The growing competition between the US and China is profoundly reshaping the global electronics industry. For regions like Europe and Japan, which lack technological independence, forming strategic alliances has become a critical path to remaining competitive in this rapidly evolving landscape.
Electronics remain indispensable to the global economy, but the days of seamless international supply chains are fading. This trend is highlighted in a recent study, "Tech wars: US-China rivalry in electronics until 2035." Over the past decade, US companies have maintained a stronghold on value creation, generating 35% of global revenues and 54% of profits among the top 350 electronics firms, despite significant manufacturing outsourcing to China.
China, on the other hand, now accounts for 42% of global electronics exports but contributes only 29% to industry value-added. Although it has made significant progress in manufacturing, it still falls short of challenging US leadership in this sector.
Geopolitical tensions fuel strategic shifts
The ongoing trade disputes, initiated under Donald Trump and extended by Joe Biden, have done little to shift the power dynamics between the two nations. While US imports from China have decreased, trade with other countries has increased, leaving the overall trade deficit intact. Simultaneously, China has diversified its export markets, narrowing its technological gap with the US.
Europe’s role: From sidelines to strategic focus
For economies such as Europe, Taiwan, and South Korea, achieving technological autonomy is unrealistic. These nations must focus on forming partnerships—preferably with the US—and channel their efforts into developing next-generation technologies. For Europe, in particular, catching up in sectors like semiconductors is no longer viable. The focus must shift to innovation and reducing dependency.
Lessons from history
The study underscores the lessons from past technological revolutions, such as Japan’s dominance in consumer electronics during the 1980s, which was later disrupted by the rise of personal computers and smartphones. As the next transformative shift looms, businesses and governments must reduce vulnerabilities and build resilience to withstand geopolitical and economic pressures.
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