IT Industry in USA

Nature

Mode of Production

- Fabrication

- Light

- Capital-intensive

- High-tech

- R&D intensive

- High value-added

- Multi-point / transnational production

- Scattered production units

- Global supply chain

- Assembling of components from different suppliers

Stage

Location

Locational Factors

R&D

MDC → Silicon Valley in USA

Transport → well-established transport → high accessibility

Labor → a number of universities nearby // expertise pool // favor training of qualified personnel or joint research

Land → flat relief // land for further expansion // proximity to financial centres / suburban areas

Capital → easy access to venture capital // better legal protection of intellectual property

Agglomeration economies → better reputation // cooperation in conducting researches // sharing information // establishing business contracts

Production

MDC → USA

Labor → higher tech /l more skilled workers

LDC → Indonesia / Vietnam

Labor → abundant cheap and semi-skilled labor for assembling → lower labor costs

Capital → large amount of foreign investment // low tax rate

Land → low land costs

Government → more lenient environmental regulation

- Reduce production cost

- Enlarge market

- Space out production process / regional specialization

- Fully utilize human resources in different parts of the world

- Economic globalization

Relocation

Benefits to LDCs

Benefits to Transnational Corporations

- More land released

- Lowers pollution level

- Improves quality of life

- Better land use planning

- Favors development of local enterprises

- Specialization → division of labors between LDCs and MDCs

- Changes in employment structure → tertiary industry grows rapidly

- Increase in world trade → globalization in production / sourcing inputs

- Economic interdependence

Disadvantages to LDCs

Relevant Alleviations

- Decrease in GDP

- Reduction in value-added industrial input

- Economic recession

- Loss of foreign investments // decrease in export value

- Less tax revenue

- Unemployment

- Social unrest

- Introduce new technology

- Close down of inefficient plants / merge with effective ones

- Strengthen training of managerial talents / skilled labor

- Improve transport networks

- Attract foreign investments from neighbouring countries

Benefits to MDCs

Benefits to Transnational Corporations

- Easier to control intellectual property rights

- More local investment

- Lowers pollution level

- Better land use planning

- Favors development of high tech industries

- More land released

- Specialization → more division of labors between LDCs and MDCs

- Changes in employment structure → tertiary industry grows more rapidly

- Increase in world trade → globalization in production / sourcing inputs

- Higher economic interdependence

Disadvantages to MDCs

Relevant Alleviations

- More serious pollution problems

- More land occupied

- More unemployment

- Decrease in GDP

- Attract investment by improving infrastructure

- Provided tax incentives for manufacturing

- Retrain laid-off factory workers with skills working in other sectors

- Invest in tertiary education to cultivate workers for high-skilled jobs

- Increase R&D investment to support manufacturing innovation → establish innovation institutes

- Provide unemployment benefits

Feasibility

Reason

Feasible

- Labor with higher productivity

- Higher automation level

- Higher political stability in MDC

- Favorable government policies (tax incentive // technical / financial support)

Infeasible

- High relocation cost

- Increase in production cost / expenses on environmental conservation

- Stronger trade / labor unions in MDC

- Less flexible in manpower management / stricter labor regulation

- Lower competitiveness // unfavorable for expansion in overseas market

Iron and Steel Industry in China

Location

Evidence

Advantages

NE China

Land: more flatland / lowland

Favors further expansion

Transportation: railway / highway nearby

Convenient transport for lowering transport costs

Raw materials: proximity to iron ore / coal

Lower transport costs for raw materials

Coastal location: near the sea

- Easier to import of raw materials and export of finished goods

- Long history for development

- Water available for cooling from river

Location

Evidence

Advantages

Western China

Raw materials / power resources: presence of coalfield / iron ore

Availability of raw materials to reduce transport costs

Labor: nearby settlement

Supply of abundant labor for manufacturing

Year of establishment: established in 1951

- Industrial inertia

- Long history of development

Physical Constraints

Negative Impacts

Water shortage: annual rainfall less than 100mm // lack of large rivers

Insufficient water for cooling

Remoteness: inland China / interior land / NW China

Hinder transportation

Low accessibility: hilly / rugged relief

Reason for Set Up in Inland

Government policy →

- Decentralization policy → 5-year plan

- Strategic reason → moving industries into inland to prevent attack of Korean War

- Balance econ development and population between east and inland

Raw materials and power resources →

- Presence of reserves in inland regions: coalfields / iron ore fields

- Better utilize resources and reduce transport costs

Cultural Constraints

Negative Impacts

Smaller population // lower education levels

Less skilled labor is available

Remoteless and low accessibility

Far away from major markets in coastal regions → increase transport costs / market access

Location

Evidence

Advantages

Eastern / Southern China

Coastal location → eastern coast (near the sea)

- Easier to import of raw materials and export of finished goods

- Reclamation is possible for further expansion

- Water available for cooling from river

Locational Factors

Technological improvement

- Allow the use of scrap iron and steel as substitutes (new furnaces)

- Allow the use of electricity → higher energy efficiency (electric-arc furnaces): coastal cities in China were well-developed and had an abundant supply of scrap iron and steel // close to cities / markets in the east where scrap iron and electricity are provided

Transportation improvement

Allow the use of bulk carriers of cargo ships and advancement in railway network: reduce transport costs and time of heavy and bulky materials // close to markets to facilitate the easy import of raw materials and export of finished goods

Government policies

- 1978 Reform and Opening Up Policy → special economic zones in coastal regions // encourage foreign investments by loosening trade barriers // increase import of raw materials and export of finished goods // close to eastern coastal regions

- 1980s → "Have some regions developed first" → coastal regions are chosen → clustering close to eastern coastal region

Market and agglomeration economies

Coastal industrial belt and major industrial region → presence of large domestic markets in the east →

- Plenty of iron and steel-consuming industries: shipbuilding / car-making

- Large demand for iron and steel products

- Agglomeration economies → more skilled labor // exchange of market and technical info // build business reputation

- Close to eastern coastal region

Location

Evidence

Reasons

Urumqi

NW / interior / remote areas

Raw materials and power resources → abundant iron ores and coal mines nearby

Transportation → railway transport linked to market / eastern coastal cities: Urumqi is original for raw materials

Shanghai

At eastern / coastal region

Transport →

- Cheap sea transport at coastal location

- Bulk carriers facilitate import of raw materials and export of finished goods

- Linked with coal mine and iron ore by railways / river: Shanghai is original for markets

Market

Large market of iron and steel products in big city

Technology

Scrap iron from urban areas