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


  • Bown, Chad


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, 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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    References listed on IDEAS

    1. Clair Brown & Greg Linden, 2009. "Chips and Change: How Crisis Reshapes the Semiconductor Industry," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262013460, December.
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    6. Laura D'Andrea Tyson, 1992. "Who's Bashing Whom? Trade Conflict in High-Technology Industries," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 86.
    7. Pao-Long Chang & Chien-Tzu Tsai, 2000. "Evolution Of Technology Development Strategies For Taiwan'S Semiconductor Industry: Formation Of Research Consortia," Industry and Innovation, Taylor & Francis Journals, vol. 7(2), pages 185-197.
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    9. Kim, S Ran, 1998. "The Korean System of Innovation and the Semiconductor Industry: A Governance Perspective," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 7(2), pages 275-309, June.
    10. C. Fred Bergsten & Marcus Noland, 1993. "Reconcilable Differences? United States-Japan Economic Conflict," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 34.
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    Cited by:

    1. MAKIOKA Ryo & ZHANG Hongyong, 2023. "The Impact of Export Controls on International Trade: Evidence from the Japan–Korea trade dispute in the semiconductor industry," Discussion papers 23017, Research Institute of Economy, Trade and Industry (RIETI).
    2. 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.
    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. 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).
    5. repec:diw:diwwpp:dp1956 is not listed on IDEAS
    6. Bown, Chad P., 2021. "The US–China trade war and Phase One agreement," Journal of Policy Modeling, Elsevier, vol. 43(4), pages 805-843.
    7. Yadong Luo & Ari Assche, 2023. "The rise of techno-geopolitical uncertainty: Implications of the United States CHIPS and Science Act," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(8), pages 1423-1440, October.
    8. 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).
    9. Lukas Boer & Lukas Menkhoff & Malte Rieth, 2023. "The multifaceted impact of US trade policy on financial markets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(3), pages 388-406, April.
    10. Eichengreen, Barry, 2024. "China's slowdown," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 46(1), pages 1-19.
    11. Chen, Fang-Yueh, 2023. "Trade warfare and sanctions in vertically related markets," Economic Modelling, Elsevier, vol. 121(C).
    12. Yu, Yu & Ma, Daipeng & Wang, Yong, 2024. "Structural resilience evolution and vulnerability assessment of semiconductor materials supply network in the global semiconductor industry," International Journal of Production Economics, Elsevier, vol. 270(C).
    13. 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


    Export restrictions; Supply chains; National security; Semiconductors; Huawei; Smic; Us–china trade relations;
    All these keywords.

    JEL classification:

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

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    This paper has been announced in the following NEP Reports:


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