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China tariff removal may help but not remove computer chip shortage

China 2874 Info Tech - Tech Hardware 731 Malaysia 119 Taiwan 185 Tariffs 1765 U.S. 5161

The ‘shortage of semiconductors’ has become a catch-all reason for supply chain challenges being faced by a diverse range of industries, particularly the automotive sector as discussed in Panjiva’s research of July 7. The Biden administration’s review of critical supply chains has yielded broad-brush strategies which will be enacted into policy in the remainder of 2021. 

In dollar terms total U.S. imports of semiconductors have increased by 37.0% in the three months to May 31 compared to same period of 2016, Panjiva’s data shows. 

However, that reflects a significant pricing component. The volume of microchips imported only increased by 4.3% over the same period, indicating cost inflation over the past five years of 31.0% annually. 

From a volumetric perspective imports from China slumped 50.3% lower over the same period, due in part to the Trump administration’s section 301 duties according to a recent article in Foreign Affairs which used data for semiconducting components (including diodes and LEDs as under HS 8541 well as microchips under HS 8542).

Removing the duties may therefore help restore prior supply chain structures, though that will require a significant improvement in relations between the U.S. and China which looks unlikely to occur during the remainder of 2021.

Chip price hike masks slow growth in shipments, China in decline

Chart segments U.S. imports of computer chips (HS 8542) by origin showing value, volume and value per unit. Source: Panjiva

While a 4.3% increase in total chip imports compared to a 50.3% drop in imports from China would suggest suppliers from other countries have stepped up, an analysis of underlying products indicates there are more focused problems.

In the case of specialist controllers, imports from China fell by 52.6% while imports from all other regions, particularly Taiwan and Malaysia, climbed 40.6% higher so that total imports actually improved by 12.8%.

Other products have seen a decline in shipments from China and in imports from other countries. Imports of processors, the second largest category by number of units shipped, imports from China fell by 32.0% while those from the rest of the world fell by 19.4%. A similar pattern can be seen in amplifiers and memory chips where imports from China fell by 53.9% and 66.5% respectively, though in both instances China only accounted for around one-fifth of imports in 2016.

Processors, amplifiers and memory chips in long-term decline

Chart segments U.S. imports of computer chips (HS 8542) by product and origin in the three months to May 31, 2021 versus the same period of 2016. Source: Panjiva

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