How the Electronics Industry Has Been Caught in the Middle of the Trade War Between the United States and China

Trade War Between the United States and China

A trade war has been brewing between the United States and China recently, and a direct effect of that will be on the electronics industry. So far the electronics industry has been spared from the tariffs, but the global electronics ecosystem has been hit nonetheless.

China has gone about strategically in its trade warfare against the United States, hitting mainly food products and commodities that are produced in states that are politically significant in the United States.

The United States is retaliating in kind. The U.S. has banned technology transfers to China and China has banned technology transfers to the U.S.

But what does that mean for an electronics company? Let’s say you have a U.S. based mobile phone company. This company makes use of a mobile processor for which the intellectual property comes from a number of different countries in North America, Asia and Europe. The chip is designed in the U.S., fabricated in Germany, assembled and tested in Singapore.

The processor is then integrated into the smartphone which is designed in Hong Kong and assembled in China.  The memory and display are obtained from South Korea, and the operating system is Android, which is made by an American company – Google.

This phone is now sold all over the world, including in the United States and China. Can you see the confusion it would cause if China and the United States were to get into a trade war over this?

That would be disastrous for the American company that makes the smartphone and could lead to the loss of tens of thousands of American jobs, not to mention thousands of jobs in electronics companies in China, Germany, Hong Kong, Malaysia, Taiwan and Korea – all of the countries that were involved in the manufacture of this phone.

We took the example of a smartphone. The same thing would repeat itself in the case of personal computers, TV, smartwatch, embedded electronic devices such as control boards and so on.

The question is whether the trade war is really worth it? The world we know is completely different from how it was 15-20 years ago. Then, a trade war could have been carried out without much collateral damage.

But now, with all intellectual property, electronic components and embedded systems developed in multiple nations around the world, shipped from one country to another, to make a single unified product – the trade war looks like a very foolish idea indeed.

The issue is not just the tit for tat tariffs imposed by the US and China against each other. Every country has at least some sort of a protectionist mechanism in place, which is playing havoc with the electronics industry.

The electronics industry is one of the biggest employment generators in the world; countries risk meddling with it at a cost to their own economies.  Protectionism has become a curse on the electronics industry, which has been hampering its growth. One hopes that better sense prevails and things get back to normal again.

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