Competition and Collaboration between Japanese and Taiwanese Firms in Optical Disk Industries

Abstract

Abstract: Historically, Japanese firms have been leading the optical disk industry in technological development and market development; however, Taiwanese and Korean firms are quickly catching up and have surpassed Japanese firms in terms of production volume. This paper focuses on the optical disk industry in Taiwan and analyzes the factors that have enabled Taiwanese firms to quickly catch up to Japanese firms. Our analysis show that cooperation with Japanese firms and international specialization have been the prerequisites of business activities in Taiwanese firms. This suggests that symbiotic relationships as well as competitive rivalries exist between firms in developed countries and those in developing countries that are quickly catching up.Keywords: optical disk, global competition, technology transfer, collaboration, Taiwan1. IntroductionToday, due to the worldwide popularity of optical disk drives such as CDs and DVDs, used in audiovisual devises and personal computers (PCs), the shipment volume reached about 600 million and the market scale surpassed 2.5 trillion yen in 2004. Recording media has also flourished, with CD-Rs alone becoming the largest recording media in history, with annual shipments of over 10 billion (Ogawa, 2009).Japanese firms have been leading the world in the technological developments of optical disks. An overview of the major standard bearers in the industry begins with Sony and Philips in CD audio and CD-ROM; Sony and Taiyo Yuden in CD-R; Toshiba, Matsushita, and a number of other Japanese firms in DVD players and DVD-ROM; Pioneer in DVD-R; and Ricoh in DVD+R. Furthermore, regarding the recording media, Japanese firms such as Taiyo Yuden, TDK, Hitachi Maxell, and Mitsubishi Chemical have developed the materials and production methods and led the introduction of the product to the market.Japanese firms have led technological developments within the optical disk field and proposed technological standards to the world. These standards have been accepted not only in the audiovisual market but also in the PC market. Thus, the technologies developed by Japanese firms have set global standards and created large markets.Between the introduction stage and early growth stage of the product life cycle, Japanese firms had been dominant in the market. However, during the latter growth stage when the technologies were established as the global standard and the market began to fully grow, Japanese firms rapidly lost their market share to foreign companies.Figure 1 summarizes the trends in shipments of optical disk drives used in PCs. It shows that the production of Taiwanese firms grew rapidly in the latter half of the 1990s, occupying a large market share. Indeed, Japanese, Taiwanese, and Korean firms have a three-way share in market for optical disk drives used in PCs.On the other hand, in the production volume of optical disk media, the decline in the share of Japanese firms and the rise of Taiwanese firms have become evident. Figure 2 shows the trends in production of CD-Rs.The CD-R market saw rapid growth after 1999. Taiwanese firms were responsible for much of the growth; the firms garnered a 70-80% share of global production since 1999.Despite the fact that Japanese firms were in control of technological development and new product introduction in the optical disk industry, how have Taiwanese and Korean firms been able to grow and even surpass Japanese firms in terms of production volume? This paper examines the factors that facilitated the rapid growth of Taiwanese firms in the optical disk industry.We argue that the development of Taiwan's optical disk industry was not merely a game of international competition, but it was based on cooperation with Japanese firms and international specialization. In other words, we argue that developing countries were able to catch rapidly up not only because of competitive rivalry with developed nations but also because of cooperation with them. …