Innovations Derived from Backwardness: The Case of Taiwan’s Semiconductor Industry

This chapter examines Taiwan’s semiconductor industry as a successful case of catching up. The case shows that its success can be attributed to catching up not only technologically, but also in other nontechnological factors. As for the manufacturing sector of the industry, it was essential for Taiwan to form a pure-play foundry model ahead of advanced countries. The backwardness of Taiwan’s semiconductor industry not only provided an opportunity to create this potentially promising model, but also forced it to choose the model. The design sector of the industry succeeded in capturing potential demand from emerging economies using its unique business model including total solution for the users. The model was created based on its experiences as a latecomer.