OEM to ODM, not many succeeded in shifting from ODM to OBM (Sturgeon and Lester 2004). The reason being that East Asian firms had difficulty in functions associated with OBM like importing, sales, marketing and distribution, which are considered very different from their core competencies in manufacturing and design. Figure 1. Supplier-Oriented Industrial Upgrading Path. Players
Parent Company
Production Chain
Lead Firm
• • •
Original brand manufacturing (BM)
Original design manufacturing (ODM) First-tier Suppliers Original equipment manufacturing (OEM)
Second-tier Suppliers
Functions
Assembly and testing
Research, product design and development Sales and marketing Supply chain management
•
Conceptualize, develop, manufacture and sell under own-brand name
•
Post-conceptual design services to the manufacturing function; product for sale under brand name of customers
•
Production of locally sources components manufactured to design and specifications provided by customers
•
Assembly and testing of components supplied by customer
The production shifts in the NIEs from assembly to OEM/ODM and OBM changed the geographical landscape of international trade in electronics. As the NIEs become firsttier suppliers to the lead firms, they opened the opportunity for the ASEAN-4 (Indonesia, Malaysia, Philippines and Thailand) and recently, China and India to be integrated into the production network as second-tier suppliers, performing the assembly and testing requirements of the NIEs. As first-tier suppliers, the NIEs played an intermediary role between the lead firms and the second-tier suppliers. Malaysia, Thailand and Indonesia are considered to have the broadest and most mature assembly capacity for components (Ng and Yeats 2002)4. On the other hand, the Philippines is considered to be promising in the semiconductor industry.
4
Thailand is considered to be the most promising regional production base for the automobile industry (Flynn, Alkire and Senter 1999). The country is poised to become the automotive hub of ASEAN, both in terms of commercial and passenger vehicles as well as parts manufacturing (Tham 2003).
4