Rivalry between USA and China reshaping electronics sector

The world needs electronics. However, the era of seamless globally integrated operations is shifting. This is a finding of the study “Tech wars: US-China rivalry for electronics out to 2035” published by Coface, a global player in trade risk management, which supports Swiss companies in their international development since 1995.

Both the US and China have much to lose. While the USA has seen some of its manufacturing shift to China, in particular, a different picture emerges for value creation:  across the 350 top listed electronics companies, US companies generated 35 percent of global revenues between 2014 and 2023. Their share of global profits amounted to 54 percent.

Over the same period, China has made considerable progress in electronics manufacturing. Its share of global electronics exports climbed to 42 percent in 2022, though that of global value-added was just 29 percent. Chinese firms operating in the electronics industry do not yet pose a major threat to US leadership, the study authors maintain.

The tech war between China that began in the first presidency of Donald Trump and was essentially continued by the Joe Biden administration has had little impact on the balance of power between the two rivals. While US electronics imports from China have dropped, most other countries have increased their electronics exports to the US. The US electronic device trade deficit has in fact increased. China was in turn able to offset the losses in trade with the US through gains in other countries, with its manufacturers even reducing the technological gap between them and the USA.

Other economies such as Japan, Taiwan, South Korea and Europe are tending to watch the rivalry play out from the sidelines. They have no prospect of technological autonomy and are therefore compelled to form alliances with partners – preferably the USA. Specifically for Europe, it is too late to start playing catch up in semiconductors, for example. It should therefore focus on possible new future technologies.

The study highlights the seemingly entrenched market dominance of Japan in consumer electronics in the 1980s. The market was dramatically redefined by the personal computer revolution of the 1990s and the smartphone boom of the 2000s. Until the next pivotal shift, electronics companies and countries must actively manage dependencies and remain agile to withstand geopolitical and economic pressures. ce/stk