electronics contract manufacturing: global production and the international division of labor in the...

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Electronics ContractManufacturing: GlobalProduction and the InternationalDivision of Labor in the Age ofthe InternetBoy Lüthje

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Industry and Innovation, Volume 9, Number 3, 227–247, December 2002

ELECTRONICS CONTRACT

MANUFACTURING: GLOBAL

PRODUCTION AND THE INTERNATIONAL

DIVISION OF LABOR IN THE AGE OF

THE INTERNET

BOY LUTHJE

The role of information technology (IT) in production networks in developingcountries cannot be assessed without an analysis of the profound changes in the

productive structure of global capitalism. In contrast to the general perception of the‘‘informational economy’’ (Carnoy et al. 1993; Castells 1996) as service- or science-based, it has to be stressed that manufacturing still matters in the ‘‘new economy’’(Cohen and Zysman 1987). In the electronics industry, a new model of outsourcedmanufacturing has emerged as the centerpiece of globalized production networks—the model of contract manufacturing (CM) or electronics manufacturing services(EMS). This form of network-based mass production is closely linked to the disinte-gration of the value chain and the emergence of the ‘‘Wintelist’’ (Borrus and Zysman1997) model of competition and the rise of ‘‘fabless’’ product design companies inkey sectors of the IT industry.

Our analysis of electronics CM as a new type of post-Fordist mass productionexplores three interrelated areas of inquiry:

1. the patterns of vertical specialization and globalization in the IT industry, as relatedto new industry structures and changing architecture of IT networks;

2. the shift from traditional multinational corporations to global network �agships(Ernst 2001) that develop transnational and regional production networks withhierarchical layers of participants; and

3. the possible impact of CM on international knowledge diffusion and local capabilityformation, as emerging from the complex relationship between global centraliza-tion and divergent national, regional, and local manufacturing practices in the newindustry.

Our analysis is based on the assumption that new information technology, or theInternet per se, is not the driver for changes in industry structure. Such technologicaldeterminism has been effectively critiqued in earlier debates on technology develop-ment and innovation (e.g. Dosi 1982). In concordance with these authors, weconceive technology as developing and reproducing itself in the context of socialinstitutions, such as corporate strategies, market regulations, government interven-

1366-2716 print/1469-8390 online/02/030227-21 © 2002 Taylor & Francis Ltd

DOI: 10.1080/136627102200003447 1

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228 INDUSTRY AND INNOVATION

tions, and corporate, regional or national systems of labor relations (Esser et al. 1997;Noble 1984). The trend towards radically decentralized network architectures andcommunications �ows (Bar 1990) re�ects the erosion of the historic form of massproduction developed under the Fordist regime of accumulation of the post-war era(Aglietta 1979; Coriat 1979) and centered in the vertically integrated corporation, asanalyzed by Chandler (1962).

This perspective can be linked with newer discussions on the changing spatialstructure of manufacturing and technological learning. Storper and Walker (1989)have shown that spatial clustering is a structural element of the social divisionof labor in capitalist economies, re�ecting the historical formations of capitalistdevelopment. ‘‘Collective technological learning’’ (Saxenian 1994: 9) is a core functionof industrial clustering. Little consideration, however, has been given to the possibilitythat there may emerge different trajectories of technological learning depending onthe position of particular districts or regions within the international division of laborin the production networks of the respective industries. Furthermore, as we willdiscuss in this paper, vertical specialization may reinforce these differences, as newmodels of ‘‘fabless’’ production support the de-coupling of product innovation frommanufacturing.

The following analysis of electronics CM as a new type of post-Fordist massproduction is developed in light of this conceptual background. Our discussion isbased on recent empirical research, comparing the development of the CM industryin the Southern and Western USA, and in Eastern and Western Germany (Luthje et al.2002). From this point of view, we are addressing the impact of the CM industry onthe international division of labor and on knowledge-formation in newly industrializingcountries, a problem examined more closely in a current research project at theInstitut fur Sozialforschung on CM networks in Eastern Europe and Southeast Asia.

In this paper, we begin with an overview of the concept and structure of ITcontract manufacturing. We then go on to discuss the signi�cance of CM forproduction networks in the IT industry—with special regard to the relationshipbetween �agship companies and their manufacturing partners. Following this, weoutline the impact of CM on the organization of work and discuss the problem ofdiverging conditions, practices and cultures of manufacturing in transnational produc-tion systems. From this perspective, we will then consider the emerging internationaldivision of labor in CM and the role of low-cost locations in this scenario. Ourdiscussion of CM companies as transnational ‘‘network builders’’ will �nally lead usto some remarks on the role of the Internet for CM production networks in developingcountries.

CONTRACT MANUFACTURING IN THE WINTELIST IT INDUSTRY

Contract manufacturing is one of the fastest growing segments in the IT industry.Growth rates are currently averaging 20–25 percent per year. According to industryconsultants Technology Forecasters, the global market volume in the year 2000 wasUS$88 billion. The leading players of the industry, most of them former smallsubassembly companies, were hardly known a decade ago. Today, the biggest �rmhas annual revenues of US$20 billion. Market concentration is developing rapidly

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ELECTRONICS CONTRACT MANUFACTURING 229

with �ve companies of North American origin (Solectron, Flextronics, SCI, Celesticaand Jabil Circuits) emerging as the key players. The names of these companies areunfamiliar even to many insiders. Contract manufacturing providers do not post theirbrand name on any product. The Los Angeles Times, therefore, called the EMSindustry a system of ‘‘stealth manufacturing’’ (for an in-depth history of the industrysee Sturgeon 1999).

Arriving at an exact de�nition of the term ‘‘contract manufacturing’’ is not easy.The aforementioned consultants characterize a contract manufacturer as:

an independent company that assembles electronic equipment, on behalf of an OEMcustomer, in which the design and the brand name belongs to the OEM. . . . Thoughmechanical fabrication and assembly may constitute part of the services provided by theCM, the core of the service is electronic assembly. We also exclude from this de�nitionsubsystem or component manufacturers, such as power supplies, backplane, cable andharness assembly, and passive and active components. (Quoted with permission fromdatabase materials)

Contract manufacturing integrates a wide array of productive functions pertaining tocircuit board and hardware assembly, as well as product engineering at the board andsystems level, component design, process engineering, parts procurement, productful�llment, logistics and distribution, and after-sales services and repair or sometimesinstallation services. From the standpoint of the labor process, these functions canbe grouped along a continuum from the design and assembly of printed circuit boards(PCBs) and related components, to the �nal assembly of systems (box-build) andlogistics and inventory-related work (Luthje et al. 2002). Contract manufacturers areserving a growing range of product markets from personal computers and servers(the initial focus), over Internet routers and switching gear, to communicationsequipment (especially mobile phones), consumer products such as computer gameor television sets, industrial and automotive electronics, as well as space and aircraftelectronics.

The wide range of manufacturing services and products that contract manufacturersprovide distinguishes them from traditional subcontractors, or ‘‘board stuffers’’, inthe electronics industries. Whereas board stuffers perform labor-intensive assemblyprocesses strictly controlled by the original equipment manufacturer (OEM), CMcompanies have the real potential to develop and manage complex productionprocesses, often cross-national in scope (Sturgeon 1999). Contract manufacturing isalso different from more sophisticated sub-supply arrangements in the IT industry,particularly from original design manufacturing (ODM). As opposed to CM, ODMcompanies own the design of the product that is supplied to OEMs and sold undertheir brand name (as typical for computer monitors or for notebook computerssupplied by Taiwanese manufacturers to �agship companies like HP, Compaq, orDell).

A simple description of the position of CM in the production chains of the ITindustry has been given by Koichi Nishimura, the CEO of CM world-market leaderSolectron, known in the industry as ‘‘Dr. Ko’’:

The supply chain that we are happening to be part of is a time-based segment of themarketplace. People want what they want, when they want it, where they want it.Cheaper, faster, better . . . At the same time, product cycles in the supply chain are

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getting shorter and shorter. When you put these two phenomena together, manycompanies are forced to outsource. They can only focus on so many things. The moresophisticated companies work on wealth creation and demand creation. And they letsomebody else do everything in between. (Cited in Austin American Statesman19 October 1998)

Dr Ko’s de�nition is particularly elegant, since it relates CM to the new forms ofvertical specialization in the IT industry. What has been widely perceived as thedecentralization of information technologies can also be interpreted as the emergenceof a whole new industry structure, characterized by the generalization of verticaldisintegration and the commodi�cation of an increasing array of IT products andsystems, previously being offered as part of larger computer and communicationssystems (Ernst and O’Connor 1992). Driven by the growth and pro�t crisis in oldersegments of the IT industry, particularly in mainframe computers, the re-compositionof capital has assumed the shape of an ongoing creation of new interrelated industrysegments with relatively autonomous norms of production and technology (Luthje2001).

The term for the ruling duopoly in the PC industry, ‘‘Wintelism’’, has become ananalytical concept for the generic forms of corporate organization and market controlin the vertically specialized computer industry (Borrus and Zysman 1997; Borrus2000). The leading industry players are focusing on the engineering and design ofkey products in highly specialized market segments. Their mission is the de�nitionof new product markets through the development of breakthrough technologies andtheir rapid commercialization, creating control and economies of scale in the respec-tive market segments. The ‘‘PC-revolution’’ of the 1980s, in which merchant producerslike Apple or Compaq together with Intel and Microsoft in the microprocessor andsoftware �eld became global industry forces, and the subsequent emergence of thenetworking equipment industry led by Cisco, epitomizes this development (Luthje2001).

A most signi�cant element of this shift is the fact that an increasing number ofvertically integrated OEMs have been embracing the rules of Wintelism. At IBM, forinstance, vertically specialized business models were adopted in the PC and thestorage division in the second half of the 1990s. Other vertically integrated UScompanies followed by spinning off core businesses as fully autonomous companieslike AT&T in the case of Lucent or HP with Agilent. More recently, large Europeanelectronics companies have shifted to vertical specialization. Ericsson and Nokia wereat the forefront, followed by Siemens and recently Alcatel. In the case of Siemens,the biggest player in the European �eld, the shift towards CM has been pioneered bythe mobile phone and computing unit ICM (Luthje et al. 2002).

With regard to CM, four ‘‘stylized facts’’ in this scenario are of importance:

1. The once tightly integrated value chain has become commodi�ed, i.e. most ITproducts are complex commodities, assembled from traded parts and componentssupplied by various industry segments. The control of the time-cycle of newtechnologies and products has become the chief problem of manufacturingorganization in the industry.

2. As market control has shifted away from assemblers towards product de�nitioncompanies (Borrus and Zysman 1997), product innovation is increasingly de-

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coupled from manufacturing. As we will discuss later, this has important implica-tions for the international division of labor and the patterns of internationalknowledge diffusion associated with CM.

3. In contrast to Fordist and also ‘‘Toyotist’’ industry models, there are no ‘‘focalcorporations’’ (Sauer and Dohl 1994) that coordinate the value chain through theirown manufacturing operations. The ‘‘supplier pyramid’’ governed by large-scale�nal assemblers (as in the auto or TV industry) is replaced by networks ofinteracting industry segments. Hierarchy is de�ned by the �agships’ ability tocontrol technology development in key market segments.

4. The acceleration of technology and product development has produced enormousinstability across the value chain. Rapid expansion through the creation of newproduct markets is accompanied by old-style cycles of overproduction and surpluscapacities—a situation which is at the core of the current slump in the high-techindustry.

PRODUCTION NETWORKS AND THE GROWING VARIETY OF OUTSOURCING

RELATIONSHIPS

Wintelism as a mode of competition and market control, and CM as a form ofmanufacturing, are highly complementary. As Sturgeon (1999) points out, the birthof the CM industry was marked by IBM’s entry into the PC market in 1981. IBM didnot only, for the �rst time in its history, source the key components (the microproces-sor and the operating system) from two unknown outside suppliers, Intel andMicrosoft. Big Blue also contracted the assembly of the motherboards to a componentssupplier for the aerospace industry, SCI of Huntsville, Alabama, which was soon tobecome the leader of the CM industry.

The most important location for the initial growth of CM became Silicon Valley.Here, some of the vertically specialized companies in the computer and in theemerging network equipment industry, Sun and Cisco in particular, teamed up withspecialized contractors like Solectron (a former solar energy company) or Flextronicsfor the manufacturing of sophisticated PCBs, fostering the use of advanced automatedassembly equipment known as SMT (Saxenian 1994: 145ff.).

The relations between vertically integrated OEMs in the USA and Europe rapidlydeveloped during the second half of the 1990s. This happened mainly through theacquisition of entire plants from OEMs, such as IBM’s card assembly businessin Charlotte, North Carolina, and Austin, Texas, or Texas Instrument’s CustomerManufacturing Division. In Europe, the �rst steps resulted from outsourcing decisionson the part of US computer companies, as the sale of an IBM plant in Bordeaux(France) to Solectron, or of two HP facilities in Stuttgart (Germany) to Solectron andDII-Dovatron.

Swedish telecommunications manufacturer Ericsson was the �rst European OEMto sell off entire production units, starting with seven plants in Sweden which weresold to Flextronics and Solectron in 1997. In the large European economies, thisdevelopment took off with the sale of the Fujitsu-Siemens server manufacturing plantin Paderborn (Germany) to Flextronics in 1999, followed by a number of outsourcing

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TABLE 1: TYPES OF OEM–CONTRACT MANUFACTURER INTEGRATION

Fabless company—minimal �nal assembly and testing Full-scale manufacturing and supply chain-management(Cisco, Sun . . .) (engineering—logistics)Full-scale outsourcing of product lines and/or plants Full-scale manufacturing and supply chain-(IBM, TI, Siemens ICM . . .) management—plant conversionLarge-scale �nal assemblers with high volume Mass production of key components (dedicated lines)outsourcing of key components (Dell, Compaq,HP CSD)Customized �nal assembly in key markets (Compaq, Final assembly (box-build) (includes local CM partners)Dell, HP PCD in Europe and Asia)Still open: vertically integrated OEM from Japan and For example, Sony/Solectron, Acer/Solectron,Korea Mitsubishi/Solectron, Sony-Ericsson/Flextronics

Institut fur Sozialforschung—Projekt‘‘IT-Kontraktfertigung’’—2000.

deals with the same company in PC and mobile phone manufacturing. The currentslump in the IT industry is producing a whole new round of outsourcing deals, thistime led by Alcatel of France and, once again, Ericsson (Luthje et al. 2002).

The rapid expansion has brought about a highly differentiated spectrum of outsourc-ing relationships, emerging from various corporate strategies and traditions as well asfrom nation- and region-speci�c manufacturing practices. As Table 1 explains, thefollowing basic forms of integration can be distinguished:

· Full-scale system manufacturing (board assembly and box-build) for fabless tech-nology de�nition companies, as practiced by Cisco, 3Com or recently Microsoft forits X-Box game console.

· Spin-off of existing production facilities from major OEMs to contract manufacturerswith continuing contractual relationships. This has resulted in a similar shift of full-scale PCB assembly and box-build operations as in the case of fabless companies. Adifference results from the fact that this form of cooperation involves the transforma-tion of the respective plants from a traditional organization into CM operations,often including substantial restructuring of work practices and in some cases joblosses. In many cases, in Europe in particular, the OEMs are maintaining parallelmanufacturing operations in-house, putting OEM and CM plants into directcompetition.

· Large-scale manufacturing of key components for PC and server manufacturers thatmaintain their own �nal assembly. This relatively conservative approach is used bycompanies like Dell, Compaq or HP’s Computer Systems Division, who consider�nal assembly as an important interface with the customer.

· Systems assembly (box-build) for international brand-name leaders in key foreignmarkets, mostly in alliance with medium-sized local contract manufacturers (aspracticed, for instance, by US computer vendors in Germany or in China).

It should be noted that the major OEMs from Asia—Japanese keiretsu and Koreanchaebol in particular—have been relatively reluctant to use CM in their core region.Sales of major assembly operations to CM companies mostly occurred in foreignmarkets (as Mitsubishi’s US cell-phone assembly operation in Georgia, which was soldto Solectron). The leader in outsourcing has been Sony, a company generally notconsidered a keiretsu. In October 2000, Sony handed over two assembly plants in

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Japan and Taiwan to Solectron—a move that was regarded as a major opener for theCM model in Asia. An important step in this direction is Sony’s recent partnershipwith Ericsson in 3G mobile phones. The manufacturing of these devices has beenentirely contracted to Flextronics (Luthje et al. 2002).

We can summarize that the generalization of CM is producing growing diversity,leading to increasing heterogeneity in the shape of production networks. With regardto the debate on vertical specialization and global �agship networks (Ernst 2001),two important quali�cations have to be made.

First, the trend towards large-scale manufacturing cooperations of high diversityfosters vertical re-integration on the part of contract manufacturers. Major contractmanufacturers have acquired specialized design and manufacturing capabilities incomponents and software as well as in supply chain management and logistics. Acompany like Solectron owns sophisticated technology subsidiaries in the �eld ofApplication Speci�c Integrated Circuit (ASIC) and chip set design. Flextronics hasbuilt a global business unit in the design and manufacturing of PCBs, the company isalso developing a telecommunications networks servicing unit, following acquisitionsin this �eld from Ericsson. The rationale behind this vertical integration are traditionaleconomies of scope, a trend also re�ected by the transition of fully integratedmanufacturing units from OEMs which also include classical manufacturing supportfunctions like tool-and-die making. With regard to the IT sector as a whole it can besaid, that vertical specialization ‘‘at the top’’ (among OEMs), is matched by verticalre-integration at the level of standardized manufacturing processes.

Second, contract manufacturers only partly match the de�nition of ‘‘�agshipcompanies’’. Although they integrate �rst-class engineering know-how in manu-facturing, component design and logistics, they do not control product developmentand cannot develop product markets in their own capacity. Contract manufacturingcompanies thus lack the most important de�ning factor of focal corporations in theWintelist computer industry. As we discuss below, this produces different logics ofvertical specialization and integration at different ends of the production chain,affecting the capacities of contract manufacturers as network leaders in both theglobal and the local arena.

THE LABOR PROCESS: A MCDONALD’S APPROACH TO MANUFACTURING?The speci�c role of contract manufacturers as ‘‘global supply chain facilitators’’ aswell as the problem of integrating the complex transnational division of labor withinthese companies become particularly visible with a closer analysis of the labor processand shop-�oor management practices.1

Contract manufacturing is producing a pattern of ‘‘�exibilized’’ manufacturing workwith some common characteristics across the industry and its different locations. Thede�ning elements of this form of work do not result from basic innovations in

1 The following summarizes the �ndings of our case studies of CM sites in the USA and in Germany and Sweden.The sample consisted of six plants of different size and scope in the Western and Southern USA owned by two

major contract manufacturers, the same companies’ plants in Germany, a related plant in Sweden, two CMoperations run by mid-sized local electronics manufacturers in Germany, and several OEM plants (Luthje et al.

2002).

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manufacturing technology, although large CM �rms can be considered leaders in theuse of advanced PCB assembly equipment and IT-based supply chain management.Basic work procedures—automated and manual PCB assembly, systems assembly, andwarehouse and logistics jobs—are standard and well known throughout the elec-tronics industry. The CM workplace is not very different from traditional electronicsmanufacturing operations, the predominance of state-of-the-art manufacturing environ-ments in mid-sized to large plants sets working conditions apart from traditional boardstuf�ng shops.

The unique characteristics of manufacturing work in the CM industry rather resultfrom the nature of integration into the global value chains of the IT industry. Somebasic characteristics of CM work can be summarized thus:

· ‘‘Work without a product’’: as CM plants do not produce their ‘‘own’’ products,quality management and workplace control has to be refocused on customerorientation. Manufacturing has to be organized as ‘‘service work’’.

· Relatively low wages with high variable proportions: as most CM plants arelocated in low-cost areas, manufacturing wages and bene�ts are rather modest, andbonus-oriented pay systems (including stock ownership and options) have to ensurecustomer orientation.

· Labor �exibility: the constant and very rapid change in production volumes ismanaged by an extensive use of various kinds of �exible employment. In the USAand Europe, and also in some low-cost locations (Mexico in particular), temporarylabor has become a strategic resource of prime importance.

· Quality management based on restricted teamwork: in most plants there is anideology of ‘‘team orientation’’, but no formal structure of work groups, etc., asknown from team concepts in other industries.

· A heavy reliance on women and minority workers: as in most areas of electronicsmanufacturing, the majority of the manufacturing workforce is female. In the USA,in California in particular, the workforce is mainly recruited from racial minoritiesin disadvantaged labor market positions.

Contract manufacturing companies pursue strict standardization of the labor processto ensure uniformity of work procedures on a global scale. Common processes aredeveloped as a distinguishing feature of the CM model, designed to offer a uniforminterface for OEMs seeking global one-stop shopping for manufacturing services.Solectron, a two-time winner of the prestigious Malcolm Baldridge Award for state-of-the-art quality manufacturing, is using the Baldridge certi�cation criteria as a toolto trim the practices in every plant worldwide along a set of company-widecommon processes. For similar purposes, Flextronics has a materials managementconcept developed by consultants under the name Demand Flow Technology (DFT)which includes uniform work prescriptions for every manufacturing workplaceworldwide.

Under such policies, however, we can observe highly divergent manufacturingpractices across plants and regions. In the USA, we clearly see a low-wage/high-�exibility model which is typical of ‘‘the new face of American manufacturing’’(Uchitelle 1994) in the growth areas of the South and the West. There is also a strongpolarization between engineers and line workers—a characteristic feature of most

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manufacturing work in the USA, which is reinforced through the widespread use oftemporary labor. Also, the quality management schemes and their incentives are muchmore widely used and enforced than in most European plants.

In German and Swedish plants there is a higher degree of work integration, moresophisticated automation practices, and also a stronger role for unions and legalemployee representations (such as works councils in Germany). Concepts such asTotal Quality Management and Customer Satisfaction Indexes are much less visiblyused. Union wage standards are widely accepted, even in non-union plants. However,there is a strong trend towards concessionary bargaining on the part of workers’representatives and unions, especially under the impact of competition from low-cost regions. Particularly striking is the high proportion of �exible employmentarrangements, achieved through temporary labor agencies or limited-term employ-ment under existing labor laws.

These differences, not surprisingly, re�ect the general environment of industrialrelations in the USA and the respective European countries. The greater role ofmanual work in US plants (especially in non-programmable processes and in therework of faulty products in PCB assembly) can directly be attributed to the lowerlabor costs in traditional non-union areas like Texas, North Carolina, Alabama, orCalifornia’s Silicon Valley, most of them with high proportions of immigrant workers.In Europe, most manual assembly work is being relocated to low-cost regions inEastern Europe (see below).

The co-existence of different work practices under strategies of globalized qualitymanagement re�ects the limits to standardization and centralization of managementcontrol. This is reinforced by the continuous acquisition of manufacturing assets fromOEMs; the growing variety of outsourcing relationships is re�ected by a growingdiversity of technologies and work practices at the shop-�oor. This is particularlyvisible with regard to the standardization of assembly equipment, an importantelement in the business strategy of major contract manufacturers. This is often takingplace more slowly than claimed. As we observe from our case studies, the change ofequipment sometimes entails enormous �nancial costs and productivity problems inindividual plants.

In spite of the emphasis on seamless global supply and manufacturing chains,management control over the manufacturing process has to be secured by thetraditional instruments of business planning: corporate �nance, investment policies,and—highly important for CM—the procurement of parts and the management ofkey customers’ accounts with large order volumes. Under these conditions weobserve a de facto co-existence of different regimes of shop-�oor control, oftenstrongly in�uenced by the traditions of the former owners of the particular plants orbusiness units.

Knowledge transfer between plants in different regions and areas has remainedsurprisingly limited and selective. This is particularly true for the more formal aspectsof work organization and education. In most of their recently acquired Europeanplants, US contract manufacturers did not, as expected by workers and unions,rigorously implement ‘‘American’’ work practices and transform the plants into low-skill and low-wage ‘‘screw driver operations’’. In the opposite direction, the companiesso far have not made any signi�cant attempts to transfer quality management or

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training schemes from European sites to the USA, although this is seen as desirablein some �elds (training in particular).

All these �ndings point to the well-known fact that manufacturing know-howcannot easily be transferred across different regions and nations, since it is rooted inspeci�c local work, education, and technological traditions. The CM industry is aparticularly striking example here, since uniformity in working procedures—sometimes characterized as a McDonald’s approach to manufacturing—is a de�ningelement of the business model. It seems that CM is following a rather traditionalpattern of knowledge development and learning, which is more characteristic for old-line manufacturing companies than for product de�nition companies as typical forWintelism. In other words, there are different learning dynamics at different endsof the production chain of the post-Fordist IT industry.

A NEW INTERNATIONAL DIVISION OF LABOR

The enormous expansion of the IT industry in recent years has converted CM from adistinctively ‘‘American’’ model (Sturgeon 1997) into a global model of mass produc-tion. Through their continuing acquisitions CM companies act as transnational networkbuilders, assembling a variety of plants with different manufacturing practices in spe-ci�c national and global markets. Contract manufacturing, therefore, can be character-ized as a mode of integrating, coordinating, and regulating diverging economic, social,and cultural conditions in global production systems (Luthje et al. 2002).

In 1996, the leading contract manufacturer, Solectron, had about 10 locationsworldwide, today there are almost 50 (Solectron 2001). Contract manufacturers arebuilding manufacturing networks in each region of the Triad—as in the case of Flex-tronics International, the second largest contract manufacturer. The company’s opera-tions are particularly concentrated in North America and Europe, and a presence ofsimilar density in Asia is being built. Of the �ve different types of operations, ProductIntroduction Centers, Product Design Centers, and Regional Manufacturing Operationsare concentrated in major industrial centers in the USA and Europe. The volumemanufacturing operations are in Mexico, Poland, Hungary, and China.

Large-scale manufacturing in low-cost areas is playing a central role in this scenario.The �rst offshore plants were acquired as part of the take-over of manufacturing unitsfrom OEMs like IBM or TI who had plants in Southeast Asia, predominantly Malaysia.In the mid-1990s, in the wake of NAFTA, contract manufacturers built huge facilitiesin Mexico, most of them in the city of Guadalajara. Currently the most rapid expansionis taking place in Europe. US contract manufacturers are setting up large-scale facilitiesin Hungary, Poland, Czechia, and Romania, modeled after the Mexican example.Flextronics alone has more than 7,000 employees in Hungary and is one of the largestemployers of manufacturing workers in the country (see Tables 2 and 3).

Globalized just-in-time production is transforming older international divisions oflabor (as analyzed by Frobel et al. 1977). Since the mid-1980s, relatively specializedproduction complexes in newly industrializing countries, in Asia in particular, havebeen emerging that supply speci�c components or manufacturing processes withstate-of-the-art technology (Henderson 1989, 1994). In CM, technologies and processesin developed and in low-cost economies are rather similar. Full-package production

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TABLE 2: MANUFACTURING SITES OF THE FIVE LEADING CMs IN EAST ASIA (SEPTEMBER 2000)

Malaysia/ China/ OtherCompany Singapore Hong Kong countries Products/size (ft2)

Solectron Johor PCBA 200,000Penang PCBA 432,000

Suzhou (Jiangsu) PCBA 333,000Flextronics Johor PCBA 210,000

Beijing PCBA 70,000Doumen (Guangdong) Industrial park with PCBA,

PCB manufacturing, cleanroom900,000

SCI Singapore PCBAPenang PCBA

Kunshan (Jiangsu) PCBAThailand PCBA

Celestica Kulim PCBAHong Kong PCBADongguan(Guangdong) PCBA

Thailand PCBAJabil Penang PC and peripherals; c.900

employeesHong Kong Telecom and networking,

medical instruments, etc.,c.4,300 employees

Canton (Guangdong)Shenzhen(Guangdong)Panyu (Guangdong)

Source: Company information (Internet).PCBA 5 printed circuit board assembly.

TABLE 3: MANUFACTURING SITES OF THE FIVE LEADING CMs IN EASTERN EUROPE (SEPTEMBER 2001)

Company Hungary Czechia Poland Other Products/size (ft2)

Solectron Romania PCBA 64,000Flextronics Zalaegerzeg PCBA, system assembly 205,000

Sarvar PCBA, system assembly 385,000.Industrial park with suppliers

Tab PCBA, system assemblyNy õ regyhaza PCBA, system assembly

Brno PCBA, system assembly 112,000Gdansk PCBA, system assembly (under

construction)SCI/Sanmina Tatabanya PCBA

Pecs EnclosuresCelestica Brno PCBA

Rajecko PCBA, system assemblyJabil Tiszaujvaros PCBA

Source: Company information (Internet).PCBA 5 printed circuit board assembly.

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(Geref� 1999) in low-cost locations is supported by the global standardization ofwork procedures pursued by major CM �rms.

A certain hierarchy between locations, however, is de�ned by three elements:

1. The lead position that Product Introduction Centers (PICs) in developed countriesplay in prototyping and in the ramp-up of new product lines towards volumemanufacturing. This implies inequality in the distribution of engineering capacitiesand the access of plants in low-cost locations to advanced engineering know-howwithin the global production system. It also implies a greater relative signi�canceof skilled labor in strategic plants in developed economies.

2. The location of specialized products with high diversity in manufacturing require-ments and low volumes (low volume/high mix) in developed countries versusstandardized mass production (high volume/low mix) in low-cost locations.

3. The concentration of specialized units in the design and manufacturing of criticalcomponents in developed countries.

In addition, there are differing types of hierarchies within Triad regions. This is mainlydue to the differences in shop-�oor management and work systems, embedded in thespeci�c environments of industrial relations in the particular regions. In NorthAmerica, mass production inside the USA (in the low-cost regions of the South andSouthwest) and in newly industrializing countries, Mexico in particular and Malaysiaand China, have developed simultaneously. Other than the major European economies,the USA has a fair number of large volume production facilities within its nationalboundaries. In Europe, there is a clear hierarchy between PIC-type operations andmore sophisticated product lines (‘‘Fuhrungsbetriebe’’ in German) in core EU coun-tries, on the one hand, and volume production in Eastern Europe on the other (Luthjeet al. 2002). The regional division of labor in Asia seems still open. The regionalheadquarters are mostly located in Singapore and Hong Kong. Whether or not aEuropean style system of lead plants will emerge in Taiwan and possibly Japan andSouth Korea remains to be seen.

Within this geographic division of labor we see highly complicated chains ofproduction emerging for individual products. The case of mobile phone productionfor a major European OEM, which we studied recently, may help to illustrate thispoint. The OEM has shifted the entire manufacturing of this product to a major UScontract manufacturer. The contract manufacturer is managing the basic manu-facturing, product ful�llment (�nal assembly, software application, and testing), andthe logistics for the European market. To this end, the contract manufacturer isoperating a huge product ful�llment center in Hungary with a capacity of 7 millionhandsets per year. This center is receiving the manufactured handsets withoutsoftware (‘‘dummies’’) from a factory of the contract manufacturer in China. TheChinese operation is handling the assembly of the PCBs and of the handsets, includingsupporting functions like the manufacturing of plastic enclosures. The highly complexPCBs are sourced from the contract manufacturer’s PCB-manufacturing facility inChina, with some engineering support coming from the contract manufacturer’soperation in Germany. The dummy handsets are shipped to the Hungarian ful�llmentcenter by aircraft, where the operating software is applied according to the ordersfrom telecom operators or retail chains. This task, again, is of high organizational

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complexity, as each handset has to be equipped with software in the language for thecountry of destination and the speci�c requirements of each operator and retailer.After being packed in boxes, the handsets are �nally delivered just in time to 15different European countries, a process run by a Dutch trucking �rm under a long-term contract with the contract manufacturer.

Given the growing size and scope of manufacturing chains, it seems evident thatthere are no simple general locational patterns in the CM industry. The organizationalcomplexity as well as the enormous requirements in logistics limit the local agglomera-tion effects of CM. Contract manufacturers tend to concentrate their manufacturingactivities in low-cost locations in relatively large, integrated plants that can handle avariety of manufacturing functions and provide a stable environment for massproduction. These plants receive most of their orders as well as their parts andequipment supply on a centralized base from other business units of the contractmanufacturer or its major suppliers. As contract manufacturers tend to internalizemanufacturing resources, the input from local suppliers generally appears to berelatively low, often limited to non-electronics parts (like sheet metal, cable and cableharness assemblies, or plastic enclosures). Equally, local cooperation with OEMcustomers in the �eld of product engineering and acquisition and the design ofspecialized components and machinery play a minor role.

This pattern of relatively strong network linkages at the global level and lowagglomeration effects at the local level can be observed for most high-volume CMoperations. It is very visible in the low-cost locations in the Southern USA (Luthjeet al. 2002), and it seems to be even more pronounced in developing countries. ForMexico, recent research provides ample empirical evidence for this �nding (Peters2000; Palacios 2001). For Hungary, our current observations seem to support thisview. The pattern is reinforced by the fact that some contract manufacturers aredeveloping full-scale industrial parks in their major low-cost locations, which integratea whole range of supply, support and logistics �rms, most of them of internationalorigin.

With regards to knowledge diffusion, our picture seems to con�rm the observationthat the dispersion of manufacturing processes depends on the degree of specializationof the particular product, component, or process (Ernst 2001: 20). Commodity-typeprocesses and products are highly dispersed, their location can be determinedaccording to a variety of factors like wage costs, market proximity, or tax incentives.On the high end of product development, there exists a strong geographical concentra-tion, which cannot be overcome easily. In CM, such a pattern is embedded in therelationship between lead plants and low-cost manufacturing sites. The hierarchy isreinforced by the fact that most OEM customers prefer (or insist) that productintroduction processes and related engineering take place within the boundaries oftheir major national markets.

Here, the Wintelist de-coupling of product innovation from manufacturing becomesa de�ning element of the international division of labor. The emerging transnationalCM networks tend to reinforce this separation on a global scale. However, theaccelerated concentration of vertically integrated mass production in low-cost loca-tions seems to imply considerable effects of technological and organizational learning.Contract manufacturing supports the creation of integrated manufacturing capabilities,

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as typically developed in mass production centers like Penang in Malaysia. For therespective locations, this development may result in a situation similar to thatfound in Malaysia, which has recently been characterized by the formula ‘‘strong inmanufacturing, weak in innovation’’ (Best 1999).

However, even in the age of Wintelism one should not underrate the strategicimportance of a strong skill base in manufacturing, combined with state-of-the-artcapabilities in logistics and supply chain organization. The important question hereis the division of labor within the CM industry and in contract manufacturer–OEMrelationships. Whereas the introduction of specialized processes and the manu-facturing of low volume/high mix products remain con�ned to industrialized coun-tries, contract manufacturers try to shift some product introduction capabilities tolow-cost locations, in order to support a more rapid ramp-up for the respectiveproducts. This seems particularly promising in locations where integrated massproduction capabilities exist. The major challenge in such a scenario is the develop-ment of a skilled and experienced manufacturing workforce, a resource that contractmanufacturers have come to enjoy in countries like Hungary or Czechia where theformer socialist system has produced a broad supply of well-trained workers at everylevel of the skill pyramid.

THE INTERNET: NEW MODELS OF SUPPLY CHAIN MANAGEMENT AND THE

IMPACT ON MANUFACTURING

For the global production systems of the CM industry, the Internet seems to be of greatsigni�cance. However, the real organizational changes associated with the Internethave to be assessed in the context of the existing practices of supply chain and shop-�oor management. Here, our observations point to a much more diverse picture.

Only few companies have developed Internet-based integration of manufacturingand enterprise resource planning (ERP) systems. Full-scale ‘‘virtual factory’’ relation-ships seem most advanced between ‘‘fabless’’ OEMs and contract manufacturers (seeTable 1). Cisco’s manufacturing organization can be considered a leading-edge model.The assembly of Cisco routers, switches, etc., is integrated into an order and resourceplanning system which is entirely based on Internet standards. Major contract manu-facturers are part of this arrangement. They also manage delivery and repair services,offering a seamless interface to the Cisco customer. A major contract manufacturer isoperating a manufacturing plant fully dedicated to Cisco product lines. The virtualintegration of this plant into the Cisco organization has to be secured by a sophisticatedcontrol system for manufacturing data on the part of Cisco and through a high degree ofpersonal interaction between engineers of both companies, supported by the physicalproximity of the respective operations in Silicon Valley (Roberts 2000).

However, plants that are operating within an Internet-based ‘‘virtual factory’’framework do not differ signi�cantly in their work organization from more conven-tional ones. Given the high degree of control over manufacturing data that existingIT networks offer to OEMs, tighter control of the shop-�oor through Internet-baseddata networking does not seem very likely. As opposed to traditional subcontractingarrangements, OEMs clearly tend to leave the management of the labor process to

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their manufacturing partners. The most important impact of the Internet on shop-�oor conditions, therefore, may be indirect: the expansion of e-commerce relatedcon�gured-to-order manufacturing is likely to increase the pressure to �exibilize workand employment (Luthje et al. 2002).

As can be observed in many consumer industries, e-commerce-based direct salesstrategies impose enormous organizational challenges on traditional assembly, ware-housing, and logistics work. For instance, PC world-market leader Dell’s Internet-based ordering system (Magretta and Dell 1998) dramatically increases �exibilityrequirements in �nal assembly. As each computer product has to be con�gured tocustomer order, manual assembly work is making a remarkable comeback in computerplants. Dell’s assembly operations in the USA almost entirely rely on manual laborwith relatively low formal skill requirements. In Europe, some of the most successfulindigenous contract manufacturers as well as high-end OEMs like Hewlett-Packard areusing similar practices. One contract assembler for consumer PCs in Germany isoperating almost entirely on the basis of manual labor (drawn from a local labor poolin an electronics industry center in East Germany with an average unemploymentrate of 17 percent; Luthje et al. 2002).

The role of Internet-based virtual factory models, however, should not be over-estimated. Most OEM–contract manufacturer cooperation arrangements are func-tioning on the basis of IT networks which are not speci�cally operating on Internettechnology. Our example of mobile phone manufacturing cited above may illustratethis. On the part of the OEM, the whole process is controlled through the OEM’s ERPsystem, which has a design and supply chain management system speci�callydeveloped for mobile handset manufacturing. The contract manufacturer’s ERP soft-ware has been adapted to work with the OEM’s system, allowing comprehensivemonitoring of order, quality, and delivery data for each individual handset in everystage of the manufacturing and logistics chain. For this purpose, each handset has a bar-code label, allowing built-to-order manufacturing from the basic assembly processesthrough the �nal stages of product ful�llment and delivery. Given the enormous costsas well as the reliability requirements of such a system, the migration to Internet-based networking architecture is likely to happen more slowly, perhaps as part of ageneral remodeling of the OEM’s ERP system.

The longer term impact of the Internet, however, may emerge out of the role ofcontract manufacturers as ‘‘global supply chain facilitators’’. As we have alreadydiscussed, the speci�c organizational know-how of transnational EMS �rms pertainsto the integration and coordination of different work practices and production cultureswithin worldwide production systems. Internet-based manufacturing promises tofacilitate this function because it requires the de�nition of uniform interfaces betweenmanufacturing procedures in different plants and locations. The multiple options ofcustomizing IT networks within a uniform architecture make the Internet ideal fordealing with different types of customer relations, production cultures, and politicaland social regulations. In this perspective, probably the strongest drivers for Internet-enabled network architectures are economies of scale derived from �exibility instandardization.

Of special importance here is the procurement of electronics components andparts. Contract manufacturers have developed sophisticated know-how in managing

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this portion of the value chain and exert considerable buying power. Parts andcomponents are either purchased by contract manufacturers on behalf of theircustomers or by OEMs themselves. Contract manufacturers also have relationshipswith global electronics parts distributors like Arrows or Avnet. Local sourcing of partsand components, as already mentioned, remains relatively limited, usually restrictedto non-strategic items like cables, sheet metals, or plastic parts.

The calculation of prices, volumes, and availability of part supply is essential to theCM industry. The problem is complicated by the cyclical nature of most componentmarkets. Successful handling of market cycles and pricing schemes bears considerablepro�t potential. In this scenario, the Internet is likely to produce two major changes:(1) the emergence of B2B markets for electronics parts and components under theleadership of major OEMs; (2) new forms of supply chain management and engineer-ing, which are related to the emergence of a new brand of application serviceproviders (ASPs) in electronics design and manufacturing.

Electronics parts markets sprang up in the year 2000 at the peak of the Internetboom. The two most important ones were The High Tech Exchange, which encom-passed major computer and chip manufacturers (among them HP, Compaq, Hitachi,Samsung, NEC, and, from the CM side, Solectron; EN 8 May 2000), and E2open.comwith strong participation from major players in the telecommunications and net-working �eld (Ericsson, Hitachi, LG Electronics, Matsushita, Motorola, Nokia, Nortel,Philips, Seagate, Toshiba and, again, Solectron). Supported by technology from IBM,i2, and Ariba and with �nancing from major investment banks like Morgan Stanley,E2open boasted a combined parts purchasing volume of US$200 billion per year(New York Times 30 May 2000). The concept of both projects is mirroring e-marketinitiatives in other industries like Covisint in the auto industry or Chemplorer inthe chemical industry, which include major manufacturers, e-commerce softwarecompanies, and telecom network operators.

Most of the expectations, however, have been disappointing, so far. The slowdownin the IT industry has also impacted on most B2B projects. According to a recent A.T.Kearny study, out of the 17 public exchanges which were announced in the electronicsindustry during the year 2000, few have reached strategically relevant trading volumes.Almost 80 percent of the companies that have committed to an exchange have yet totransact any volume outside of pilot activities (EN 6 August 2001). According to thisand other accounts, the reasons for this development at least in part are structural.In an industry dominated by large trading partners with close, direct relationshipsand high visibility, the bene�ts of bringing together multiple buyers and sellers arenot apparent. One consequence has been that major OEMs like Dell and contractmanufacturers like Celestica have refocused their B2B strategies on the developmentof so-called private exchanges with direct connections to suppliers and customers(EN 3 September 2001).

Application service providers (ASPs) in the electronics design �eld go beyond merepart trading. They develop software which integrates parts purchasing with the designprocess and product introduction at the assembly-line level. Start-up companies likeSilicon Valley-based Spin Circuit are developing data-exchange systems for the designof PCBs and hardware, bringing together OEMs, parts producers, distributors, andcontract manufacturers. These design gateways promise seamless interfaces between

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product designers, manufacturing engineers, and parts suppliers who all will becomepart of a single Internet-based exchange system. Design engineers may even be ableto change their product layouts according to the cost and availability of parts trackedin online databases. Some contract manufacturers are heavily supporting start-ups inthis �eld because early participation seems to offer the opportunity to control crucialnodes in global Internet-based manufacturing networks.

The future impact of the integration of component design and trade on suppliernetworks and on manufacturing and engineering work is still dif�cult to assess. Thesuggestion seems plausible, however, that global electronics parts and componentmarkets will foster the de-localization of sourcing relationships which is alreadycharacteristic of the CM industry. On the labor side, we may expect the substantialrationalization of engineering work, an increased separation of product and processengineering, and a diminished role for personalized cooperation between productand manufacturing engineers within local industry networks. In qualitative terms,engineering work may become still more oriented towards non-technical, commercialfactors like cost and parts availability. It may also mean increased competition forengineers in developed countries from outsourcing of engineering work to low-costregions. However, such a development will mainly reinforce existing trends, sincecontract manufacturers are actively making use of local engineering talent which insome locations, especially Eastern Europe, is widely available.

CONCLUSIONS AND IMPLICATIONS

Our aim in this paper was to analyze the profound economic and social changes inthe IT industry which are shaping the conditions for electronics CM and theInternet as an infrastructure for transnational production networks. Our results canbe summarized as follows:

· Vertical specialization in the IT industry, as epitomized by the Wintelist model ofcompetition and industrial organization, has resulted in the creation of a newindustry for contract-based manufacturing services which is rapidly becoming themanufacturing infrastructure for a growing number of IT industry segments.

· The rapid expansion of CM, today mostly driven by traditional electronics compan-ies, has resulted in a growing variety of outsourcing arrangements. Vertical specializa-tion on the part of OEMs is fostering the vertical re-integration of manufacturingresources in the CM industry. Contract manufacturers are emerging as global supplychain integrators with sophisticated manufacturing know-how, but without �agshipcapacities in product de�nition.

· The separation of product design and manufacturing has resulted in a new type ofmanufacturing work characterized by service-oriented quality management com-bined with relatively low wages and high employment �exibility. The drive forglobally uniform work processes is taking place in the context of persisting nationaland/or regional regimes of shop-�oor control, resulting in relatively similar laborprocesses under different social conditions and manufacturing cultures and strongmanufacturing-centered learning dynamics.

· The international division of labor in CM is strongly linked to this pattern. The

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physical and geographical re-integration of mass production resources is primarilytaking place in low-cost locations, resulting in strong manufacturing-centeredtechnological learning dynamics in the respective locations.

· The Internet bears considerable potential for �exible standardization of customer andsupplier relationships in CM. Whereas the impact on manufacturing work seems tobe relatively low, standardized order processing and parts procurement through pub-lic or private e-marketplaces is expected to increase competition among suppliers,strengthen the buying power of large contract manufacturers, and foster supply chainrationalization through the integration of parts purchasing and engineering.

How this will affect knowledge transfer in emerging manufacturing centers indeveloping countries is not easy to predict. It seems evident, however, that theInternet will not change fundamentally the learning dynamics nor the economic andsocial problems inherent to the international division of labor in the IT industry ofthe Wintelist age. As geographers Neil Coe and Henry W. Yeung point out in theirstudies on e-commerce development in Singapore:

Instead, as with previous techno-economic systems, the world wide e-commerce will becharacterized by distinctive and constantly evolving patterns of uneven development.Place, in the abstract sense, and cities, in their material form, will remain of the utmostimportance, as there will be a need for centers of co-ordination and control, or hubs andnodes, in the intensifying world of electronic �ows. (1999: 13)

The position of CM within the social division of labor in the IT industry suggests thatlearning and knowledge transfer will follow the patterns of traditional manufacturingindustries. Contract manufacturing is generally supporting an upgrading of themanufacturing base in the respective low-cost regions. This is especially true forcountries with a strong skill base in industrial component manufacturing like Hungary,which are trying to establish themselves as �rst line suppliers to manufacturingindustries like auto or electronics (for this interesting case see Havas 2000; Radosevicand Yoruk 2001). The most important policy strategies for these locations are inthe �elds of general infrastructure development (transportation, site development,telecommunications) and workforce development. The political challenge is to securepositive trade-offs between the investments of national and local governments ininfrastructure and education on the one hand, and stability and social sustainabilityin employment conditions on the other.

The impact of CM on local supplier industries in the respective countries andregions seems to be more mixed. Supplier networks which are already enjoyingestablished ties with important OEM customers, like Taiwanese companies in thePC and notebook industry, will not necessarily be threatened by large contractmanufacturers. Recent market forecasts even expect growing business for thesenetworks, as OEM companies increase their outsourcing during the recession (SouthChina Morning Post 12 December 2001). It seems increasingly dif�cult, however, forthe supply chain model of the PC industry to be replicated for products with strongerdominance of vertically integrated OEMs, as mobile phones or consumer electronics.

On the negative side, the re-concentration of manufacturing will limit the possibilitiesfor traditional component suppliers to upgrade into manufacturing services. As wehave discussed, the consolidation in the CM industry creates some opportunities for

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local, customized assembly services which require speci�c market know-how. Betweenthese mostly local players and the global CM companies, however, there remains littleroom. Medium-sized and larger companies from developing countries have not beenable to keep up with the rapid pace of centralization in the CM industry, a developmenthighlighted by the acquisition of Singapore’s NatSteel, once the sixth largest contractmanufacturer in the world through Solectron in 2000 (FEER 3 June 2000). Companiesthat are too small to be global and too large to be niche players, like the recentlyestablished CM business of Acer or the former Hungarian electronics �rm Videoton(Radosevic and Yoruk 2001), may encounter similar problems.

As the IT industry is in the forefront of developing new forms of network-centricmass production, the basic problem remains the logic of competition and industrialrestructuring embedded in the post-Fordist division of labor in the IT industry. Thelimited prospects that the CM model seems to have for local networks of suppliersof new IT products and technologies re�ects the de-coupling of product innovationand manufacturing inherent to the Wintelist industry model. The insistence of OEMson keeping product engineering, product introduction and specialized manufacturingprocesses close to their central locations seems to be a major barrier to product-oriented innovation networks in the low-cost locations of the CM industry.

From this perspective, CM remains a high-risk industry, involved in the cyclicalnature of the Wintelist industry model. The interplay of vertical specialization on theone hand, and global consolidation on the other is also globalizing the impact ofexpansion and contraction. At the same time, contract manufacturers cannot escapethe downturn by pushing the development of their own products and technologies.The risks involved in this structure are becoming currently apparent with theenormous job losses in low-cost IT manufacturing locations in the wake of therecession in the USA and other industrialized countries. Although the crisis hasaccelerated the outsourcing activities of OEMs, CM locations in Mexico, Malaysia, andHungary have lost thousands of jobs. This is accompanied by the increasing competi-tion between low-cost locations, as between Mexico and Asia (Palacios 2001), orwithin particular regions like Malaysia and China in Asia (Best 1999).

The problem is that local politics of place can do relatively little to balance theserisks. An important question, however, is how local governments in high-techmanufacturing centers could become players in the process of globalization. Thisquestion has been largely neglected in the political and academic arena. The increasingcompetition between regions which are closely inter-linked through global productionnetworks calls for some mechanism which goes beyond the zero-sum game ofincreasing public subsidies, tax breaks, and infrastructure investments on the onehand and decreasing social and ecological standards on the other (Mazurek 1999).

The development of new telecommunications and data infrastructures is takingplace within this political context. The Internet will not offer a quick �x for any ofthe economic development problems involved in the present international divisionof labor in high-tech industries. The emerging global e-commerce is posing newquestions concerning the political framework of global production. The regulation ofInternet-based B2B infrastructures and of the social and ecological standards involvedin e-traded electronics parts and components is evolving as an important problem ofglobal governance.

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