_The Global Information and Communications Technology Industry: Where Vietnam Fits in GVCs_ features, another background elements, another textures to be used by other programmers, and so on. Or, an enterprise software ‘IT consultancy’ might rely on ‘platform’ software from Oracle, Microsoft, or SAP to build systems customized for particular ‘vertical’ applications, such as for taxation or for the capture, storage, search, and analysis of medical records. Shifting parts of the value chains to low-cost locations lowers prices, which speeds adoption of information technologies across the world, leading to productivity spillovers (Mann and Kirkegaard 2006). However, fragmentation in GVCs can also mean that companies and even entire countries and regions can sometimes participate in the industry yet be walled off from higher value added activities and from innovation and the processes of new industry creation (Dedrick, et al., 2010). For policy makers, the focus is shifting to capturing high-value added niches in GVCs; abandoning attempts to create fully vertically integrated national industries — an increasingly anachronistic approach. For statisticians, fragmented GVCs put a premium on the identification and tracking of intermediate goods and services flows (Sturgeon and Memedovic, 2010; Escaith and Timmer, 2012).

Generally speaking, the ICT industry is too international and too important to broader economic development to be a significant target for protectionist policies. Electronic hardware and systems are rightly perceived as having a positive effect on other industries. Furthermore, expertise related to innovation has tended to be concentrated in only a few places (for example, in Silicon Valley, California, and in large firms based in the United States, Europe, and Japan). As a result, politicians and policy makers have been loath to put too much pressure on firms to produce locally or to put up barriers to trade, even during economic crises. Intense competition, at first between American and Japanese producers, along with a series of boom and bust cycles driven by forces both internal and external to the industry (Brown and Linden 2009), are what pushed early fragmentation of electronics GVCs, rather than trade barriers and local content rules alone, as has been the case in the textile/apparel and automotive sectors.<sup>5</sup> Because trade barriers have been minimal in this industry worldwide, the main impact of the 2008-2009 economic crisis was to sharply reduce demand, driving the full absorption of operating inventories and accelerating existing trends toward industry consolidation and shifts to low-cost production geographies.

# **ICT Hardware**

The ICT hardware industry is the world’s most important goods-producing sector. Each year, the industry generates a mushrooming array of products and services. Now deeply entwined in our social fabric, ICT products and systems support critical aspects of communication, education, finance, recreation, and government. While statistics on global manufacturing employment are not available, consider the case of the United States, where innovation in ICT hardware, which employed 1,054,700 in 2014, has helped spawn a host of upstream and downstream ICT service industries, including computer systems design services, telecommunications, as well as data processing, hosting, and related information services, which together employed 3,205,300.<sup>6</sup> Maintenance and repair, and wholesale and retail trade of electronic goods accounted for another 329,800 US jobs in 2014.

Worldwide, thousands of companies from dozens of countries contribute to the industry on a daily basis. Even a single product can contain work carried out by dozens of firms in multiple countries. Because there is less need for co-location of engineers than in other technology-intensive sectors, it is relatively easy for ICT firms to engage in the twin strategies of outsourcing and offshoring. As a result, international sourcing is common. Business functions can be separated and

> 5 Local production in autos is also driven by high product variation, the heavy and bulky nature of some components, and the low inventory demands of “lean production” practices. 6 U.S. Bureau of Labor Statistics Current Employment Statistics program, <u>http://www.bls.gov/data/#employment, accessed Janurary 15, 2010.</u>

4