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

systems, highly automated robotic equipment can be reprogrammed with relative ease, making the work highly geographically mobile. In final assembly, however, automation is more difficult because of the radically different size and shape of finished products and poor flexibility of the equipment used. Assembly personnel, therefore, have had to adapt to a much more complex and challenging production environment. Instead of performing one or a few operations on the same product for months at a time, line workers must frequently perform new and different operations as a variety of products move down the line. Such work is much less geographically mobile.

Materials management, for both circuit board and final assembly, are also much more complex, and many plants are working to adopt the most advanced “lean production” methods for maintaining quality in the face of product variety. While circuit board assembly machines still feed final assembly stations in linear fashion, final assembly has been reorganized into “cells” that hold very little inventory and where workers perform several tasks rather than a single task. Finally, new logistics functions have been added to ship small lots, often by air, directly to retailers for distribution. Materials management, testing, and quality assurance systems have all been upgraded dramatically to accommodate the vast increases in product variety.<sup>12</sup> The retraining and new process development specified here were implemented in 2001– 02 for a small number of old and new products that fit the target profile of the plants. These new capabilities in turn provided a platform to win new low-volume, high-mix business in the period 2003–05. Since then, the Guadalajara electronics cluster has solidified its new role and employment has rebounded to pre-2001 levels, with a higher ratio of engineering and other skilled occupations. This is reflected in figures on exports per worker, which rose from 128,610 in 2000 to 226,723 in 2008. Due to the sudden drop in demand during the most recent economic crisis, this figure fell to 188,143 in 2009 (authors’ calculations, CADELEC 2010). Because of the new product mix, high investment in worker training, and decreased portability of the work now performed in Guadalajara, contract manufacturing firms have apparently been more reluctant to engage in massive layoffs during the recent economic crisis than they were in 2001, at least so far (see year 2009 in Figure 3). While growth of high-tech employment in Jalisco State did decrease in 2009, employment remained stable at about 78,500 workers, 83 percent of whom were in manufacturing (CADELEC 2010).

The changes in Guadalajara’s electronics industry since 2001 are a striking example of “industrial upgrading” (Humphrey and Schmitz 2002), in which the industry shifts to higher value products, more advanced processes, and adds a host of new functions and services. However, it is important to note that many of the techniques that support these changes were developed outside of Guadalajara. In this way, global contract manufacturers can provide a powerful mechanism with which to disseminate best practices. On the other hand, our field research also found that local officials, plant managers, and workers played a powerful role in the transformation of the region. Finally, while employment at foreign-owned contract manufacturing facilities is now back to 2001 levels, local suppliers have not made the transition to the new high-mix product profile of production in Guadalajara, and employment has not recovered at most of these firms.

> 12 Increases in product variety vary by firm, but in general it has increased by several orders of magnitude, that is, from tens to thousands. As a result, the number of components in use have increased even more dramatically.

26