_The Global Information and Communications Technology Industry: Where Vietnam Fits in GVCs_ relocated with relative ease. Accordingly, GVCs in the ICT industry are more geographically extensive and dynamic than in any other sector.

Evidence of the importance of the ICT hardware sector in GVCs can be found in statistics on intermediate and final goods trade. Trade in intermediate goods is indicative of GVCs because fragmented production processes require that parts, components, and partially manufactured subassemblies cross borders—sometimes more than once—before finished goods are shipped to final markets (Feenstra 1998; Dean, Fung, and Wang 2007; Brülhart 2008). Data on trade in intermediate and final goods can be found in the World Bank’s MC-GVC database, which in addition to electronic hardware covers the automotive and textile/apparel/footwear industries. As Table 1 shows, world merchandise exports have grown faster than world GDP since from 1988, until 2011, when the current collapse of international trade began to reverse the trend (from 20112014 world GDP slowed to 2.2% per year while world merchandise exports grew at less than 1%). Trade in ICT hardware is the largest of the three sectors covered by the World Bank’s MC-GVC database, and its importance has grown from 11% of total merchandise exports in 1988 to 16% in 2014 (from US$ 69 billion to US$ 2.7 trillion). Intermediate ICT goods exports grew faster than final goods in the period 1988-2011, but slightly more slowly since.

From a GVC perspective, countries with very high levels of intermediate goods imports tend to act as hubs for final assembly and export of finished goods (unless they are large reexporters). Historically, the United States was the top location for electronics manufacturing and export, followed by Japan and Germany. Today, these countries are still in the game, in regard to production (especially of intermediates), ownership of intellectual assets, and orchestration of the GVC, but their importance as traders of ICT goods as China has become the most important location for final assembly, by a wide margin. While pioneering electronics producers from the United States, Japan, and Germany began experimenting with re-locating labor-intensive aspects of production in low cost locations in the 1970s and 1980s, the offshoring of ICT hardware assembly gathered steam in the 1990s, and exploded after the bursting of the “dot-com” bubble in 2001. These trends are reflected in Figure 1, which show the rise of China (and SAR Hong Kong mainly as a re-exporter to China) as the largest importers of intermediate ICT hardware goods, by far. Vietnam’s more recent recent appearance as a location for the high volume final assembly of ICT final goods is suggested by rising imports of intermediates, which can be detected at the bottom of Figure 1.

**Table 1. World Exports ICT Hardware in 1992, 2008, and 2014, millions of current US$**

||1988|2011|2014|_CAGR_<br>_1988-2011_|_CAGR_<br>_2011-2014_|_CAGR_<br>_1988-2014_|
|---|---|---|---|---|---|---|
|**World GDP**|18,042|68,009|72,680|_5.9%_|_2.2%_|_5.5%_|
|**World Merchandise Exports**|627|16,472|16,910|_15.3%_|_0.9%_|_13.5%_|
|**ICT Hardware Exports**|69|2,487|2,690|_16.8%_|_2.7%_|_15.1%_|
|_% of World Merchandise Exports_|_11%_|_15%_|_16%_||||
|Final Goods|41|1,291|1,410|_16.2%_|_3.0%_|_14.6%_|
|_% of ICT Hardware_|_59%_|_52%_|_52%_||||
|Intermediates|28|1,196|1,280|_17.7%_|_2.3%_|_15.8%_|
|_% of ICT Hardware_|41%|48%|48%||||

Note: all values in millions of US dollars at current prices and exchange rates. Sources: Merchandise Exports: UNCTADstat, http://unctadstat.unctad.org/wds. World GDP: World Bank World Development Indicators, <u>http://data.worldbank.org/data-catalog/world-development-indicators</u> ICT Hardware trade: World Bank MC-GVC Database using a consistent 175 country panel that accounts for 95-98% of world trade, see: http://wits.worldbank.org/WITS/WITS/AdvanceQuery/GVC/GVCQueryDefination.aspx?Page=GVCIndicator 5