Beijing Institute of Technology

The trade war between industry titans China and the USA
has repercussions on the semiconductor industry.

Student’s names
Oscar Eduardo Lopez Salas | 1820249009
Juan José Acemel Arcos | 1820249109
Anondo Bepari | 1820249191

International Economy

5/1/2025
The trade war between industry titans China and the USA has
repercussions on the semiconductor industry.

Oscar Eduardo López Salas | 1820249009

Juan José Acemel Arcos | 1820249109
Anondo Bepari 1820249191

Abstract:

Throughout this study, the effects of the trade war between the United States and China on
the global semiconductor industry, which impacts significantly on the technological sphere,
have been assessed. It has been established that trade tariffs and geopolitical factors
contributed to shifts in the manufacturing, innovating and distribution of semiconductors.
These findings also suggest that while the trade war has impacted the supply chain and the
costs of production, price stability and the design and manufacturing effectiveness of
semiconductors have improved. In this trade war, the United States government has taken
advantage of the CHIPS Act, while China tries to expand its self-sufficient capabilities. This
will continue to transform the structure of the semiconductor industry in various parts of the
world, supporting regionalization and changing the patterns of international trade. At the
core of this paper is the bilateralism of the conflict wherein there is a search for innovation
and industrial development, and yet too much economic variability and fragmentation of
globalization.

Keywords: Trade war, Semiconductors, Manufacturers, Logistics, Materials,

Globalization, Technology, Supply chain.

Introduction and Motivation

The worldwide semiconductor business has been significantly damaged by the trade war
between the United States and China. Since 2018, supply chains have been disrupted and
prices have been unstable due to tariffs, export restrictions, and investment limitations.
However, as both countries want for increased semiconductor production self-sufficiency,
this conflict has also encouraged technological innovation. With an emphasis on how U.S.
and Chinese policies have altered production, trade dynamics, and technological
breakthroughs, this article attempts to examine the effects of the trade war on the
semiconductor industry. This study aims to comprehend the conflict's long-term implications
on the world economy by looking at price trends, production movements, and modifications
to global supply chains.
Figure 1. Conceptual art representing the US-China trade conflict regarding semiconductors
industry.

Objective

This study will analyze the multifaceted consequences of the US-China trade war on the
semiconductor industry as a whole. It will show how tariffs, export controls, and other regulations
rerouted supply chains, disrupted international price levels and interfered with production plans. In
addition, it will also consider how modern these geopolitical tensions are; they not only create
difficulties, but also stimulate technological advances: countries, companies, and others begin to
focus on self-sufficiency and figure out ways to restock their supply chains in-house.

This research will also investigate the geopolitical impacts on smaller economies within the
semiconductor ecosystem in terms of investment growth, the emergence of manufacturing centers,
and changes in professional talent availability. With respect to these transformations for example, the
study aims to demonstrate how changes in the semiconductor ecosystem have affected companies’
growth strategies, including market shares, research & development, and commercial partnerships.
All in all, the research expects to deepen the understanding of the long-term consequences of the
trade war covering economic, industrial and geopolitical aspects and explain how the global
semiconductor industry is evolving in the face of increased interdependence.

Hypothesis

Hypothesis:
The US-China trade conflict accelerates the development of semiconductors while
destabilizing global component prices due to disrupted supply chains and fluctuating
production costs.

Destabilization of Pricing Stability

Global semiconductor prices have become unstable as a result of the trade war. Price swings
have resulted from the disturbance of the semiconductor supply chain brought on by tariffs,
export limitations, and logistical bottlenecks. For example, China has increasingly resorted to
suppliers from other regions, such as Taiwan and South Korea, despite the US's efforts to
restrict China's access to advanced semiconductor manufacturing methods. This has
increased demand for these chips and, consequently, their pricing. The US's export
restrictions on semiconductors and essential manufacturing tools, like those placed on
Chinese firms, have raised the cost of producing chips, which has an impact on their

Due to the intensifying trade war between the US and China, semiconductor companies have
had to fast adjust, which has led to both obstacles and innovation. This phenomena is
demonstrated by the ways in which both nations have advanced semiconductor capabilities
by utilizing their manufacturing and technological expertise, frequently leading to
technological innovation in direct response to trade restrictions and tariff impositions.

Technological development

The semiconductor supply chain has been disrupted by the US and China's implementation
of tariffs, export bans, and other regulatory measures, which has forced firms to accelerate
R&D. Businesses have pushed for innovation in fields including memory storage
technologies, AI processing chips, and semiconductor fabrication technologies in an effort to
become less reliant on foreign materials or technology. For instance, China is concentrating
on becoming self-sufficient in semiconductor production as a result to the US's export
restrictions on Chinese firms like Huawei. In response, the Chinese government has boosted
its investments in domestic semiconductor companies such as SMIC (Semiconductor
Manufacturing International Corporation) and offered assistance and subsidies to promote
the industry's expansion. As a result, Chinese industries have made tremendous technological
improvements, reducing the technology gap with their international rivals. In order to
strengthen the US's capacity to produce semiconductors and lessen dependency on imports,
the US government has stepped up efforts to promote domestic semiconductor
manufacturing at the same time. One such initiative is the CHIPS Act (Creating Helpful
Incentives to Produce Semiconductors for America). Businesses are being forced to improve
semiconductor technologies and speed up their innovation cycles as a result of these
government-backed programs and the escalating tensions between the two countries. Tariffs
have also increased production costs, especially for companies that depend on American or
Chinese components, which has led to an unpredictable pricing environment for the world's
semiconductor industries. The strategic moves of US companies like AMD and Intel, who
are quickly creating new technologies in response to China's increasing self-sufficiency
initiatives in order to preserve their competitive edge, lend more credence to this theory. As
businesses attempt to lessen the effects of tariffs and the tech war, these changes in
production processes demonstrate the rapid pace of technical advancement.
 Figure 2. Timeline of the development in semiconductors industry.

Theoretical Framework

1. Exchange Rate

Particularly for globally traded items like semiconductors, exchange rates play a crucial
role on semiconductor pricing. The price of importing and exporting semiconductors is
impacted by changes in the US dollar and the Chinese yuan brought on by the US-China
trade war. For example, a higher dollar can raise the price of US-made semiconductors
for overseas consumers, while a lower yuan can make Chinese semiconductors more
competitively priced on the worldwide market. By increasing the cost of imported chips
and upsetting the global pricing equilibrium, tariffs make this problem even worse.
Figure 3. Exchange Rate between Yuan (Renmimbi) and US dollar. On the right US dollar
price in Yuan, bottom dates of Jan 1981 to Jan 2022.

2. Manufacturing

The semiconductor industry is characterized by high capital investment and complex

manufacturing processes. Advanced semiconductor fabrication plants cost billions of
dollars to build and operate. Tariffs and export restrictions on critical equipment and raw
materials (such as photolithography machines and rare earth elements) hinder the ability
of companies to scale up production efficiently. These disruptions force manufacturers to
either absorb the higher costs or pass them on to consumers, which destabilizes
semiconductor prices. As the US imposes restrictions on the sale of advanced
manufacturing equipment to China, the latter has ramped up efforts to develop its
production capabilities, often resulting in the creation of more localized supply chains.

3. Supply Chain

From the extraction of raw materials to the design and production of chips to final
assembly and testing, semiconductors are made via a worldwide supply chain. This
supply chain has been shattered by the US-China trade war, and businesses are rushing to
adapt to new export controls, tariffs, and limitations. Inefficiencies have been brought
about by the supply chain's fragmentation, particularly in the international commerce of
semiconductor materials and components. Businesses that depend on US technology or
Chinese manufacturing have been compelled to reevaluate their supply chain structures,
either by vertically integrating to lessen dependency or by sourcing from other areas.
4. Globalization

Semiconductor businesses can now benefit from reduced production costs and effective
manufacturing centers worldwide, from China to South Korea and Taiwan, thanks to
globalization. Some of these globalizing trends have been reversed, though, by the
US-China trade war. The United States has promoted the reshoring of semiconductor
manufacture in an effort to lessen reliance on Chinese technology. By investing in local
fabrication capacity, China has attempted to achieve manufacturing independence in
semiconductors, resulting in a more regionalized approach to semiconductor production.
The principles of an integrated global economy are called into question by this
fragmentation.

Figure 4. Share of chip manufacturing and share of market cap.

5. Global Logistics and Trade Routes

Global semiconductor logistics and trade routes have had to be rearranged as a result of
the implementation of tariffs and export restrictions. For instance, customs delays and
regulatory scrutiny now affect trade flows that used to flow freely from China to the US
and vice versa. These modifications have resulted in shortages of semiconductors, longer
delivery delays, and higher transportation expenses. Logistics and trade route
optimization have emerged as crucial components of sustaining production efficiency as
businesses adapt to these shifts.

6. Materials

Rare earth elements like cobalt, lithium, and neodymium, which are concentrated in
particular areas like Asia and Africa, are essential to semiconductors. Since China owns a
sizable amount of the world's supply of rare earth elements, the US-China trade war has
raised concerns about the availability of these commodities. The US and other nations are
now looking for alternatives and diversifying their raw material sources as a result of this
geopolitical leverage. The cost structures of semiconductor manufacture are changing as
a result of these changes, which increases pricing volatility.

7. Costs of production

Both fixed and variable expenses have a significant impact on the cost of producing
semiconductors. Raw materials and labor are examples of variable costs, whereas R&D
and manufacturing equipment investments are examples of fixed costs. Many businesses
have seen an increase in production costs as a result of the trade war's disruption of the
world's material supply and the imposition of tariffs on essential components. We have
increased prices for semiconductor-based products as a result of these cost increases,
which are frequently passed on to customers.

8. Imports and Exports

With nations buying and exporting chips for use in anything from smartphones to
automotive technologies, semiconductors play a vital role in international trade. The flow
of semiconductors between the US and China, two of the market's biggest players, has
been constrained by trade restrictions. For instance, the supply of expensive
semiconductors to China was disrupted by US export restrictions aimed at the Chinese
telecom behemoth Huawei. Conversely, the market's instability has been exacerbated by
Chinese retaliation, which has led to higher levies on US semiconductor exports.

9. Technology war and transfer of technology

In addition to tariffs, the US-China trade war is also a technological battle. The United
States has attempted to restrict China's access to vital semiconductor technologies,
including as production tools and design software. The goal of these initiatives has been
to slow down China's progress in fields where semiconductors are essential, such as
artificial intelligence and 5G. As a result, China has expedited its technical growth, with
major advancements in domestic semiconductor capabilities being made by state-backed
enterprises. The global industry landscape will probably continue to be shaped by this
technology battle.

10. Regionalism

In the semiconductor industry, regionalism has grown as a result of the trade war. To
lessen their reliance on China, the US, Europe, and Japan are all working to create more
independent semiconductor production ecosystems. In response, China is making
significant investments in its own semiconductor industry to lessen the effects of outside
pressures. The industry is moving toward more regionally concentrated manufacturing
hubs as a result of this change, moving away from its previously worldwide orientation.

11. Supply chain value

The value chain of the semiconductor business, which includes several phases from
design, fabrication, assembly, testing, and final delivery, is today more integrated than
before. The value chain's movement of resources, parts, and technology has been
 hampered by the trade war, which has raised production costs and slowed down
innovation. In order to reduce risks, businesses are increasingly spending more on supply
chain security than on product development.

12. Mining

Geopolitical instability has made the semiconductor industry's reliance on rare earth
resources even more problematic. China has considerable influence over the production
of semiconductors worldwide due to its supremacy in rare earth mining. Countries like
Australia and the US are looking into other mining options as a result of the trade war,
which is forcing the US to lessen its reliance on Chinese minerals, but this process is
expensive and time-consuming. The instability of semiconductor supply chains has been
exacerbated by the shortage of essential materials, which has increased production prices.

Methodology

This study's methodology aims to thoroughly investigate how the US-China trade war has
affected the semiconductor sector. The study employs a methodical methodology,
incorporating industrial trends, economic analysis, and global trade concerns to assess the
hypothesis: Due to broken supply chains and shifting production costs, the US-China trade
war destabilizes global component pricing while also accelerating the development of
semiconductors. We are using a mixed research methodology to investigate this idea,
integrating quantitative and qualitative data from several sources. The following is a
breakdown of the methodology's main phases:

1. Defining the Hypothesis and Research Questions

According to the theory, the geopolitical tensions brought on by the US-China trade war are
driving both the advancement of semiconductor technology and pricing volatility worldwide.
The following are the main research questions that are driving this study:

● What impact has the trade dispute between the US and China had on the
advancement and innovation of semiconductor technologies?

● What effects has the trade war had on the cost of semiconductors, their output, and
the rise of new producers around the world?

● What effects have tariffs, export controls, and trade restrictions had on global
semiconductor supply chains, trade routes, and logistics?

● What long-term effects will these changes have on the global semiconductor market
in terms of the economy and industry?
2. Literature Review and Theoretical Framework

To provide a theoretical foundation for the research, an extensive literature review was
conducted. This review focuses on academic journals, industry reports, and policy papers
that address the economic, industrial, and trade-related dimensions of the semiconductor
sector. Particular attention to:

● Economic viewpoints: Examination of price swings, supply-demand relationships,

and expenses brought on by export restrictions, tariffs, and changes in trade
regulations.

● Industrial viewpoints: Pay attention to how the manufacture of semiconductors has

changed, how technology has advanced, and how new manufacturing centers have
emerged in reaction to trade disturbances.

● Views on international trade: Evaluation of the ways in which the US-China trade
war has impacted trade routes, logistics, and shipping patterns worldwide, with
particular attention to important commodities like semiconductor components and
rare earth elements.

Based on well-established economic ideas about supply chain management, international

trade, and how government involvement affects market dynamics, this review enriches the
research's theoretical foundation. To comprehend the economic ramifications of the ongoing
trade battle, important models of trade barriers, market fragmentation, and technology
transfer are studied.

3. Comparative Analysis of Semiconductor Prices, Production, and New Manufacturers

A critical part of the research methodology involves comparing historical and current data on
semiconductor prices, production volumes, and the emergence of new semiconductor
manufacturers across various regions. This analysis relies on:

● Price Trends: Data on semiconductor prices from 2017 (before the trade war) to the
present, with an emphasis on important semiconductor types such as DRAM, NAND
memory, and integrated circuits.

● Production Trends: A comparison of the amounts of semiconductors produced

before and after the trade war in the main producing nations (the US, China, Taiwan,
South Korea, Japan, and others). This entails examining export numbers, production
statistics, and changes in production tactics (such as nearshoring, diversification, and
reshoring) brought on by trade tariffs and export limitations.

● Emerging Hubs and New Manufacturers: Locating and assessing new

semiconductor producers that have emerged in reaction to the shifting trading
landscape. An examination of government subsidies, trends in foreign direct
investment (FDI), and the strategic positioning of emerging enterprises such as SMIC
(China), TSMC (Taiwan), and regional semiconductor companies in Southeast Asia,
Europe, and the US are all included in this.
This comparative approach provides a comprehensive understanding of how the trade
conflict has altered the competitive landscape in semiconductor manufacturing and affected
the pricing stability of chips on the global market.

4. Analysis of Global Semiconductor Supply Chains and Trade Routes

The next stage of the methodology focuses on the analysis of changes in global
semiconductor supply chains and trade routes due to the US-China trade war:

● Supply Chain Disruptions: Examining how the semiconductor supply chain has
been affected by tariffs, export restrictions, and geopolitical unrest, from the
procurement of raw materials (such as rare earth elements) to the final chip assembly
and distribution.

● Trade Route Shifts: Examining the logistical modifications in international trade

routes, with an emphasis on the transportation of semiconductor components and
shipment rerouting, it is evident that global distribution has been influenced by rising
shipping prices and delays. To map the changes in trade flows, this methodology uses
data from shipping companies, logistics companies, and international trade groups.

● Shipping and Logistics: Researching how export restrictions and tariffs affect the
logistics of semiconductors, including shipping delays, higher shipping costs, and the
rise of alternate trade routes and regional centers. We'll evaluate how freight
companies, ports, and distribution hubs are adjusting to these new trade dynamics.

5. Quantitative and Qualitative Data Analysis

The research will employ both quantitative and qualitative methods to analyze the data
gathered from the comparative analysis and global trade studies.

● Quantitative analysis is the use of statistical methods to examine price data,

production levels, and trade volumes over time in order to find important patterns and
connections between the dynamics of the semiconductor market and trade regulations
(such as export limits and tariffs).

● A qualitative method of examining industry reports, policy documents, and

interviews with important stakeholders (such as legislators, business leaders, and
trade specialists) is known as qualitative analysis. This will provide light on how
governments and businesses handle emergencies.

6. Implications for the Future of the Semiconductor Industry

Based on the findings from the data analysis, the research offers a projection of the long-term
effects of the US-China trade conflict on the semiconductor industry:

● Technological Development: How the trade war can help or hurt semiconductor
technology innovation, particularly in cutting-edge areas like 5G, AI, and quantum
computing.
 ● Market Instability: The possibility that supply chain fragmentation and growing
production costs would cause semiconductor prices to remain unstable.

● Regional Shifts: The strategic importance of new production centers and the
long-term effects on the regional distribution of semiconductor manufacture.

7. Conclusion and Recommendations

Finally, the methodology concludes with an evaluation of the research findings and provides
policy recommendations for stakeholders in the semiconductor industry, including
government agencies, multinational corporations, and international trade organizations.

Global effects

Hypothesis:

Due to broken supply chains and shifting production costs, the US-China trade war
destabilizes global component pricing while also accelerating the development of
semiconductors.

The substantial changes in semiconductor prices, manufacturing methods, and international

supply chains since the start of the US-China trade war in 2018 serve as the foundation for
this theory. Even though the conflict has created difficulties, especially with regard to
unstable prices and the reorganization of international trade flows, it has also accelerated
technological development and altered the competitive environment in the sector.

Research Questions:

● Technological Development: What impact has the trade dispute between the US and
China had on advancements in semiconductor technology?

● Production Shifts and Price Variations: How has the trade war affected
semiconductor production levels, prices, and the rise of new manufacturers around
the world?

● Supply Chain Disruptions: How have trade routes, logistics, and worldwide
semiconductor supply chains changed as a result of trade restrictions, export controls,
and tariffs?

● Long-Term Effects on the Industry: What are the long-term effects on the
semiconductor industry, namely with relation to technical innovation and economic
stability?
 Figure 5. TSMC and other global chipmakers rely heavily on equipment from ASML.

Literature Review and Theoretical Framework

The theoretical framework is grounded in the following economic theories and models:

● Trade Barriers and Market Fragmentation: Tariffs and export controls have
fragmented the previously integrated semiconductor market, resulting in the
reshoring of some production activities and the development of regional supply
chains. This disruption has forced companies to adapt their supply chain strategies,
increasing costs and influencing market behavior.
 Figure 6. Manufacture share of main components or machines for semiconductors
fabrication.

● Technology Transfer and Intellectual Property (IP): With China aiming to

improve its indigenous semiconductor capabilities, the trade war has sparked worries
about coerced technology transfers. To hinder China's technological advancement, the
US has used its dominance over vital technology, including semiconductor design
software and photolithography equipment.

Figure 7. Semiconductor and production equipment exports to China from US.

● Government Intervention and National Security: The semiconductor industry has

become a strategic asset in the geopolitical struggle between the US and China. Both
nations have implemented policies to protect their technological and economic
interests, such as the US's imposition of export controls on Chinese firms like
Huawei, and China's efforts to achieve self-sufficiency in semiconductor
manufacturing.

Comparative Analysis of Semiconductor Prices, Production, and New Manufacturers

Price Trends:

● Price Fluctuations:
Since the beginning of the trade war, semiconductor prices have shown significant
fluctuations. For example, the price of DRAM chips rose sharply between 2018 and
2019, driven by the increased demand from US manufacturers and tariffs on Chinese
components. However, prices for certain types of semiconductors, especially those
used in consumer electronics, have become more volatile due to disruptions in supply
chains and the shift to alternative suppliers.
 Figure 8. DRAM average sellin price (January 2017 - August 2020)

According to data from the Semiconductor Industry Association (SIA), the global average
price of memory chips, including DRAM and NAND, has been subject to significant
volatility, with sharp increases in prices in 2018 due to reduced availability from Chinese
suppliers.

Production Trends:

● Shifting Production Volumes:

The US, China, Taiwan, and South Korea have all experienced shifts in their
semiconductor production volumes in response to the trade war. In particular:

o China: Due to considerable investments in domestic manufacturing capacity,

China has seen a significant increase in semiconductor production. With the
help of government subsidies, businesses such as SMIC (Semiconductor
Manufacturing International Corporation) have increased manufacturing.
China still lags Seebehind in the production of high-end processors, such as
those used in 5G infrastructure, despite these efforts.

o South Korea and Taiwan: South Korea, with Samsung and SK Hynix, and
Taiwan, with TSMC, have taken advantage of the interruptions caused by the
trade war to increase their market dominance. For instance, as US businesses
shift their production away from China, TSMC has increased its
manufacturing capacity to satisfy their demands.

o US Reshoring: In response to the trade war, the US semiconductor industry

has moved part of its production operations back home. Government
initiatives like the CHIPS Act have encouraged corporations like Intel to
increase their investment in domestic factories.
Figure 9. Intel future investments and ongoing projects (Fabs-Advanced
Packaging-Assembly).

Figure 10. Global foundriy producton share 2024.

Figure 11. Semiconductor logic production capacity.
 Figure 12. US capital investing in different manufacture sectors. (Billions dollars annual
rate).

New Manufacturers and Emerging Hubs:

● The trade war has encouraged the development of new manufacturing hubs outside
traditional locations like the US and East Asia. Emerging semiconductor
manufacturing regions include:

o Southeast Asia: Countries like Vietnam and Malaysia have seen increased
investment from global semiconductor companies. Malaysia, in particular, is
seeing more assembly and testing operations being relocated from China due
to the uncertainty created by tariffs and export controls.

Figure 12. Major manufacturers investments on different South East Asia nations.

o Europe: The European Union has introduced initiatives to reduce reliance on

foreign semiconductor imports. ASML, a leading Dutch company, is now the
sole supplier of photolithography equipment, a key technology for advanced
semiconductor production, giving Europe an edge in certain niche markets.

Analysis of Global Semiconductor Supply Chains and Trade Routes

Supply Chain Disruptions:

● With raw materials coming from Africa, component assembly taking place in Asia,
and final product distribution reaching North America and Europe, the semiconductor
supply chain is among the most intricate and international in the world. This
worldwide network has been disrupted by the trade war in a number of ways:

Figure 13. Global Semiconductor Supply Chain Based on Geographic Specialisation

Figure 14. Supply shortage index of semiconductors and electrical items.

o Raw Materials: China’s control over rare earth elements, critical for
semiconductor production, has been a focal point of the trade war. The US
and its allies have sought alternative sources for these materials, which has
introduced additional costs and inefficiencies into the supply chain.

Figure 15. Rare earth reserves major holders.

o Intermediate Components: US export restrictions on advanced

semiconductor manufacturing tools have disrupted the ability of Chinese
 companies to manufacture cutting-edge chips. This has particularly impacted
companies like Huawei and SMIC, which are dependent on US-based
equipment and software.

o Manufacturing and Assembly: Tariffs on components have pushed

manufacturers to shift operations. For instance, Intel and TSMC have
expanded production in countries like Taiwan and the US to reduce
dependency on Chinese supply chains.

Figure 16. Semiconductors manufacturing capacity, increase, incentives and growth rates.

Trade Route Shifts:

● Trade routes for semiconductors and their components have been heavily impacted
by the tariffs and export controls. The most notable shift has been in the rerouting of
shipments that once flowed freely between the US and China. For example, while
semiconductor components from China were once a major part of US imports,
companies are now turning to alternative suppliers in Taiwan, South Korea, and
Japan, especially in response to tariffs and export bans.

o Shipping Costs and Delays: The rise in tariffs has led to increased shipping
costs and logistical delays. Additionally, semiconductor manufacturers are
increasingly relying on air freight rather than sea transport to avoid delays at
ports, increasing transportation costs.
 Figure 17 & 18. Comparison between maritime shipping prices and air freight price
increase since 2023.

Quantitative and Qualitative Data Analysis

Quantitative Analysis:

● The quantitative aspect of the research analyzes price data, production volumes,
and trade flows using publicly available datasets from sources like the
Semiconductor Industry Association (SIA), World Trade Organization (WTO), and
national customs data.

o Price Trends Analysis: Regression analysis was used to correlate the

introduction of tariffs with fluctuations in semiconductor prices over time.
 o Production Trends: Data on semiconductor production and export volumes
was compared between the US, China, Taiwan, and other key regions to
identify shifts in production patterns.

o Trade Volume Trends: Trade volume data between the US and China for
semiconductors has been analyzed to assess the impact of tariffs and export
controls on the global semiconductor market.

Table 1. Trends in Semiconductor Exports (Product HS 8541)

Qualitative Analysis:

● To learn more about how businesses are adjusting to the shifting trade climate,
surveys and interviews with important industry participants will be undertaken. These
stakeholders include CEOs from semiconductor companies, logistics companies, and
policy experts. Among the main topics to be examined are:

o Impact on Innovation: How the trade war is driving or hindering innovation

within the semiconductor industry.

o Strategic Shifts: How companies are adjusting their business models,

including reshoring and diversifying production locations, to mitigate the
risks posed by the trade war.

Implications for the Future of the Semiconductor Industry

Based on the analysis, the long-term implications for the semiconductor industry will be
assessed. These include:
● Technology Development: As businesses look to obtain a competitive edge in these
vital areas, the trade war may hasten some technology developments, especially in
AI, 5G, and quantum computing.

● Industry Instability: The semiconductor industry may remain unstable due to

ongoing supply chain interruptions and pricing volatility, which would make it less
predictable and more competitive.

Figure 20: Global Value Chain of Semiconductors.

● Regionalization: In order to lessen dependency on international supply chains and

lower the risks associated with potential geopolitical conflicts, the semiconductor
industry may continue to regionalize, with Asia, North America, and Europe forming
more autonomous production hubs.
Figure 21: Capital investment planning for increasing chip production in America.

Figure 22: Materials manufacturing for certain industries.

Industrial reconfiguration
One of the main fronts in the US-China trade war is now the semiconductor sector. The sector, which
was once dominated by US companies, has changed as a result of significant changes in global
supply chains and production. The implementation of export bans, tariffs, and other regulatory
measures by the US and China has presented semiconductor businesses with both possibilities and
obstacles for innovation and adaptation.

Manufacturing and Technological Shifts:

The production procedures used in the semiconductor industry require a significant amount of money.
To stay competitive, businesses like Samsung, Intel, and Micron have made significant investments in
state-of-the-art fabrication facilities. However, the global supply chain has been disrupted as a result
of the trade war. For example, US companies who formerly relied on Chinese manufacturing are
increasingly sourcing their goods from South Korea, Japan, and Taiwan. In order to lessen its reliance
on foreign chipmakers, China has stepped up efforts to build local semiconductor manufacture
through state-sponsored programs like the "Made in China 2025" plan.

Figure 23. Integrated circuits production and consumption in China.

 Figure 24. Domestic market of IC in China, projection for 2025.

Global Supply Chain Reconfiguration:

With production facilities dispersed over several nations, the semiconductor supply chain is currently
extremely fragmented. Businesses have been forced to modify their supply chain strategy as a result
of the tariffs imposed by the US and China. To reduce their reliance on foreign suppliers, some
businesses have vertically integrated, while others have diversified their supply chains. Because their
fabs are essential locations for semiconductor production, companies like TSMC (Taiwan
Semiconductor Manufacturing Company) and SMIC have emerged as key actors in the new
environment.

Figure 25. Invested capital and infrastructure development for manufacturing electronic components
for different sectors.
Investment in R&D and Innovation:

Semiconductor businesses are increasing their research and development activities in reaction to the
trade war. To keep ahead of Chinese companies like SMIC, who are quickly bridging the
technological divide, US companies like AMD and Intel are pushing the boundaries of semiconductor
technology development. Furthermore, with strong government support for domestic companies,
China is making significant R&D investments to develop a self-sufficient semiconductor industry. As
a result, both nations prioritize advanced semiconductor manufacture to maintain a strategic
advantage in the global struggle for technological domination.

Pricing Instability and Market Dynamics:

Price volatility throughout the trade war has been a defining feature of the semiconductor sector.
Prices for both raw materials and completed semiconductor goods have fluctuated as a result of
changing supply chains, tariffs, and export limitations. Businesses must strike a balance between
growing production costs and consumer demand for chips that are more sophisticated and potent.

As governments and businesses negotiate the intricate interactions of political, economic, and
technological pressures, this industry transformation is probably going to keep changing the world.

Figure 26. Market panorama, major suppliers, development regions, forecasting and materials.
Conclusion

To sum up, the trade war between the United States and China has had a significant and
varied effect on the semiconductor sector, resulting in a complicated environment full of
opportunities and problems. Significant technological developments have been fueled by the
fight, especially in fields like chip production, artificial intelligence, and 5G technology. The
semiconductor industry has developed more quickly as a result of companies being forced to
innovate quickly as both countries have put regulations in place to lessen their reliance on
foreign suppliers. More sophisticated and locally made technologies have been developed as
a result of this drive for self-sufficiency, which has decreased dependency on the global
supply chain. However, the trade war has brought forth a number of threats and instability.
Price fluctuations and the disruption of global supply networks have made the environment
uncertain for both consumers and enterprises. In addition to raising manufacturing costs, the
implementation of tariffs and export restrictions has resulted in delays and inefficiencies in
the movement of components and supplies. Due to pricing instability brought on by these
variables, businesses now find it more challenging to project expenses and make long-term
plans. The geopolitical split in semiconductor production is becoming more noticeable as the
sector becomes more regionalized and both China and the United States strive for
semiconductor self-sufficiency. A more divided global market where regional rather than
global pressures impact supply chains, rivalry, and technology standards could result from
this fragmentation. The global economic balance is shifting due to the reshoring of
semiconductor manufacturing and greater investment in domestic production, which affects
both established and emerging markets. The semiconductor industry's future depends on
striking a careful balance between the necessity for worldwide cooperation and intense
technological competitiveness. Global cooperation will be necessary to guarantee the
industry's long-term stability, even as competition is spurring innovation. The global
semiconductor market can only survive these challenging times and continue to meet the
increasing demands of a world that is becoming more digital by working together to address
common issues like supply chain vulnerabilities, the lack of essential raw materials, and the
need for standardized technologies.

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