Cluster evolution of IC industry from Taiwan to China

Article history: Received 24 February 2009 Revised 25 March 2009 Accepted 25 March 2009 In this work, we for the first time study the inter-industrial clustering behaviors of integrated circuit (IC) industry fromTaiwan toChinavia amountof foreigndirect investment (FDI). According to themutual dependence among IC design,manufacturing and packaging-and-testing industries, Lotka–Volterra model is solved to explore the cluster evolutions. Effects of inter-level collaborations along production value chain on FDI flows into China are considered. Evolution of FDI into China for IC design industry significantly inspires the subsequent FDI of ICmanufacturing, packaging and testing industries. Since the production of IC manufacturing, packing and testing enterprises depends on the preceded products that design industry has devised, the middlestream manufacturing and downstream packaging-and-testing firms tend to converge toward upstream design houses. Taiwan IC industry's FDI amount into China is estimated to be cumulatively increasing, which suggests the clustering tendency of Taiwan IC industry. Prediction of FDI with Lotka–Volterra model is superior to that of the conventional growth model (i.e., Bass model) because the industrial mutualism among various stages is included. The flows of FDI have not yet reached equilibrium points, so the FDI inflows into China will expand for IC design or packaging-and-testing industry, while decline for manufacturing industry. © 2009 Elsevier Inc. All rights reserved.