Chapter 14
Hardware production in the global context
How could Vietnam find its niches?

Like computer software, the IT hardware is the final outcome of a long series of innovative activities taking place before the end-user can operate a computer system or enjoy a consumer product. Someone, somewhere, must conceive the product. Then, the product must be designed, manufactured, tested, sold, and installed. A similar process of innovation must be carried out for each component that makes up the final product.

Much of modern electronics are based primarily on semiconductor tech- nology, particularly integrated circuits. An integrated circuit is able to house millions of micro components (such as transistors, resistors, capacitors, diodes, etc.) on a single flake of silicon no larger than a thumbnail. But an integrated circuit by itself is of little use. Integrated circuits are only useful as one of many components that make up final products.

Final products are assembled from various semiconductors (including integrated circuits), bare circuit boards, connectors, wire harnesses, plastic or metal cases, picture tubes or flat panel displays, and the like. In this way semiconductors and other components are 'packaged' into final products. After the product is manufactured, it must be marketed, sold, distributed, installed, and, from time to time, serviced. If the product is to be used as part of a larger system, it must be 'integrated' into a systems design in order to be usable. In a highly simplified manner, Figure 4 outlines the various stages of production in electronics for both components (part A) and final products (part B).

Figure 4
Stages of production for electronic components and final products
A) Components (such as bare circuit boards, semiconductors, and plastic cases):
CONCEPTUALIZATION Stages of Production END USE
Product Design Manufacturing Design Component Manufacturing Distribution
Stage 1 Stage 2 Stage 3 Stage 4
B) Final Products (such as televisions, computers, and fax machines):
CONCEPTUALIZATION Stages of Production
Manufacturing-Related Function 		END USE
Product Design Manufacturing Design Component Purchasing Product Manufacturing Systems Integration Marketing Sales, Service
Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6
SOURCE: BRIE (Berkeley Roundtable on the International Economy), University of California, USA.

For policy purposes, we use a very broad definition of "production" -- covering all stages of electronics production from conceptualization of a new product to its installation at the premises of the end-user -- in order to high- light the range of activities and actors involved in the IT industry. We treat manufacturing as an important, but not all-encompassing stage of production.

The optimal tools for government to support one stage of the long production process may be different than for other stages. For example, policies designed to encourage 'product design' (stage 1) may include market research, the formation of venture capital for start-up companies, and estab- lishing computer aided design (CAD) centers. While policies designed to encourage 'manufacturing related functions' (stages 2 through 4 in part B) could include investment in CAD tools specifically intended for printed circuit board layout (stage 2), establishing connections with component distributors in Singapore and Hong Kong (stage 3), and helping to upgrade Vietnamese companies engaged in electronics production from hand assembly of printed circuit boards to automated assembly. Because of the special importance of software in systems integration (stage 5), policy recommendations for this stage of production were already discussed in Chapter 13 .

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