Technology upgrading in China and Vietnam by exporting Japanese high-precision production skills

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Sadoi, Yuri
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The transfer of technology and knowledge is an important issue for developing countries for their industrial and economic development. Japan, as a leader in high-technology-based industries, has been playing an important role in the transferring of technical skill and knowledge to other Asian countries. At the same time, Japan is facing controversy about whether to promote the upgrade of subsidiaries in Asian countries or to keep its core technologies at home to maintain Japan’s international competitiveness. High-precision production requires high skills and knowledge and is largely used for core parts in the automobile and electronics industries. The development of machine tools has replaced skilled workers at the intermediate precision level. However, micron-level precision parts cannot be produced by machine tools because the tools lack the necessary precision and productivity level. The needed technological skill and knowledge of high-precision products is difficult to transfer and indispensable for key industries. In this study my goal was to investigate the process of technology transfer, especially the transfer of high-precision skills in the manufacturing industry from Japan to China and Vietnam. China’s recent significant development has been largely due to foreign direct investment (FDI) and foreign technology assistance. China’s government continues to focus on the importance of high technology and R&D capabilities. Precision tool making is an important skill-based technology that must meet tolerances as tight as 1 μm, which is required to produce high-precision parts used for core technologies in automobiles and electronics. In recent years, the shift of FDI from China to Vietnam has been significant, due to the recent rise in labour cost in China and risk distribution management strategies. In this study I describe technology transfer projects of high-precision tool production from mother firms in Japan to joint ventures in China and the shift to joint ventures in Vietnam. Within that context, I examine high-precision technology formation processes. First, the theoretical framework of technology transfer and the role of FDI, especially by Multinational Enterprises (MNEs), are introduced, and the importance of tool-making skills for achieving high precision in core technology is discussed. To examine the Japanese technology transfer practices in small and medium enterprises (SMEs), I surveyed and interviewed the Japanese subsidiaries in Shanghai in February 2007 and those in Vietnam in March 2008. Empirical research on tool-making firms is examined in case studies, and strategies for achieving high skill levels of workers are analyzed.
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