New data has revealed why German firms are refusing to join the USA’s tech trade war with China over semiconductor chips, a critical component in modern electrical devices. Researchers at the
University of Sussex and
Kings College London found heavy links between German automotive manufacturers like Mercedes-Benz, BMW and Volkswagen, and the country’s semiconductor firms. With automotive companies now dependent on Chinese markets and suppliers, the researchers say this explains why Germany is ‘defying US calls to cut China out of semiconductor supply chains‘ in an ongoing global trade dispute known as ‘the chip war’.
Dr Steven Rolf, Research Fellow at the Digital Futures at Work Research Centre, University of Sussex Business School, said: “China spends more on importing semiconductors than oil and the USA is using all its leverage to get European firms to turn off the tap. The pressure is huge, which is why it has been so interesting to see German players ignoring calls to separate, or decouple, from China. Once you see how deeply German automotive and semiconductor interests are wedded together it makes sense. They are stuck in the middle, vulnerable to US powers on tech, and China on cars. For now, it looks like they are sticking with the latter.”
Dubbed “the world’s most critical technology” in a 2022 book on the subject, semiconductors are used in modern electronics such as smartphones, medical devices and routers. The industry is worth more than $500 billion and expected to double by 2030.
Political ramificationsDr Rolf added: “US attempts to stall China by weaponising supply chains rely on a relatively small number of firms across Europe and Asia. While these firms can be understood as chokepoints, capable of blocking or accelerating China’s technological advances. Yet they are critically under-studied. For the first time we can see the difficult choices companies like Merck, Siemens and SÜSS MicroTec are having to make between US tech and lucrative Chinese markets, and the political ramifications of those choices.”
The study found German semiconductor firms are no more dependent on Chinese markets than those in Japan or South Korea, countries which have supported American efforts and even withdrawn from China altogether. Yet what the researchers term “secondary exposure”, through links to other important industries like car makers, has led them to resist the US embargo.
Dr Julian Germann, senior lecturer in international relations at the University of Sussex School of Global Studies, added: “Germany’s semiconductor industry may not be the largest, but its strategic importance to the U.S. China chip war is undeniable. The calculated defiance by firms at the frontline of U.S. China competition suggests that the next American president would need to ramp up pressure on Germany to enforce tech sanctions against China.”
Written by researchers at the University of Sussex and Kings College London the paper analyses new trade datasets and annual company reports. It is part of an ongoing study into the role businesses across the world are playing in US-led initiatives to decouple its economic relations with China.