Semiconductors: A Case for Strategic Trade?

This case analyses the evolution of the semiconductor industry in the US and Japan, and how it was shaped by the domestic policies, and the international trade problems it created. The authors address the implications of the international agreements between the two countries, which constituted a landmark in international trade politics.

The objectives of the case are as follows: To broaden the concept of comparative advantage beyond the standard notions of factor abundance. The case shows that there are elements of comparative advantage in the allocation of different branches of the semiconductor industry between the US and Japan. To show how strategic trade policy may be counterproductive, in the presence of elements of comparative advantage. To demonstrate that the ability of governments to predict technology, and/or the market, is low, leading to policy interventions that destroy value for domestic economies and the World.