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How the United States marched the semiconductor industry into its trade war with China

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  • Bown, Chad P.

Abstract

The US-China trade war forced a reluctant semiconductor industry into someone else's fight, a very different position from its leading role in the 1980s trade conflict with Japan. This paper describes how the political economy of the global semiconductor industry has evolved since the 1980s. That includes both a shift in the business model behind how semiconductors go from conception to a finished product, as well as the geographic reorientation toward Asia of demand and manufactured supply. It uses that lens to explain how, during the modern conflict with China, US policymakers turned to a legally complex set of export restrictions targeting the semiconductor supply chain in the attempt to safeguard critical infrastructure in the telecommunications sector. The potentially far-reaching tactics included weaponization of exports by relatively small but highly specialized American software service and equipment providers in order to constrain Huawei, a Fortune Global 500 company. It describes potential costs of such policies, some of their unintended consequences, and whether policymakers might push them further in the attempt to constrain other Chinese firms.

Suggested Citation

  • Bown, Chad P., 2020. "How the United States marched the semiconductor industry into its trade war with China," CEPR Discussion Papers 15597, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:15597
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    Cited by:

    1. Funke, Michael & Wende, Adrian, 2022. "Modeling semiconductor export restrictions and the US-China trade conflict," BOFIT Discussion Papers 13/2022, Bank of Finland Institute for Emerging Economies (BOFIT).
    2. Bown, Chad P., 2021. "The US–China trade war and Phase One agreement," Journal of Policy Modeling, Elsevier, vol. 43(4), pages 805-843.
    3. Scheifele, F. & Bräuning, M. & Probst, B., 2022. "The impact of local content requirements on the development of export competitiveness in solar and wind technologies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 168(C).
    4. Willem THORBECKE, 2021. "The Semiconductor Industry in the Age of Trade Wars, Covid-19, and Strategic Rivalries," Discussion papers 21064, Research Institute of Economy, Trade and Industry (RIETI).
    5. Chad P. Bown & Thomas J. Bollyky, 2022. "How COVID‐19 vaccine supply chains emerged in the midst of a pandemic," The World Economy, Wiley Blackwell, vol. 45(2), pages 468-522, February.
    6. Natsuki Kamakura, 2022. "From globalising to regionalising to reshoring value chains? The case of Japan’s semiconductor industry [Reorienting the drivers of development: alternative paradigms]," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 15(2), pages 261-277.

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    More about this item

    Keywords

    Export restrictions; Huawei; National Security; Semiconductors; SMIC; Supply Chains; USâ??China trade relations;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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