This article discusses the dynamics of competition within the semiconductor industry in East Asia through the lens of international political economy. In today’s digital era, semiconductors are no longer merely technological products but have evolved into symbols of economic power and national sovereignty. Countries such as Japan, South Korea, and China are heavily investing in this sector, recognizing that dominance in semiconductors provides strategic influence within the global system. The industry has transcended the limits of ordinary market competition and has become a part of geopolitical strategies. The author argues that semiconductor competition in East Asia reflects the struggle between state interests and market forces. This discussion will be organized around three main arguments: first, the importance of the semiconductor industry in national strategies; second, the development of the semiconductor industry in East Asia; and third, the competition between the United States and China in this sector.
First, the semiconductor industry forms the backbone of nearly all modern technologies, from smartphones and electric vehicles to defense systems. From an IPE perspective, semiconductors are viewed not only as economic products but also as instruments for strengthening national power. East Asian countries are racing to build their semiconductor capabilities, aware that dependence on external parties could weaken their position on the global stage. States act not only as regulators but also as active players directing industry growth through investments, subsidies, and partnerships with the private sector. Semiconductors are often referred to as the new oil due to their vital role in the global economy. Many countries are now strengthening cooperation to bolster their positions within the semiconductor ecosystem. For example, the United States formed the Chip 4 alliance with South Korea, Japan, and Taiwan, aiming to optimize each country’s strengths in the supply chain while considering political factors.
Rising geopolitical tensions, particularly regarding the potential conflict between China and Taiwan, have driven nations to strengthen their supply chains to safeguard national security. Mastery of chip technology also provides diplomatic leverage. Today, around 75% of global chip production capacity is concentrated in East Asia. Since 2014, China has poured significant investments into strengthening its semiconductor industry by acquiring foreign technologies and mobilizing private investment. Across almost every stage of the supply chain, from chemical materials to manufacturing, China now boasts domestic players, although it still lags in technological sophistication. To close this gap, China continues to promote investments and talent development in engineering fields.
Second, the development of the semiconductor industries in Japan, South Korea, and China demonstrates how states employ various strategies to achieve technological dominance.
Japan laid the foundations of its semiconductor industry in the 1970s with strong government support through the Ministry of International Trade and Industry (MITI). Although Japan faced setbacks in the 1990s due to U.S. pressure, it has maintained its strength in material production and chip manufacturing equipment. Today, Japan is working to revive its industry, especially after the COVID-19 pandemic exposed vulnerabilities in the global supply chain. Protectionist policies during Donald Trump’s presidency further encouraged Japan to strengthen its domestic chip production and offer an attractive industrial ecosystem for foreign companies.
Meanwhile, South Korea developed its industry through powerful conglomerates such as Samsung and SK Hynix. Currently, semiconductors contribute nearly 20% to South Korea’s GDP and account for about 56.9% of the global memory chip market. However, South Korea still lags in the logic, analog, and optical chip sectors. As a result, the country is now striving to expand its capabilities into sectors such as AI chips, electric vehicles, and automotive semiconductors, aiming for $245 billion in production and $200 billion in exports by 2030.
China, as the world’s largest consumer market for semiconductors, has built its industry through an aggressive investment strategy. Through the $150 billion National Integrated Circuit Plan and National IC Fund launched in 2014, China has accelerated its industry development through massive investments and acquisitions of foreign firms. Another major initiative, such as Made in China 2025, targets China’s emergence as a global leader in strategic manufacturing sectors, including semiconductors. Currently, China accounts for about 25% of global semiconductor production, and this figure continues to grow.
Third, competition between the United States and China in the semiconductor industry has intensified. After decades of leading the industry, the U.S. is now striving to revive its production capacity in response to China’s rapid rise.
China’s rapid development, supported by currency depreciation strategies and large-scale subsidies to domestic companies, has raised concerns in Washington, particularly over perceived unfair trade practices. Within this dynamic, Taiwan emerges as a highly strategic point, both politically and economically. Taiwan Semiconductor Manufacturing Company controls more than 90% of the world’s production of the most advanced chips. The potential conflict between China and Taiwan is a major concern for the United States, as disruptions to chip production could have broad implications for national security.
In an effort to strengthen the sector, the U.S. passed the CHIPS and Science Act in 2022, aiming to boost domestic semiconductor production through substantial subsidies and to enhance research and development in technology. Beyond semiconductors, this law also supports the strengthening of STEM fields and the bioeconomy and expands the roles of agencies such as NASA and the National Science Foundation.
Despite the significant scale of U.S. investment, competitors like China and South Korea are allocating even larger sums to maintain their advantages. Tensions escalated further when, in 2024, the United States expanded export restrictions on semiconductor technology to 140 Chinese companies, including those operating in Japan, South Korea, and Singapore. In response, in December 2024, China announced restrictions on the export of strategic minerals such as gallium, germanium, and antimony, which are critical materials for advanced technology production. Controlling nearly half of the gallium and germanium supply to the U.S., China’s move represents a tangible form of counterpressure against the American tech industry.
The three arguments outlined above, which are the importance of the semiconductor industry in national strategies, the industry’s development in Japan, South Korea, and China, and the dynamics of U.S.–China competition, demonstrate the complexity of this industry. Semiconductors have become instruments of power, symbols of sovereignty, and primary tools in the struggle for global dominance. Through the lens of international political economy, we can see that competition in the semiconductor industry in East Asia reflects the broader battle between state power and market forces amidst a shifting global structure.
