US-China Watchers Should Keep Their Eye on Semiconductors


China’s ambitions for its semiconductor industry will provide a telling bellwether for the future of US-China trade relations. China’s objectives – and more precisely, the manner in which they intend to achieve them – will raise vexing issues for US policy makers. And since similar issues are arising across a number of other key sectors, the manner in which the semiconductor issue is dealt with will tell us a lot about whether the two countries will be able to work out a broader modus vivendi for their trading relationship moving forward.

Here’s the background: Semiconductors have become a fundamental building block of today’s high-technology knowledge economy, powering everything from cell phones to sophisticated medical diagnostic equipment and solar panels. Forward-looking technologies like driverless cars will depend on semiconductors, as will advances in cyber security. And of course, the most formidable military weaponry in the world also relies on semiconductor technology. Possessing – and maintaining – a lead position in this critical industry is one of the hallmarks that separate advanced economies such as the US, Japan, Taiwan, Korea, and the EU from the rest of the pack.

China has become the foremost global powerhouse when it comes to exporting the various information and communication technology (ICT) products that depend on semiconductors. Importantly however, it lags far behind the leaders when it comes to its ability to produce the semiconductors needed to power these essential products.

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