What is the impact of US-China trade friction on the semiconductor industry

How will the US-China trade friction affect the semiconductor industry

Since the United States began to impose high tariffs on imported goods in China in mid-2018, it caused friction between the US and China. The so-called “the US-China trade war” began. Half of the US trade deficit is to China. China also said that it intends to aim for a manufacturing power named “China Manufacturing 2025”, and the United States said that “as a sanction for intellectual property rights infringement, we shall impose 25% additional tariffs against imported goods from China of 50 billion dollars. ” 

From the US it means that the fact that the trade deficit is against China and that China does not like to dominate over the United States in the high-tech field. It means that it is contesting the hegemony of so-called Manufacturing Industry.

America honors high tariffs on capital goods and intermediate goods from China

The US side has stated that “it will add 25% of additional tariffs on imported goods from China,” but nearly 70% of the imported products are “capital goods and intermediate goods “. China became a manufacturing powerhouse, and it came to shape to prevent hegemony in the field of “high-tech”. And China responded, “we will add 25% additional tariff to US which is $34 billion imported goods from the United States” to spite them. 

Reactions of American semiconductor companies

American semiconductor companies do not oppose President Trump’s protection of own intellectual property rights and protection of domestic industries, but they oppose the imposition of high tariffs on Chinese products. Because the semiconductors are imported from China, and the design and the product are made in the US.

Reactions of semiconductor companies in China

Demand for semiconductors in China is increasing, so now supply is not catching up to the demand. The current Chinese semiconductor industry relies on imports from the United States and other countries. For that reason, the government has also subsidized to strengthen the domestic “high-tech” field of “China manufacturing 2025”, but as the Chinese economy is worsening more than imagined, how long it will last is unknown. Both semiconductor companies from US and China does not agree with such imposement.

Japanese semiconductor companies can dominate

It goes without saying that semiconductor manufacturers in Japan and other Asian countries will dominate if the US side imposes high tariffs on “capital goods and intermediate goods” from China. The reason is simple, it is because the number of times Chinese semiconductors are exported to the USA surely will decrease. Therefore, there is no doubt that companies that invest directly from the US will get less profit.

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