DECIG Seminar: January 2025

Industrial Policy in the Global Semiconductor Sector

Pinelopi K. Goldberg (Yale University), Réka Juhász  (University of British Columbia), Nathan J. Lane (University of Oxford), Giulia Lo Forte  (University of British Columbia), Jeff Thurk (University of Georgia)

Presenter:

Jeff Thurk

Time:

Wednesday, January 15, 2025

10:00 – 11:00 AM  (ET)

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Abstract

Link to paper

The resurgence of subsidies and industrial policies has raised concerns about their potential inefficiency and alignment with multilateral principles. Critics warn that such policies may divert resources to less efficient firms and provoke retaliatory measures from other countries, leading to a wasteful ``subsidy race.'' However, subsidies for sectors with inherent cross-border externalities can have positive global effects. This paper examines these issues within the semiconductor industry: a key driver of economic growth and innovation with potentially significant learning-by-doing and strategic importance due to its dual-use applications. Preliminary model estimates indicate that while learning-by-doing exists, it is smaller than commonly believed, with significant international spillovers. These spillovers likely reflect cross-country technology transfers and the role of fabless clients in disseminating knowledge globally through their interactions with foundries. Such cross-border spillovers are not merely accidental but result from deliberate actions by market participants that cannot be taken for granted. Firms may choose to share knowledge across borders or restrict access to frontier technology, thereby excluding certain countries.

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