Major semiconductor producing countries rely on each other for different types of chips

Gary Clyde Hufbauer  and Megan Hogan 

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The global semiconductor production system is complex, integrated, and not easy to disentangle. Each of the five major global semiconductor producers—China, South Korea, Japan, Taiwan, and the United States—is also a large chip importer. Not all chips are equal, and no producer specializes in every chip category, leaving even the largest exporters reliant on imports.

The need to preserve trade in semiconductors is evident in the disparities in average export prices per chip between the major source countries. US chip exports were the most expensive, fetching an average price of $2.16 per chip in 2021, reflecting advanced US chip production techniques and its specialization in more sophisticated chips. Unit values for chips imported by the United States from other producing countries are far lower, as the US manufacturing sector imports simpler, low-value chips that it does not produce itself.

Self-sufficiency advocates seem to suggest that the United States should meet its own semiconductor needs. But doing so would require US producers to prioritize basic chip production—an arena where it has a clear disadvantage—while continuing to compete with South Korea and others in producing more advanced chips. Self-sufficiency is therefore self-defeating. The United States and others should instead follow the logic of comparative advantage.