e-Business and Disintegration of the Semiconductor Industry Value Chain

Abstract

This paper examines the influence of Internet-based e-Business applications on the vertical separation of design, manufacture, equipment production and process development in the global semiconductor industry. Vertical specialization has contributed to the rapid growth of semiconductor manufacturing capacity in Southeast Asia and the creation of new forms of international production networks linking design and manufacturing specialists. Although these trends began before the development of Internet-related e-Business applications, the Internet is facilitating these trends and their effects on the geographic distribution of manufacturing capacity. At the same time, however, many of the opportunities created by e-Business applications for vertically specialized firms should prove equally advantageous to integrated device manufacturers. Obstacles to e-Business applications in the global semiconductor industry include standardsrelated issues, data-security concerns, and the needs for far-reaching internal reorganization of business processes, especially by smaller firms. All of these obstacles suggest that the adoption of e-Business and the realization of its productivity benefits or cost efficiencies are likely to occur slowly.