How the United States Marched the Semiconductor Industry into its Trade War with China

34 Pages Posted: 29 Jan 2021

See all articles by Chad P. Bown

Chad P. Bown

Peterson Institute for International Economics

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Date Written: December 18, 2020

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.

Keywords: Export restrictions, supply chains, national security, semiconductors, Huawei, US–China trade relations

JEL Classification: F13

Suggested Citation

Bown, Chad P., How the United States Marched the Semiconductor Industry into its Trade War with China (December 18, 2020). Peterson Institute for International Economics Working Paper No. 20-16, Available at SSRN: https://ssrn.com/abstract=3751611 or http://dx.doi.org/10.2139/ssrn.3751611

Chad P. Bown (Contact Author)

Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

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