A BB chip is reactive: It

context.

is not a passive component that only receives signal.

We also make use of information whichThus, a BB chip cannot be purchased fromappeared in published journals and reports. First, we

integrated circuit (IC) catalogue lists of chip vendors.

attempt to briefly outline the interfirm handset

Recently,development networks. Next, we examine the novelemphasized in mobile phone industry. Reflecting thetechnology

adoption

tendency, a BB chip not only processes telephone

disintegration

drawing

process
on

three

in

vertical
casesofmultimedia

functions

have

been

calling functions but also executes multimedia

collaboration in these regions.

functions, like MP3, high quality of camera imaging,games, video playing, and so on. The value added

3.2 Technological structure and interfirm

GSM mobile phone handsets with these functions

development process modularity

are called feature phones, smartphones, or PDA

The technological structure of a mobile phone

phones depending on market segments.

handset is divided roughly into the communication

Because of these various function requirements,

part, signal processing part, power management, andengineering man-hours required for handset software

external I/O part. The communication part receives

development have been rapidly increasing. The

electric waves through antennas and converts theapplication, firmware, and operating system (OS)signal to digital data for the signal processing part.

software must be designed in accordance with

The signal processing part has its own central

hardware components. Smartphones and PDA

processing unit (CPU) to control the handset system

phones often use Windows, Linux, or Symbian OS

just as Intel processors do in PCs. The external I/O

to control the entire systems of these systems. A

part controls all information inputs and outputs fromfeature phone uses real time operation systemevery component such as display panel and keypad.

(RTOS), which conducts real-time switching of each

These parts are laid out on a PCB, which is thetask every 10 micro seconds to control the phone’s

terminal main body of a mobile phone handset. The

entire system. Nowadays, as a part of a platform, OS

display, key, digital camera, and so on., are devices

is provided for a mobile phone handset manufacturer

arranged on the circuit of the terminal main body.

by a technology platform vender together with a coreIn our investigation, we consider the signal

chipset.

processing part which is in the form of a technology

The development of a BB chip requires

platform because this is the core technology of asystem-level knowledge of mobile phone handsets.

mobile phone handset. This part centers on a BB

As multimedia functions have increased, BB chip

chip

vendors

that

controls

signalsand

implements
46

have

had

to

considertheproductCollaborative novel technology adoption in vertical disintegrationarchitecture for designing mobile phone handsets.

chipsets with other devices and software for

BB chip vendors, mostly technology platform

developing

vendors, can design powerful BB chips to executedesigns.

multimedia

functionssemiconductor

becauseprocessofadvanced

proprietaryproduct/platform

In the early 2000s, these vendors started toTheprovide standardized technology platforms for 2G,

requirement for system integration may call for a

2.5G (GPRS, EDGE), and/or multimodes to expand

closer relationship between a BB chip vendor andtheirmobile phone handset developer rather than a simple

manufacturers, ODMs, and IDHs, particularly inbuyer-supplier relationship. In addition, the design ofemerging markets. Nowadays, handset development

advanced BB chips sometimes involves close

processes

cooperation with operators.

development, technology platform development,

Handsettechnologies.

their

to

modularized

new

into

entranttechnology

handset development, and manufacturing and each ismanufacturers, ODMs, and IDHs need to understandundertaken by specialized vendors or manufacturers

the interdependencies of a chip with handset system(Figure 3).

design and other components, since the chip is

In

to

a

varietyincludingareopportunities

brand

relevantdevelopers

marketmobilephone

handsetmanufacturers have developed handsets based oninterdependencies drastically increase if BB chip

service requirements of operators, and have thus

vendors change their chip designs. In a system ofadopted advanced telecommunication technologies

nested modules, such innovations of core component

such as 3G. Until the early 2000s, major Japanesedesign represent movements up the system hierarchy

manufacturers other than CDMA manufacturers,

and sometimes lead to revolutionary changes thatsuch as Panasonic, NEC, Mitsubishi, and Fujitsu,

refurbish

were equipped to develop proprietary BB chips andproductfunctions.

most

The

basic

of

Japan,

systemfoundations(Henderson & Clark, 1990).

software in accordance with individual handset

When 2G started booming around 1996,
specializedchip

Philips,

In the 3G era, even the Japanese firms began to

Qualcomm, etc.) started to offer standardized BB

adopt customized chips based on standardized

chip hardware. Nokia and other major manufacturers

technology

decided to customize BB chips by exploiting

increasing development costs, which sometimes

vendors’

hardwarewent up to more than 10 billion yen. Many of thesetechnologies. These manufacturers loaded basic

Japanese manufacturers started adopting customized

software (drivers, wireless interface, RTOS, etc.)

BB

into BB chips, and assimilated the customized

platforms provided by specialized vendors or byBB

vendors

chip

(TI,

processes

ADI,

model designs for their local market handsets.

and

47

chips

platforms

based

on

as

they

suffered

standardized

fromtechnology

Yasumoto and Shiu

Figure 3. Modularity of mobile phone handset development processes

collaborations between manufacturers and vendors.

has been overwhelmingly led by multinational

In Taiwan, PC manufacturers apply theircorporations, the advent of the local handset

successful ODM business model to the mobile phone

manufacturers

handsetcompetition in the domestic market.

business.

Theydevelopdetailed

has

ignitedincreasingly

fiercespecifications for mobile phone handsets including

The advent of the local manufacturers has

Ultra Low Cost (ULC) ones by following theinduced a unique industrial evolution in the form ofspecifications from major global manufacturers such

two backward linkage effects: (1) the outgrowth ofas Motorola and Sony Ericsson. At the same time,

IDHs

these ODMs also expanded their component

development, and (2) the emergence of IC fablessprocurement

took

ventures that design core ICs for mobile phoneadvantage of economies of scale in their handset

handsets. The emergence and evolution of China’s

development and manufacturing business.

mobilecapabilities,

andtherebyspecializing

phone

in

handsetmobilephone

industrywill

handsethave

On the other hand, there have been several

international implications as the growth of global

types of handset development in China. The Chinesedemand for low-cost and multifunction mobile

mobile phone industry can be regarded as being on aphone handsets is expected to accelerate (Imai &divergent path of upgrading. While export growthShiu, 2007).
48

Collaborative novel technology adoption in vertical disintegration

Table 1. Brief description of design and test stages

Tasks

Outcomes

Circuit/PCB Design

Engineering Verification Test
(EVT)

Design Verification Test
(DVT)

Production Verification Test
(PVT)

Simulation,
Lists (PCB Check, Net List
& Single Pin Check),
Checks (Mechanical, Layout
Rule, EMI Preview),
Placement Confirmation

Pre-Test (Working Samples):Component Test & Simulation,
Testing (H/W,S/W, Design Quality,
EMI, Application & BIOS)

βTest (Pilot Run Sample):
Customer Test,
Testing (Total, H/W, DFM,
Application, EMI, BIOS),
BIOS Porting

Circuit Design,
ICT (Circuit Testing),
Gerber File,
BOM (Bill of Materials),
Driver & BIOS,
Draft Manual

αTest Report,
Test Reports (EMI Pre-Scan, On
Board Function, Driver,Component Templates,
Environmental, Assembly System
Template, Power Consumption,
S/W EVT, Design Quality Margin,
Vibration/Shock, Customer
Environment Simulation),
Reports (H/W Timing,
Voltage/Signal & Margin, Chipset
Register Check & Performance
Adjustment, Component Spec.
Check, EVT Pilot Run),
Simulation Results & Real
Onboard Signal Confirmation,
EVT Sample Bug Confirmation,
EVT Bug Trace List, Manual

Final Test Report,
Reports (S/W DVT Test,
Safety, Certification, DVT
Pilot Run),
EVT Sample Bug Solution
Confirmation,
DVT Sample Bug Trace List

Pilot Test (Production Pilot Run
Samples):
Pilot Run Test,
Testing (Production, Total, H/W,
DFM, Application & BIOS,
EMI,S/W),
BIOS Porting
Transfer to Factory,
Formal Test Report,
DVT Sample Bug Solution
Confirmation,
PVT Bug & Limitation

Source: Interviews and documents of firms

Here we focus on a leading IDH since theprofits of IDHs come primarily from design fees.

profits of IDHs are relatively higher than those of theAnother benefit comes from the printed circuit board

Chinese local mobile phone handset manufacturers.

assembly (PCBA) business. IDHs provide PCBAs

IDHs specializing in the development of electronic

on which components are mounted. The PCBA

devices were born in the US in the trend of designbusiness’s benefits have been increasing comparedoutsourcing beginning in the 1990s. Cellon, a San

to design fees since it can benefit from economies ofJose-based venture established in 1999 by Chinese

scale of component sourcing. Accordingly, theand US engineers, claimed to be the first IDH

PCBA business has approximated the ODM

specialized in mobile phone handset development.

business.

An IDH in the context of the mobile phone handset

In the PCBA business model, an IDH licenses a

industry is a firm that is specialized in the

BB chip from an external technology platform

development of handsets (Imai & Shiu, 2007).

vendor and thereby provides lists of product

Relying on electronics manufacturing service

functions for their customers. After the customers(EMS) manufacturer’s volume production, IDHs

decide target functions, the IDH starts to selectfocus on design business to develop handsets

preverified components suitable to the customers’

according to customer mobile phone handset

requirements for developing a PCBA. Compared to

manufacturers’

design service based on customer specifications, therequirements/specifications.

The
49

Yasumoto and Shiu

PCBA business model demands more meticulous(hardware), OS (software), UI (software) and othermarketrelated components so that MP3 function can beresearchforfunction

proposals

andcomponent selections because of the fast market

achievedchange and shortened product lifecycle in thecomponents. A technology platform that relates

industry. In our research, we examine the PCBA

these elements to MP3 function is modified andbusiness model as it shares some critical characters

introduced into a product system design in iterative(i.e., original design, component selection anddesign-testing processes.

sourcing, and related market research) with brandwithcompatibility

betweenthese

Furthermore, a novel technology platform

manufacturers’ and ODM businesses.

adoption sometimes gives rise to more than 10,000

The study sheds light on handset design-testing

software bugs and 1,000 hardware bugs. Suchstages as these stages are significantly relevant toprocesses lead us to infer that novel technology

novel

Handsetplatform adoption requires collaboration within anddevelopers share the same mobile phone handset

between firms, particularly between technology

development stages, including (1) product definition

platform vendors and handset developers.

technology

platform

adoption.

(function, specification, component definition); (2)product design (industrial, mechanical, hardware

3.3.

designs, and software engineering); (3) pilot

manufacturer

production and review (proto production review andEver since NTT DoCoMo, Japan’s largest operator,

design modification); (4) testing and acquisition of

introduced i-mode service in 1999 and 3G service

compulsory certification; and (5) preparation for(W-CDMA) in 2001, the mobile phone handset hasvolume production. Tasks and expected outcomes ofbeen not only a verbal and text communication toolthese stages (Table 1) are related to system design ofbut also a multimedia terminal. In Japan, threenested modules rather than component technologies.

operators are competing while 11 mobile phone

Sometimes a function of a novel technology

handset manufacturers have strived for productplatform is implemented by various components. For

differentiation. Firm A is one of the late-entry

instance, in the development of the MP3 music

manufacturers, who started the handset business infunction, designers must consider the memory size

1998. However, the firm has developed more

for storage, the alternative technologies for playback

products compared to others, and hit the highest(i.e., software or hardware), the modification of themarket share in 2007.

play settings during calling-in, and other usages.

Japanesemobilephone

handsetFirm A’s handset business has four business

These problems require handset developers tounits, including three handset development businessconsider NAND memory (hardware), BB chipunits and a platform development center. Three of50Collaborative novel technology adoption in vertical disintegration

the handset development business units receive

different technology platforms. The business unit forservice requirements from three different Japanese

DoCoMo handset development manages technology

operators and develop mobile phone handsets

platforms (i.e., core chipsets and Symbian OS),tailored to each of the domestic operators. Althoughwhich are common between Firm A’s handsets forthese three domestic operators’ requirements are

DoCoMo. Firm A had used iTron OS ondifferent, Firm A attempts to share components

NEC-Panasonic BB chips and TI OMPA application

between its handset lineups, particularly for eachprocessors until 2003. However, the increasing cost

operator.

and lead time of software engineering, which

In order to share product platforms andaccounted

for

more

than

60–70%

ofcommon components within and between handset

engineering-hoursofhandsetdevelopment,

development business units, the firm established theencouraged

A

to

a

platform development center. This center plans

Symbian-based OS for DoCoMo’s 3G handsets fromproduct platforms (i.e., sets of chipsets, OS, and2004. Accordingly, NEC-Panasonic chipsets and

PCB),

PCBs were shared between several Firm A’s models

develops

commonbasic

software,applications/user interface (i.e., browser, mailer, etc.),

Firm

adopt

commonsuch as 902i, 702iD, 902iS, and so on.

and hardware (display panel, camera module, etc.) in

In 2007, Firm A released its models based on

advance of specific model developments, and also

the first generation of Vendor A’s handset technology

manages the libraries of common components that

platforms. Vendor A developed the first generation ininclude definite specifications.

cooperation with DoCoMo, focusing on application

For instance, most parts of user interface

rather than communication. The platform series wasapplication software do not have product-specificdeployed on the basis of de facto standard high-end

feature characters, so that such parts can be regarded

application processor chipsets both in Japan andas a common software platform and shared withworldwide, which Vendor A released in 2002.

different mobile phone handsets. To give another

The platform series was equipped with highexample, DoCoMo’s 904, 905, and 705 handset

speed BB, application processors, large-capacity

models share the same PCB design, while the 904

memory for application processing, full hardware

model has video graphics array (VGA), 3 megaaccelerator, effective power management, and acamera pixels, and other functions, the 905 model

variety of other modules and interfaces. The

adds an extra mobile television function, and the 705

platform series was expected to be more suitable toabandons high functional performance in exchange

the Symbian-based OS that was developed and/or

for a slimmer body.

shared between several DoCoMo manufacturers. Yet,

These handset development business units use

the Linux OS of an Indian software vendor, Wipro
51

Yasumoto and Shiu

Technologies, also became available on the platform

for proprietary handset designs.

in 2005.

This problem made Firm A believe that a deep

The newness of a technology platform canreliance on vendors’ development supports would

cause unexpected software bugs and system-related

hinder the understanding of interactions amongproblems. Long debugging and testing processes,

components and the nurturing of knowledge aboutsometimes lasting more than 6 months, are always

product system design. Moreover, Firm A did not

required. The lack of practical usage experience

have the experience of designing core chips, whichcauses various unexpected bugs and problems duringother major competitors had. The lack of thethe development stages of both a chipset and its

experience made it difficult for Firm A to checkhandset systems. Moreover, a technology platform

chip-related design problems and/or to create

with advanced multimedia functions, which areproduct system newness. In practice, Firm A’s

required for advancement and to meet market

handset development lead time was up to 18 months

competition, can aggravate compatibility issues within 2002, which was longer than the 10–12 months

software and hardware components. For example,

average lead time in the industry.

when Firm A used a technology platform composed

These experiences led the firm to conclude thatof a NEC-Panasonic BB chip and a TI OMPA

it

was

necessarytoclosely

cooperatewithapplication processor to design 900i series mobile

technology platform vendors in order to assimilate

phone handsets in 2003, it had to make enormous

required system knowledge into these vendors’ coreefforts to debug to verify system stability.

chipsets. Afterward, in early 2006, Firm A joined theIn addition, product developers need to copetechnology platform development project with

with other design issues related to electromagnetic

DoCoMo, Vendor A, and two other manufacturers.

interference (EMI), radio wave interference, andIn the project, they attempted to develop a series ofpower consumption by examining the compatibility

comprehensive mobile phone handset platforms withof core chipsets with the circuit design and otherthe Symbian-based OS. The new technology

components

power

platform series was expected to help accelerate themanagement circuit designs). Usually, a vendor

global adoption of the W-CDMA 3G services andoffers development boards and reference designs for

reduce the cost of handsets for mobile phone handset

problem-solving and to shorten product development

manufacturers at the same time.

(particularly

for

RF

and

lead time. However, even though Firm A referred to

The technology platform for dual-mode phones

the development boards and reference designs

supporting W-CDMA and GSM/GPRS was built on

offered by vendors such as NEC, Panasonic, and TI,

Vendor A’s existing single-chip LSI, which was athey often did not include information indispensablecombination of a BB chip and an application52

Collaborative novel technology adoption in vertical disintegration

processor as of July 2004. The technology platformfirst, the information of handset system, particularly

added new functions such as supports for HSPDA

relatedandOS,function/specification design at platform planning

middleware for multimedia applications, andstages. Such design determined function-partitioning

drivers. This technology platform serving as a baseandsystem for W-CDMA handsets could eliminate thecomponents/devices, and software.

EDGE

technologies,

andcoveredtoapplication,interfaces

helpedbetweenthetheplatform’s

chipset,otherneed for mobile phone handset manufacturers to

At the later stages of chipset development, thedevelop separate systems each for specific handset

collaboration from the chipset’s system verification

functions, and thus it would reduce the time andrelated to handset functions also contributed tocost of development to almost half. Further cost

examining and improving the stability of handset

reductions in mobile phone handsets are expected if

system designs. System problems related to themore firms adopt the platform.

chipset had been probed in the handset system

Firm A started to participate in the collaborative

designs

of

Firm

A and

other

collaborative

development processes before the sample chipset

manufacturers. The processes helped cope withrelease. That was more than 10 months before thesystem problems at the early handset development

technology platform release. This cooperation

stages.

enabled Firm A to propose their requirements for

Firm A enjoyed other benefits of time-to-market

technology platforms at the platform specificationcompared to its competitors. It took about 10 months

planning stages and put its IPs into the platform toto complete a new handset design after receiving a

receive royalty fees. At the later stages, Firm A

novel technology platform (derivative handset

carried assigned software engineering portions,designs based on matured technology platforms

examined prototype chipsets on engineering boards,

needed 4–6 months). The overlapping of technology

and thereby contributed to settling problems fromplatform verification and early handset development

the stages of testing and debugging for chipset

stagesprototyping.

development leadtime. In the collaborative processes,

could

reducethehandsetplatform

As a technology platform vendor, Vendor A did

Firm A could understand the characteristics of the

not have sufficient know-how on applicationnovel technology platform and the critical testing

management, system stability, electronic current

points for debugging and handset design verification.

control, unexpected handset usage analysis, andHandset development leadtime may be shortened tootherless than half if firms are acquainted with such

system-levelissues.

The

collaborative

processes encouraged Vendor A to assimilate suchinformation.

know-how into the technology platform earlier. At

Yet, more essential is the fact that the53

Yasumoto and Shiu

involvement in the collaboration allowed Firm A toseven product development teams for developing 2G,

enjoy its earlier release of the first handset model

2.5G, and 3G handsets. In 2006, its mobile phonewith the novel technology platform months ahead ofhandset models were developed based on several

its competitors. Total development leadtime from thedifferent technology platforms including 2G chipsets

technology platform development to the first handset

such as Calypso and LoCosto from Vendor B and 3G

release is about 2 years; more than 12 months forchipsets from Qualcomm. Firm B used Calypso andplatform development and 10 months for handset

Locosto to develop two to three product platform

development. However, the total leadtime in thismodels and six derivative models in 2006.

case was expected to be 16–17 months. Novel

In the R&D division, the “New Producttechnology platform adoption would be accelerated

Development Team” surveys several different

in the collaborative interfirm processes rather thantechnology platforms and proposes to their customers

modularized ones.

to replace their current core chips if new technology
platforms perform better and show a cost advantage.

3.4. Taiwanese mobile phone handset ODM

It receives specifications from Motorola and so on,

The Taiwanese mobile phone handset industry began

and took charge of detailed mobile phone handset

in approximately 1994 when BenQ began to develop

designs, verifications, and manufacturing.

mobile phone handsets. In 2000, the Taiwanese PC
ODMs

such

QuantaBdevelops

software(i.e.,

nativeComputer,Compalapplications, device drivers, file manager, UI, etc.)

Arima

Computerfor multimedia functions and integrates some IC

simultaneously started investing in their mobile

chips (i.e., Bluetooth, NAND memory, melody IC,

phone handset subsidiaries or in-house divisions toimage sensor, etc.) from third parties. However, when

launch the production of mobile phone handsets.

adopting a new Vendor B’s platform for developing

Between 2001 and 2004, Chi-Mei group, Hon Hai

mobile phone handsets, Firm B faces a number ofPrecision, High Tech Computer, Asustek Computer,system problems. For instance, the initial period of

Mitac

Gigabyte

adopting a novel technology platform involves

Technology also entered the business. Some firms

innumerable software and hardware bugs related todeveloped their own brand mobile phone handsets,critical components and devices. The reason for thesewhile others applied the ODM business model of PC

bugs is the fact that Vendor B does not commit to total

to the mobile phone handset business.

solutions with complete information on product

Electronics,

as

Firm

Inventec,

International,

andWistron,andFirm B entered the mobile phone handset

system architectures, because its platforms allow

industry in 1999 and became one of the biggest

customer firms to develop proprietary producthandset ODMs in Taiwan. Nowadays, Firm B has

designs with specifications proper to these customer
54

Collaborative novel technology adoption in vertical disintegration

firms.

to the usage of customers. Thus, the collaboration

Vendor B provides the platform as a packagewith Firm B could be expected to yield feedback on

consisting of a set of core chipset and basic software,system-level verification from Firm B, therebya reference design with a sample board, bill of

leading to an improvement in the consistency ofmaterials (BOM), test and verification data reports,

technology platforms with handset designs. As an

technical supports, and so on, which could help

α-site customer, Firm B contributed to stabilizing thecustomers’ handset development. However, the

new technology platform.

availability of its platforms on handset system

At the same time, the role of an α-site customer

designs should be examined according to customers’

helped Firm B eliminate system problems on handset

design and specification requirements. In addition,

designs before the formal platform sample release.

Vendor B does not intend to cover all the usages ofFirm B received a novel chipset engineering sample

customers. Thus, for instance, a handset design based

about one year earlier than its competitors. Thus,

on a Vendor B solution could easily run out of battery

Firm B could start its handset design and engineering

ifsample verification on the basis of the new

inexperienced

customers

attempt

morepicture/video functions than expected.

technology platform well ahead of its competitors.

Firm B emphasized that in order to overcome

The earlier access to novel chipset knowledge

these problems it enhanced the debugging capability

enabled Firm B to design its handsets with checking

by hiring more quality assurance engineers 3 years

the compatibility of the platform with handset systembefore. More essential is the fact that Firm B started

designs and other components before the technology

to cooperate with Vendor B as its α-site customer.

platform release. The earlier access also contributed

Since the release of LoCosto engineering samples into2005 by Vendor B, Firm B had exerted efforts on

sometimes from 10 months to 6 months. The

debugging for the new core chip. Firm B participatedcollaboration fostered the assimilation of a novelin the later stages of Vendor B’s technology platform

technology

development after the chipset engineering sample

accordance with system-level requirements.

reducing

handsetplatform

development

into

handset

lead

time,

designsinrelease, which followed testing and verification at the3.5. Chinese mobile phone handset design

chipset level.

house

As an ODM, Firm B had rich system-level
experiences such as circuit designs, component

In the early 1990s, the mobile telecommunicationcompatibility, device arrangement, EMI and signal

service industry started its full-fledged global

interference management, power management, andexpansion. The trend soon spread to China. Driven byother system design issues which are closely related

the surge of demand from the international and55

Yasumoto and Shiu

domestic markets, China’s mobile phone handset

Yet, the number of sales for each model isindustry has exhibited a spectacular growth since therelatively small, on average less than 50 thousandlate 1990s. Export and domestic consumption grew atunits. Handset manufacturers aim at 500 thousand

almost parallel rates until 2003. In 2005, around 75%

units of sales per one model in Japan; however, inof handsets produced in China were exported.

China, 50 thousand unit sales are the minimum

Althoughhandsetvolume to make a profit. In Japan, the lifecycle of amanufacturers recently became outward-looking,model is 6 months, but there is no rule for themultinationalforlifecycle of a model in China. On average, theapproximately 95% of China’s total mobile phone

lifecycle of a model is 9 months, but some models areexports.

sold for longer than 2 years. The fall in the Chinese

the

local

mobilecompanies

phone

still

account

When we turn our eyes to the domestic market,

local manufacturers’ market share will continue if

however, a strikingly different picture appears.

they cannot release a variety of models every month.

Starting from just around 5% in 1999, shares of local

The Chinese local manufacturers’ lack of ability

brands rapidly increased until 2003, when China’s

to develop a variety of models has been compensatedofficial media triumphantly announced that thefor by IDHs. The performance of the IDH industry

Chinese mobile phone handset makers had captured

did not fall as much as the local mobile phone handset

more than 50% of the domestic market. However, themanufacturers did. According to the investigation of amajority of the local mobile phone handset

U.S. research company, iSuppli, there were about 50

manufacturers slid into a retreat after 2004 thatto 60 IDHs in China, and it was expected that thecontinued until early 2006. In 2006, even with theirproducts that IDHs design would account for 50% or

financial achievements, the improvement is still

more in terms of the volume of shipment of the local

smaller in market share compared to major foreign

mobile phone handset manufacturers (iSuppli, 2005).

companies such as Nokia, Samsung, and Motorola.

The top 5 IDHs were once estimated to account for

The increasingly heated competition in the

70% of the Chinese mobile phone handset market.

domestic market encouraged the local handset
manufacturers

tointroduce

organizational

Major IDHs have the ability to implement all theorprocesses of mobile phone handset development:

technological innovations which were ignited by

PCB circuit design, software engineering, component

strong cost sensitivity and an enduring quest for

arrangement, industrial/mechanical design, testingproduct variety. One can find innumerable phone

and verification, certification, and preproduction

models; there are estimated to be more than 700 new

preparation. IDH’s business model provides totalmodels released in the market in 2006 (about 1,500

solutions for customer firms.

models were on the market in total).

This type of business model has gradually56

Collaborative novel technology adoption in vertical disintegration

expandedtocomponent

procurement

andthe situation demanded Vendor C to search for a new

manufacturing services, areas in which ODMs are

α-sitestrong. Yet, a conformational shift of the chipset

manufacturers except for Firm C were not willing tomarketbusiness

adopt the platforms. Thus, after 2004, Vendor C choseenvironment for IDHs in China in recent years. IDHs

Firm C as an α-site customer in order to develop 6226,

procured chipsets mainly from American and6228, and 6229 chipsets. Vendor C expected that rich

European venders such as TI, Phillips (NXP), andexperiences in both handset development andInfineon until 2004. However, the Taiwanese IC

customer/market contacts helped Firm C become an

technology platform vendor, Vendor C, started toimportant α-site customer for Vendor C.

hasradicallychangedthecustomer,major

ChineseIDHs

andrelease its proprietary total solution chipsets at theOn the other hand, Firm C concluded thatend of 2004, suppressing the license fee. The market

Vendor C’s technology platforms would fit theshare of Vendor C had radically increased to about

requirements of the Chinese market, and thus began

40% in 2006, so that it exceeded the market share of

to adopt them for its handsets beginning at the end of

the top vendor TI as the adoption of the total solution

2004. Firm C emphasized that a successful mobile

platforms by IDHs increased (Merrill Lynch, 2006).

phone handset development should match the needs

Compared to TI’s technology platforms, Vendor

of

the

targetmarketwithavailable

relatedC’s technology platforms perform more powerfully

technologies. When Firm C observes a selling point

when executing multimedia functions. In other words,

in the target market, various divisions including the

Vendor C’s technology platforms integrate moresales and R&D divisions are organized into a “Projectmultimedia functions such as Bluetooth, camera, andResearch Committee.”

MP3 than TI’s chipsets. In addition, Vendor C’s

The members of these divisions are expected toplatforms enable faster handset development sinceinclude different technologies, market demands,

they integrate a large portion of handset functions

and/or operator perspectives in the discussion of theand provide real PCB board reference designs.

possibility of the chipset commercialization. Unlike

However, the total solution platforms contain a lot ofother major mobile phone handset manufacturers, thesystem problems. Vendor C needs an α-site customer

committee of Firm C is not a permanent organizationin order to effectively settle such problems.

for advanced technological researches, but is a task

The α-site customer of Vendor C’s 6217, 6218,

force for analyzing both technical trends and market

and 6219 chipsets was the Taiwanese IDH called

requirements. Vendor C’s chipsets are at first studied

Darts where Vendor C invested before 2004. However,in the committee.

two of Darts’ development teams were pulled out ofA chipset development takes 10 months or more

the Taiwanese ODMs, Arima and Foxconn. Althoughwhile a handset development based on a novel
57

Yasumoto and Shiu

technology platform needs at least 10 months. Firm C

development lead time compared to that of its

cooperates with Vendor C for 6 months. At the time ofcompetitors. Firm C can take advantage of novel

Firm C’s involvement, Vendor C has alreadychipset knowledge 6 months earlier than its

completed its chipset engineering samples. Referencecompetitors. The early availability of novel chipset

design (and BOM) development and preproduction

information has allowed Firm C to precede its

testing follow the engineering sample release. Firm C

competitors by 4 to 5 months in new product releases.

helps Vendor C develop reference designs, giving theFirm C has already verified the system compatibility

information to Vendor C on what the systemof the chipsets on its real handset design byarchitecture of the handsets would be. Firm C checks

understanding the system-level characteristics when

the chipsets’ problems concerning product system

novel technology platforms are released.

and the interdependencies of the chipsets with otherIn 2006, Firm C successfully developed nearly

components at system level. Firm C develops real

50 types of proprietary product platforms, each of

PCB board reference design which provide awhich used Vendor C’s several technology platforms.

practicable PCB circuit design and related component

To this date, the number of Firm C’s mobile phone

configurations while Vendor C improves its chipsets.

handset models that have been developed by theseIn close cooperation with Vendor C, Firm C has
attempted

to

solve

system-levelproduct platforms has exceeded 100 types.

compatibility

problems at the early stages of its handset

4. Discussion

development projects. At these stages, Firm C has
verified the compatibility of chipsets on real productIn modularized development processes, any single

system designs, not only debugging Vendor C’s

firm, even a system integrator, can hardly invest in

chipsets but also examining other components orand control all the complementary knowledge

devices in laboratory tests. The problems ofnecessary for novel technology adoption. Knowledge

compatibility come up unexpectedly, so that it isboundaries are sometimes beyond firm boundaries innecessary to fine-tune the settings between Vendor

spite of definite task partitioning between firms

C’s chipset and components/device drivers such as(Brusoni & Prencipe, 2001; Brusoni, et al., 2001;

image sensors and flash memory.

Takeishi, 2002) under interfirm development process

Firm C emphasized that cooperation withmodularity. Particularly in technological change,

Vendor C helped in checking the chipsets’ problems

close cooperation between partner firms is regarded

concerning product system and interdependencies

as a vehicle to acquire complementary knowledge

between components. Moreover, Firm C also pointed

beyond their task boundaries (Takeishi, 2002).

out that this cooperation shortened the productInterfirm modularity seems to blur the role of58Collaborative novel technology adoption in vertical disintegration

close coordination within and between firms.

customer of Vendor C, not only because the firm

However, this study shows that close, bilateral

could receive lower sell prices but also because thecommunication channels between product developers

firm could develop their handsets with the latest core

and technology vendors are also indispensable inchipsets earlier than competitors. These firms also

modularized development processes when coreemphasized that vendors expected to make use of thetechnologies change. Each firm’s business scope isdesign capabilities and end-user experiences of thesenot oriented to vertical integration. Nevertheless, thefirms in the collaboration.

coordination is not as open in the transition of coretechnologies

as

shown

in

past

In general, a simple buyer-seller relationship isresearches

not proper to related firms, especially when novel(Chesbrough, 2003; Iansiti & Levien, 2004; Sturgeon,core technologies are adopted in modularized2002).

interfirm relationships. In reality, one of the major

Our interviews with the Chinese local mobile

IDHs, Techfaith, established in 2002, also launched aphone manufacturers and IDHs since 2005 also

joint venture with a technology platform vendor,

provide some evidences of the criticality of interfirm

Qualcomm, in 2006 as the multimedia functions

collaborations between technology platform vendors

would be more value-added in the future. A local

and product developers. Even the Chinese local

mobile phone handset manufacturer, Amoi, provides

mobile phone handset manufacturers and IDHs,

another emblematic case. Amoi has also worked withwhich have been thought to rely on modularizedSpreadtrum, China’s local technology platform

interfirm processes, share the same perspective: “thevendor, to develop GSM/GPRS mobile phonecooperation with core chip vendors will contribute tohandsets and the Chinese 3G standard TD-SCDMA

their product development.” The interviewees all

handsets.

emphasized that in their handset development

The collaboration within and/or between firms

projects for novel technology platforms it was

may be enhanced by technological uncertainty as

sometimes difficult to identify where the problems

shown in past researches (e.g., Iansiti, 1997; Takeishi,came from. As a result, these problems have always

2002).

delayed their product development.

technologies

The

uncertainty
would

accruing
be

from

new

relevanttoTechnical information and support from coresupplier-manufacturer relationships. In spite of thechip vendors usually help solve these problems.

country differences, the Japanese, Taiwanese, andFurthermore, some of them attempt to be α-site

Chinese firms would all face high technologicalcustomers while others commit to deeper cooperation

uncertainty when adopting new technology platforms.

with core chip vendors. An IDH established in 2005

Such

pointed out that it was necessary to be an α-site

technology integration across firms.
59

technologicaluncertainty

would

inviteYasumoto and Shiu

product

systems.

In

practice,indesign-in

Figure 4. The range of interdependencies
collaboration between a vendor and a customer
Case 1: Japanese Firm A and Vendor A

Vendor A

Application Chip

HandsetReal PCB
Board

PCBs
Circuits

BB, Basic SoftwareRF
PMU

manufacturer, the vendor is involved in the
manufacturer’s product development from the earlystagesFirm A
Chips
Devices
Middle-ware

Application
and Related
Devices
Mechanics

BB, Basic Software

Application Chip

PCBs

RF
PMU

closelyaccommodatetomanufacturer’s

theNobeoka, 2000). Such a tendency could demand
technology integration including the search andselectionofelementtechnologies

in

close

collaboration between a vendor and a manufacturer

Firm B
Chips
Devices
Middle-ware

torequirements (e.g., Clark & Fujimoto, 1991; Dyer &HandsetReal PCB
Board

Circuits

order

technologies/components

Case 2: Taiwanese Firm B and Vendor B

Vendor B

in(Takeishi, 2002).
On the other hand, in modularized interfirm

Application
and Related
Devices
Mechanics

development processes, technology platforms are
standardized while the insides of technology

Case 3: Chinese Firm C and Vendor C

Vendor C
BB, Basic Software

PCBs
Circuits

platforms are kept in black boxes developed within

HandsetReal PCB
Board

specialized vendors. These cases here are witness toFirm Cthe fact that vendors and product developers each

Chips
Devices
MiddleApplication Chip
-ware
Application and Related Devices

have heterogeneous capabilities to cope with different

RF
PMU

development problems under vertical disintegration.
Vendors

need

to

be

capableofmanaging

technological uncertainty of new core technology
However, novel technology platform adoption

development while product developers are destined

under vertical disintegration is characterized withto manage product system designs. The search andsystem integration rather than technology integration.

selection processes of technologies are left for

The cases here show that collaborative processes arevendors.

not driven by technological uncertainty, but are rather

Reflecting such interfirm labor division, thetriggered by systemic problems resulting from thecollaborative processes between vendors and productadoption of novel technology.

developers rather focused on system integration to

The vertical integration of product development

ensure system stability of technology platforms andof complex products like automobiles may require

product designs. Firms collaborated with each othermore complete fusion of element technologies withbased on system knowledge, which enhanced60Collaborative novel technology adoption in vertical disintegration

systemic problem-solving, relevant to the interface

interfaces between the core and other levels in

between core chipsets, product designs, software, andinterfirm collaboration. Firm A provided theother components. According to our interviews, firms

information of function/specification requirements

attempted to check both novel technology platforms’

andsystem stability and compatibility with handset

simulation and test, while sharing necessary

designs and other components in close cooperation.

information about the BB chipset architecture with

In our cases, product developers made efforts tocontributed

toapplication-related

systemVendor A.

acquire new core technology knowledge, which

The technology platform of Vendor B did not

defined the basic configuration of product technology

offer a complete solution set of chips, software, andbases, in order to quickly design their products’

devices, but provided a low cost solution with basic

configurations consistent with novel technology

handset functions. Yet, the development needed

platforms. At the same time, technology platformsystemic checks of the platform in product system.

vendors took advantage of these collaborations toFirm B worked with Vendor B to solve systemic bugs

refine and verify their solutions according to systemof unidentified interdependencies, while obtaining

knowledge of product circuit designs.

the BB chipset information related to handset design.

These cases show that the necessity of system

In the case of cooperation between Firm C andknowledge rather than technological uncertainty

Vendor C, the total solution development faced highdrives collaborative novel technology adoption under

degree of interdependencies between several levels.

interfirm

modularity.

Vendor C coped with the interdependencies within

Accordingly, the overlapping processes are restricted

the firm by learning from customer firms how toto the late technology platform development andencapsulate the interdependencies into the solution.

early product development stages, though the scope

Firm C helped develop the reference design, whileof collaboration could vary depending upon cases.

learning how to exploit the solution in its handset

development

process

The range of interdependencies is different by

development.

the cases (Figure 4). Firm A adopted Vendor A’s new

These cases show that the difference intechnology platform in order to develop 3G highcollaboration timings must be explicated by the issues

performance and multimedia smartphones. Firm Aofparticipated in collaborative technology platform

technological uncertainty (Figure 5). Firm A wasdevelopment with Vendor A and several firms. Highinvolved in the technology platform development

performance requirements, particularly related tofrom the beginning of platform planning (e.g.,complex application processing, required sufficient

functional requirement and specification setting)consideration

collaborating with DoCoMo, Vendor A, and some

to

the

function-partitioning

and61

systemlevel

problem-solving

ratherthan

Yasumoto and Shiu

Figure 5. Differences in collaboration object and timing in Japan, Taiwan, and China
Technology Platform Development
Technology
PlatformPlanning(Function/Spec. Design)

Engineering Sample
System Test &Debugging

Simulation& Debugging

Reference
DesignDevelopment

Product Development(Firm C, IDH)

Product Development (Firm B, ODM)

Product Development (Firm A, Brand Manufacturer)

prepared its chipset engineering samples. Firm C was

manufacturers.

not involved in chipset development until reference

DoCoMo has intended to establish common
its

serviceboard design was started by the partner technology

development

cost.

platform vendor. The firm contributed to the partner’s

Corresponding to the attempt, these firms including

real PCB board reference design development by

Firm A started to develop a technology platform

implementing chipset debugging in relation to otherbased on the vendor’s application chipsets. Firm A

components on PCBs.

softwareplatforms

introductions

toreducing

accelerate

Firms B and C were mostly engaged inpartly coped with technological uncertainty reduction
with its partner firms at the stage of technology

system-related

platformcompatibility,

specification

planning

andsoftwareproblem-solving
internal/external(e.g.,

deviceinterfaces,

engineering stage, particularly in simulation process.

electromagnetic and wave interferences, power

However, Firm A did not exert development

management). The differences in collaboration object

capabilities until the chipset was tested and verified inand timing result from the fact that the scope ofterms of product system consistency.

system integration in technology platforms differin

On the other hand, Firms B and C were involved

between Firm B and Firm C. Firm B used lesscollaborative

integrated chipsets while Firm C adopted total

problem-solving

after

the

engineering sample releases, when technologicalsolutions of more integrated chipsets.

system configurations had been already nailed down

These findings suggest that collaboration

by technology platform vendors. Firm B helped

purposes and timings may reflect the level of system

debug the system after the partner platform vendor

knowledge requirement rather than technological62Collaborative novel technology adoption in vertical disintegration

Table 2. Brief description of differences in collaborations

Technology Platform
Range of Platform(Vendor’s Coverage)
Interdependencies
between Core Chipset
and Other Levels

Collaboration Typeand Purposes (ProductDeveloper’s Role)
Collaboration Timing

Firm A
3G(W-CDMA); Symbian
OS and RTOS
Core, A part of C1 and C2

Firm B
2G/2.5G (GSM/GPRS),
Nucleus RTOS
Core, C1, A part of C2

Firm C
2G/2.5G (GSM/GPRS),
Nucleus RTOS
Core, C1, C2, A part of C3

with C1 (Circuits,
Recommendation
Components),
with C2 (PCB Reference
Board Design, Some Chips
and Devices, SW),
with C3 (Some “Advanced”
Applications and Devices)
Collaborative Partner forTechnology Platform
Development with Vendor A
and Several Firms

with C1 (Circuits,
Recommendation
Components),
with C2 (PCB Reference
Board Design, Some Chips
and Devices),with C3 (-)

with C1 (Circuits,
Specific Components),
with C2 (PCB Reference
Board Design, SpecificChips and Devices, SW),
with C3 (Real PCB Board
Design, Specific
Applications and Devices)
α-site Customer of Vendor
C for Reference Design
Development

Partly from Platform
Planning(Function/Specification
Design),Simulation & Debugging
before Engineering Sample
Tape-out

System Test & Debugging forEngineering Sample

α-site Customer of Vendor B
for System Test & Debugging

uncertainty (Table 2) and interdependencies. Firms

Reference
DesignDevelopment

integrated to provide utilities for customers.

have several levels of interfirm collaboration for

System performance is rather dependent on its

technology development and product development

ability to mediate between a variety of types ofaccording to the difference between the platform

knowledge within and between firms (Henderson &range and the range of interdependencies between

Cockburn,core components and other system levels of nested

compatibilities between core technologies andmodules, though interfirm relationships are often

components/devices are ensured (Brusoni & Prencipe,characterized by simple classifications, such as

2001; Brusnoi, et al., 2001). Thus, the ability to spanclosed/open dichotomy.

knowledge boundaries between firms is particularly

The capabilities of novel technology adoption

1994)

to

the

extentthat

mutualhighlighted in modularized interfirm development

rather rest on the management of system knowledge

processes (Prencipe, 2003).

of nested modules across firms even in the interfirm

At last, we should note that some of the Chinese

modularity of technology development process andlocal mobile phone handset manufacturers suggested

product development process. Technologies have thethat Vendor C’s total solutions would make it difficult

attribute of a “system” in nature (i.e., they are

to develop distinguished handsets. This situation isembodied in multicomponents and interrelated toalso the case in other digital product industries (e.g.,each other). A set of components together is

DVD player). Although Vendor C’s total solutions
63

Yasumoto and Shiu

can shorten product development lead time to market,

attempts to elucidate how and why productcustomer firms can hardly differentiate their products

developers

as Vendor C encapsulates most product functions into

collaborate with each other for novel technology

the chipsets or bundles other components with theplatform adoption in the modularized interfirm

solutions.

development processes.

In the case, not only task boundaries but also

andtechnology

Cooperation

under

platforminterfirmvendors

development

knowledge boundaries are enlarged to product systemprocess modularity is oriented to system integration

design beyond traditional technology platformof nested modules rather than technology integration.

vendors’ boundaries. Accordingly, Vendor C is rather

The cases studied in this paper revealed that theoriented to vertical integration in place of mutual

partial distribution of system knowledge as well asinterfirm

handsetcomponent knowledge across firms drives the

manufacturers can hardly balance the tension

collaborative process. Each single firm cannot

between cooperation and competition. This fact

maintainwould imply that the management of systemproblem-solving (Brusnoi, et al., 2001). Novelknowledge

technology

coordination.

beyondAsainterfirm

result,boundaries

of

all

the

knowledge

adoptionrequiresrelevant

producttosystemmodularized development processes would shape notknowledge of nested modules, which provides aonly the firms’ competitiveness but even the

deeper level of knowledge beyond the architecturaldynamism of interfirm labor division structures.

level (Prencipe, 2003) even in modularized interfirm
development processes.
A product developer should acquire new core

5. Conclusion
The

technology

technology

providesbasicarchitectural system configurations according tobeen

underlying product technology bases, in order tomodularized into relatively independent interfirm

quickly design their products consistent with novel

processes.

manufacturing

technology platforms. At the same time, a technology

processes is often regarded as the critical source of

platform vendor needs to examine and refine its

manufacturers’

competitiveness.

solutions according to product system knowledge of

Nevertheless, nowadays, product developers can

product system designs. The interfirm overlapping

exploit even core technologies from specialized

processes

vendors as such vendors provide standardized

development

technological solutions. Drawing on the cases of theenhances problem-solving for sharing/refining such

Japanese, Taiwanese, and Chinese firms, the study

system knowledge.

of

many

and

which

product

development

development

knowledge,

industries

Development

inimitable

and

has

64

between
and

late
early

technology
product

platform

development

Collaborative novel technology adoption in vertical disintegration

Product development capabilities depend uponunder interfirm development process modularity can

the interfirm management of both component andsupport each other to overcome such knowledge

product system knowledge and related boundary

insufficiency problems.

spanning, particularly in the vertical integration of

The Chinese 3G TD-SCDMA development may

product development of complex products likeconfirm this finding. The Chinese digital productautomobiles (Clark & Fujimoto, 1991; Dyer &industries seemingly rely on and take advantage ofNobeoka, 2000; Takeishi, 2002). On the other hand,interfirm

the cases here show that the capabilities of novel

TD-SCDMA development collaborative networks

technology adoption will be relevant to thebetween base station vendors, technology platform

management of system knowledge of nested modules

vendors, brand manufacturers, IDHs, and software

across technology development process and productvendors have successfully advanced TD-SCDMA

development process under the interfirm process

technology development. The insufficiency ofmodularity.

technological and system knowledge in the Chinese

product

modularity.

However,the

These finding should contribute not only to

local firms would be compensated for by major global

revealing the managerial issues involved in novel

technology platform vendors (e.g., ADI, TI, Infineon,technology

interfirm

NXP) and brand manufacturers (e.g., Nokia,

development processes, but also to explicating theMotorola, Samsung, LG) who have been indirectly

dynamism of the technology development andinvolved in the networks through partnerships withproduct development in open interfirm networks. As

the local firms.

adoptioninmodularized

elucidated in the HDD case, the lack of system

On the other hand, several total solution vendors

knowledge may decay firms that depend upon

attempt to encapsulate various functions into theirproduct modularity and corresponding modularized

standardized chipsets in the continuous improvement

product development (Chesbrough & Kusunoki,of the semiconductor process. Encapsulation would

2001).

unilaterally urge product developers to exploit total

However,

the

cases

elucidatethatsolution platforms so that these developers cancomplementary knowledge (i.e., system knowledge)

developis

betweenknowledge accumulation. In order to deploy

manufacturers and vendors. The finding would show

distinctive product systems, manufacturers need toa witnessing fact that product modularity andmake sufficient investment in system knowledge

corresponding modularized product development(Brusoni & Prencipe, 2001). However, encapsulation

does not necessarily hinder the system reformation

yields a variety of homogeneous products to cause

owing to technological changes. Specialized firms

harsh competition without remarkable productprovidedinthecollaboration

65

products

without

sufficientsystemYasumoto and Shiu

evolution while accelerating product development.

Acknowledgement

Encapsulation seems to enhance thoroughinterfirm modularity, more divided relationship of

The study was financially supported by thedevelopment processes between vendors and product

Grant-in-Aid

developers, and thus hinder bilateral mutual learning(2005-2006, 2007-) and C (2006-), Ministry of

between them. However, as revealed in this study,

Education,bilateral relationships encourage both vendors andJapanese Government.

for

Scientific

Culture,Science,ResearchandB

Technology,

product developers to nurture system knowledge ofnested modules to the extent that this knowledge

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ABAS: Annals of Business Administrative ScienceVol. 6 December 2007

CHIEF EDITOR

Junjiro Shintaku, the University of TokyoEDITORIAL BOARD

Makoto Abe, the University of Tokyo
Takahiro Fujimoto, the University of Tokyo
Makoto Kasuya, the University of Tokyo
Nobuo Takahashi, the University of Tokyo
Technical Editor: Maki Nishida, Global Business Research Center

ABAS: Annals of Business Administrative Science is published annually by Global
Business Research Center, Marunouchi, Chiyoda-ku, Tokyo, JAPAN. http://www.gbrc.jp