Technology Rivalry and Resilience Under Trade Disruptions: The Case of Semiconductor Foundries

Speaker: Miao Weiting

Venue: Room 718, Complex Building, School of Economics, Zijingang Campus

Abstract: This paper studies how geoeconomic fragmentation reshapes dynamic technology rivalry. Distilling key empirical features from novel data on the semiconductor foundry industry, I develop and estimate a dynamic oligopoly model of step-by-step innovation with trade disruption risk and industrial policies. In an integrated global market, firms that lag sufficiently behind the technological frontier optimally cease investing, as the step-by-step structure of innovation and persistently thin follower margins limit expected post-innovation rents. Export controls and investment restrictions alter this equilibrium. By reducing direct frontier competition and securing protected home demand, such policies can unintentionally restore innovation incentives for lagging firms, while potentially reducing spillovers and increasing innovation costs. The net effect depends on the trade-off between weaker knowledge diffusion and the rents created by protected domestic markets.