“Friend-shoring” and global supply chains: Empirical evidence from the semiconductor industry

Drawing on U.S. global trade data from 2015 to 2023, this study empirically examines the impact of the “friend-shoring” policy on semiconductor supply chain dynamics. The analysis reveals that a one-standard-deviation improvement in bilateral political relations is associated with a 0.28 percentage point increase in the U.S. import share of semiconductors from politically aligned countries. Supply chain realignment shows considerable heterogeneity: trade in raw materials and finished components has shifted toward politically aligned partners, whereas manufacturing equipment shows weaker responsiveness due to efficiency considerations and supply-side constraints. The policy has introduced a “security premium” in import prices, especially for manufacturing equipment and imports from upper-middle-income politically aligned partners. Despite U.S. efforts to reduce dependence on China, products with high reliance on Chinese sources show no substantial disruption. Moreover, allied countries have not experienced a significant increase in their export shares to the U.S. market, while China’s semiconductor exports to U.S. allies have continued to expand. These findings indicate that the friend-shoring has led to only limited restructuring within semiconductor supply chains and has not materially altered existing dependency patterns.