THE MACMILLAN SERIES OF ILO STUDIES

Iftikhar Ahmed (editor) BIOTECHNOLOGY: A HOPE OR A THREAT1

Richard Anker and Catherine Hein (editors) SEX INEQUALITIES IN URBAN EMPLOYMENT IN THE THIRD WORLD

W. R. Bohning STUDIES IN INTERNATIONAL LABOUR MIGRATION

Enyinna Chuta and Carl Liedholm EMPLOYMENT AND GROWTH IN SMALL-SCALE INDUSTRY

Ghazi M. Farooq and George B. Simmons (editors) FERTILITY IN DEVELOPING COUNTRIES

David J. C. Forsyth TECHNOLOGY POLICY FOR SMALL DEVELOPING COUNTRIES

Dharam Ghai, Cristobal Kay and Peter Peek LABOUR AND DEVELOPMENT IN RURAL CUBA

Dharam Ghai, Azizur Rahman Khan, Eddy Lee and Samir Radwan (editors) AGRARIAN SYSTEMS AND RURAL DEVELOPMENT

Jeffrey James and Susumu Watanabe (editors) TECHNOLOGY, INSTITUTIONS AND GOVERNMENT POLICIES

Nicolas Jequier and Yao-Su Hu BANKING AND THE PROMOTION OF TECHNOLOGICAL DEVELOPMENT

Azizur Rahman Khan and Dharam Ghai COLLECTIVE AGRICULTURE AND RURAL DEVELOPMENT IN SOVIET CENTRAL ASIA

Ng Sek-Hong and Victor Fung-Shuen Sit LABOUR RELATIONS AND LABOUR CONDITIONS IN HONG KONG

Guy Standing UNEMPLOYMENT AND FEMALE LABOUR

Wouter van Ginneken and Christopher Baron (editors) APPROPRIATE PRODUCTS, EMPLOYMENT AND TECHNOLOGY

Susumu Watanabe (editor) MICROELECTRONICS AND THIRD-WORLD INDUSTRIES

A. B. Zahlan ACQUIRING TECHNOLOGICAL CAPACITY

The ILO's World Employment Programme (WEP) aims to assist and encour­

age member States to adopt and implement active policies and projects designed to promote full, productive and freely chosen employment and to reduce poverty. Through its action-oriented research, technical advisory

services, national projects and the work of its four regional employment teams in Africa, Asia and Latin America, the WEP pays special attention to

the longer-term development problems of rural areas where the vast majority

of poor and underemployed people still live, and to the rapidly growing urban

informal sector. At the same time, in response to the economic crises and the growth in

open unemployment of the 1980s, the WEP has entered into an ongoing

dialogue with the social partners and other international agencies on the social dimensions of adjustment, and is devoting a major part of its pol­

icy analysis and advice to achieving greater equity in structural adjust­ment programmes. Employment and poverty monitoring, direct employment creation and income generation for vulnerable groups, linkages between macro-economic and micro-economic interventions, technological change and labour market problems and policies are among the areas covered.

Through these overall activities, the ILO has been able to help national decision-makers to reshape their policies and plans with the aim of eradicating mass poverty and promoting productive employment.

This publication is the outcome of a WEP project.

The designations employed in ILO publications, which are in conformity

with United Nations practice, and the presentation of material therein do

not imply the expression of any opinion whatsoever on the part of the

International Labour Office concerning the legal status of any country, area

or territory or of its authorities, or concerning the delimitation of its frontiers.

The responsibility for opinions expressed in studies and other contrib­

utions rests solely with their authors. and publication does not constitute an

endorsement by the International Labour Office of the opinions expressed

in them. Reference to names of firms and commercial products and processes does

not imply their endorsement by the International Labour Office. and any

failure to mention a particular firm, commercial product or process is not

a sign of disapproval.

Microelectronics and Third-World Industries

Edited by

Susumu Watanabe Professor of Economics, Tokyo International University

A study prepared for the International Labour Office within the framework of the World Employment Programme.

M

© International Labour Organisation in 1993

Softcover reprint of the hardcover 1st edition 1993 978-0-333-58720-1

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ISBN 978-1-349-13124-2 ISBN 978-1-349-13122-8 (eBook) DOI 10.1007/978-1-349-13122-8

Contents

Preface viii

Notes on the Contributors X

List ofT abies xii

List of Figures xiv

1 Introduction 1 Susumu Watanabe

Problem Setting 1 Problem Areas and Terminology 4 FA and Conventional Automation Technologies 6 Plan of the Volume 9 Main Conclusions 11

2 Mexico 14 Lilia Dominguez-Villalobos

Introduction 14 Diffusion ofF A Equipment among the

Sample Firms 20 Reasons for Adoption and Non-Adoption of

FA Machinery 24 The Impact on International Competitiveness 27 The Impact on Labour 29 FA and the Maquiladoras 38 Conclusions 41

3 Malaysia and Singapore 46 Fong Chan Onn

Introduction 46 National Policies and the Spread of the

New Technology 47 Diffusion ofF A Machines among the Sample Firms 50

v

vi Contents

Purposes of FA Applications 53 The Impact of the New Technology 55 Factors Influencing the Pace of FA Diffusion 59 Conclusions 62

4 Brazil 70 Afonso C. C. Fleury

Introduction 70 Trends in the Brazilian Economy 71 Supplies of FA Equipment 73 Diffusion of FA Machinery: Its Motivation and

Obstacles 78 The Impact on Labour 83 ME and Local Technological Capabilities 85 Government Policies for Modernisation and

FA Diffusion 87

5 The Republic of Korea 92 HakK.Pyo

Diffusion of FA Equipment 93 The FA Equipment Industry 95 The Impact on the Indigenous

Technological Capacity 99 The Role of the Government 106 Summary and Conclusions 109

6 India 115 GhayurAlam

Introduction 115 India's Machine, Tool Industry 118 Production of NCMTs 120 Development of Local NC Industry 122 Development of Local NCMTs 124 Technology Import 127 Conclusions 132

Contents

7 Microelectronics and Third-World Industries: an Overview Susumu Watanabe

Vll

136

Diffusion of Microelectronic Industrial Technology 137 Purposes ofF A Applications 146 Determinants of the Diffusion ofF A 148 The New Technology, Trade and Employment 154 The Role of the New Technology in 'Catching Up' 158 Conditions of Successful Exploitation of the

New Technology 164 The New Technology and Organisational

Rationalisation 166 Summary and Conclusions 169

Glossary 178

Index 181

Preface

Microelectronics and industrial machinery based on it are among the essential elements of the ongoing Fourth Industrial Revolution in the industrial world, according to W. W. Rostow.* How far and in what ways are third-world economies benefiting or suffering from the adoption of these new technologies? There is by now a sizeable empirical literature on related subjects. Most existing studies, however, deal with individual countries, industries, firms or plants; they do not enable us to draw a global picture. The present volume, which is confined broadly to factory automation technologies, is an attempt to fill this gap.

The volume contains five country case studies and a global overview chapter, preceded by a brief introduction. These studies were prepared within the framework of the ILO's World Employment Programme (WEP), with financial support from the ILO regular budget and from the Swedish Government (SAREC).

In the absence of systematic statistics on the diffusion of new tech­nologies among the developing economies, export data on numerically­controlled (NC) machine tools from three main supplying coun­tries -Japan, the former Federal Republic of Germany and the United States - are used as a proxy in Chapter 7. Supplemented by production figures from wherever such machines are locally produced, these data provide us with a fairly accurate idea about the geographical pattern of microelectronics-based factory automation technologies in the Third World, as the use of other types of factory automation technologies is much more limited. Largely based on enterprise-level surveys, the country case studies in Chapters 2 through 6 contain information on the motivation and other factors influencing the diffusion of new technologies, as well as on the effects of their applications.

The countries chosen for the case studies -·Brazil, India, the Repub­lic of Korea, Malaysia, Mexico and Singapore - were vaguely known to be major users of new technologies, or to have potential to become

* W. W. Rostow, 'Long cycles and policy', in his Rich countries and poor countries (Boulder and London, Westview Press, 1987), p. 83.

VIII

Preface ix

one (in India's case). The main omiSSions are China and Taiwan (China). These gaps are filled in Chapter 7, using information from other sources.

In finalising the manuscript, I benefited from comments from the WEP Reading Committee: Gijsbert van Liemt, Ko Doeleman and Kurt Hoffman. The research project was launched while I was a WEP staff member; and its completion was delayed due to my return to Japan and subsequent health problems. I wish to express my regret for inconveniences that this delay must have caused to many people, especially the authors of the country case studies.

I would like to thank my former colleagues Ajit Bhalla, Ivan Elsmark and Susan Peters for their patience and continued encour­agement. My thanks are also due to Mrs Susan Saidi, who typed different versions of the book manuscript.

SUSUMU WATANABE

Notes on the Contributors

Ghayur Alam is Director of the Centre for Technology Studies, New Delhi. Formerly he was Senior Staff member of the National Council of Applied Economic Research (NCAER).

Lilia Dominguez-Villalobos is Professor at the Master in Economic Sciences Programme, National Autonomous University of Mexico. She has published articles on maquiladoras, technological and restructuring issues of the Mexican economy.

Afonso Fleury is Professor of Industrial Organisation at the School of Engineering, University of Sao Paulo. He is the author of Work organisation in Brazilian industry and a chapter on Brazil in The technological behaviour of state-owned enterprises, edited by J. James (Macmillan, 1989). He has also published, in Brazilian journals, several articles on technology, productivity and work organisation.

Fong Chan Onn is currently Deputy Minister of Education. At the time of writing he was Professor of Applied Economics and Dean of the Faculty of Economics and Administration, University of Malaya. He has served as a consultant to the Malaysian Government and various international organisations. His recent publications include Technological leaps: Malaysian industry in transition (Oxford Univer­sity Press, 1986); New economic dynamo: Structures and investment opportunities in the Malaysian economy (Allen & Unwin, 1986); and The Malaysian economic challenge in the 1990s: Transformation for growth (Longman, 1989), as well as many articles in international journals.

Hak K. Pyo is Assistant Professor of International Economics at Seoul National University. He has been consultant to various international organisations and visiting professor at International Monetary Fund in 1989-90.

Susumu Watanabe, former research coordinator at Technology and Employment Branch of the lLO, is Professor of Economics at Tokyo International University. He is the main author/editor of Interna­tional subcontracting: A tool of technology transfer (APO, 1978):

X

Notes on the Contributors xi

Technology, marketing and industrialisation (Macmillan India, 1983); Technology, institutions and government policies (with Jeffrey James) (Macmillan, 1985); Microelectronics, automation and employment in the automobile industry (John Wiley, 1987). He has also pub­lished many articles on small enterprises, subcontracting, technology, industrialisation and the Japanese economy.

List of Tables

1.1 Areas of application of microelectronics 4 2.1 Selected economic indicators of Mexico, 1978-88 15-16 2.2 Composition of the sample by industry, size

and ownership pattern 19 2.3 Growth of FA machinery use among the sample

firms, 1980-7 21 2.4 Motivation of adopting different types of

FA machinery 25 2.5 Reasons for non-adoption of FA machinery 27 2.6 Changes in the average export ratio and export

growth among the sample firms by firm group 28 2.7 Employment at the sample firms by firm

group, 1980-6 30 2.8 Labour-saving effects of FA machinery at

sample firms 32-4 2.9 Workforce composition at the user and

non-user firms 36 2.10 Trends in the maquiladora sector, 1979-88 39 2.11 Labour-saving effects of FA machinery at

sample maquiladoras 40 3.1 The use of FA machinery among the sample firms 51 3.2 Motivation for FA machinery adoption 53 3.3 Changes in the workforce size before and after

the FA adoption 57 3.4 Main constraints on the diffusion ofF A machinery 60 3.5 The employment impact of FA machinery on the

sample firms 67-9 4.1 Production of FA equipment in Brazil, 1986-9 74 4.2 Authorised producers of different types of FA

equipment and source of their technology 75 4.3 Local production and imports of NCMTs 76 4.4 Structure of the sample 78

xii

List of Tables xiii

4.5 Diffusion of FA machinery in selected Brazilian industries 79

4.6 The number of NCMTs per firm 80 4.7 Effects of FA application 82 4.8 Obstacles to FA application 82 4.9 Changes in the structure of the workforce at

the sample firms 84 4.10 The number of NCMT producers in Brazil 86 5.1 Microelectronic FA equipment in the Republic of

Korea: production, exports and imports 94 5.2 Growth of the electronics industry in

the Republic of Korea: 1970-88 97 5.3 Technological imports approved and

payments 1962-88 100 5.4 Recent trends of patent and utility model appli-

cations in the Republic of Korea 101 6.1 Average yearly foreign collaboration

approvals ( 1961-88) 116 6.2 Performance of the Indian machine tool industry 119 6.3 NCMT production in India 120 6.4 NC units used by Indian NCMT manufacturers 121 6.5 List of foreign collaborations (CNC lathes) 128 6.6 List of foreign collaborations (machining centres) 129 7.1 Exports of NC metal-cutting machines from

three major supplying countries to the Third World, 1980-90 138

7.2 Production and exports of NCMTs in the Third World 141

7.3 The structure of the Japanese domestic market for NC metal-cutting machines 152

7.4 World export market for metal-engineering products (SITC, Rev. 2, 7) by region, 1980-6 157

List of Figures

1.1 Unit labour cost using different types of machines 8 4.1 Supply of power systems for NCMTs by power

size and by type of supplier 87 5.1 Time profile of microelectronics in the Republic of

Korea: imports and domestic production 96

xiv