# **_Global Value Chains in the Electronics Industry                       Sturgeon and Kawakami_**

advertising, Google’s main source of revenue. In the context of Google’s business model, HTC branded phones are welcome. If Android takes hold in mobile electronics, opportunities for HTC and other firms with the design capabilities to become “Platform Brands” could expand rapidly.

## **_Emerging Factory-less Start-ups: Moving into the Driver’s Seat?_**

Recently, a few firms from developing countries have been able to engage in pure systems integration, assembling system elements purchased through the global supply base. In this sense, they resemble factory-less start-up firms typically seen in advanced technology regions such as Silicon Valley, California. Such firms may or may not have a strong technology kernel, but they inevitably have a clear product roadmap and marketing strategy, and rely on a host of technology and (if needed) manufacturing partners to realize their finished products or services. An example from the automobile sector is Chery, a small state-controlled Chinese automobile company based in Wuhu, some 200 km west of Shanghai. The company has been able to develop and market a line of Chery-badged vehicles within a remarkably short time by making use of the supply base, both within China and in the West, for a full range of inputs, from parts to process technology to design expertise.<sup>23</sup> These sourcing arrangements, which have only recently become readily available for fledgling companies like Chery to piece together, show that Chery is nothing like a typical car company, and that it is far removed from the most recent entrants to the mass market for cars, the vertically integrated and horizontally diversified national champions from Korea: Hyundai, Kia, and Daewoo.

Similar cases from the electronics industry can be found in the area of portable global positioning (GPS) and portable navigation devices (PNDs). Until the early 2000s, the mobile navigation market was dominated by Japanese manufacturers such as Pioneer, Panasonic, and Clarion. These firms supplied automakers with very sophisticated systems with rich functions. Because U.S. government policy limited the accuracy of global positioning system (GPS) signals prior to 2000, the systems developed by Japanese electronics firms relied on comparisons of measured distance and direction traveled to on-board map databases. While some of these systems were sold as aftermarket products, many were supplied directly to automakers for inclusion as optional in-dash original equipment on new cars. These firms worked closely with auto makers to customize products and meet strict quality standards. Their products had integral system architectures based on proprietary technologies developed in-house and were extremely expensive, as much as one-tenth of a car’s sale price.

In the early 2000s, the availability of more accurate GPS signals allowed a set of start-up PND makers to enter the market with ultra-low-cost aftermarket products that quickly began to erode the profits and market share of traditional car navigation makers. Among the market share leaders today are Netherlands-based TomTom, U.S.- and Taiwan-based Garmin, and Mitac, based

> 23 For styling and engineering, Chery works with Italdesign, Pininfarina and Torino in Italy. Additional engineering and development work is outsourced to Lotus Engineering and MIRA in the UK and to Porsche Engineering in Germany and Austria. It works with AVL in Austria on gasoline and diesel engines, and with Ricardo in the UK on hybrid powertrains. Heuliez in France supplies a retractable hardtop for the Chery A3 coupe cabriolet, a car designed by Pininfarina. For critical parts and subsystems, Chery sources from global suppliers such as Bosch, ZF, Johnson Controls, Luk, Valeo, TRW and Siemens VDO (Whittaker et al. forthcoming).

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