From 2013 to 2014, both total U.S. exports and U.S. general imports grew in this sector. Total U.S. exports increased $6.4 billion (2.4 percent) to $267.6 billion in 2014 owing to increased exports of semiconductors and telecommunications equipment (table EL.1). U.S. export growth resulted from higher exports of semiconductors to China and Malaysia and widespread demand in Mexico for various electronic products.

The $16.5 billion expansion of U.S. general imports of electronic products reflected a $10.1 billion increase in imports from China—much of which was cellular telephones and consumer electronics—and a $2.9 billion increase from Malaysia, mostly for semiconductors (table EL. 2).¹ However, U.S. import growth was slightly offset by a $1.3 billion reduction in imports from Japan.

U.S. Exports²

The $1.4 billion growth of domestic exports of U.S. semiconductor equipment such as chips and circuits in 2014 was largely driven by Malaysia (up $682.8 billion) and China (up $579.5 billion). Both countries are large producers of consumer electronics, telecommunications equipment, and information and communications technologies, all of which rely heavily on semiconductors as a principal component. Demand for these products continued to rise in 2014, contributing to growing demand for semiconductors: worldwide shipments of semiconductor wafers—a major component of semiconductors—increased by 11 percent over the previous year.³

The $787 million growth in U.S. domestic exports of telecommunications equipment during 2013–14 in part reflected increased demand for these goods as countries continued to expand their digital networks to accommodate growing Internet traffic and mobile services.⁴ The two largest export categories within this telecommunications subsector were computer network switches and routers, and cellular telephones,⁵ both of which were heavily re-exported goods. Re-exports represented 57 percent of total exports of the former and 69 percent of total exports of the latter (table EL.3).⁶ Although data are limited, the majority of these re-exports are believed to be used goods. Cellphones, for example, are commonly collected from wireless original equipment manufacturers, operators, and retailers by remarketers after consumers trade in their old devices for new ones.⁷ Many of these used devices are repaired, refurbished, and retested before being re-exported.⁸

Mexico remained the largest destination for U.S. domestic exports of electronic products in 2014 and also registered the largest expansion of U.S. exports (up $964 million). The growth occurred across several subsectors, including parts of circuit apparatus, medical goods, and consumer electronics. Reasons for this increased demand vary. One important factor is Mexico’s standing as a leading manufacturing hub for contract electronics manufacturers, given its proximity to the large U.S. market and its abundance of relatively low-cost labor.⁹ As such, the country often imports inputs, such as parts of circuit boards, from the United States, which are then used for final manufacturing of various electronic products. Second, Mexico is a principal destination for U.S. exports of consumer electronics—the majority of which are re-exports from foreign-trade zones (FTZs) in the United States.¹⁰ Improved consumer confidence towards the end of 2014 likely bolstered demand for these goods in Mexico.¹¹

Finally, Mexico’s increased investments in the healthcare sector, which rose to 6.7 percent of GDP in 2014, may have translated into growing demand for medical products.¹² Total U.S. export growth was slightly limited by an $891 million decrease in measuring and testing equipment and an $832 million reduction in navigational instruments. These reductions were due in part to the appreciation of the U.S. dollar during 2013–14, which made U.S. exports relatively more expensive in foreign markets.¹³

U.S. Imports

Although U.S. general imports increased for 7 of the 10 largest suppliers within the electronic products sector, the $10.1 billion expansion of imports from China accounted for about two-thirds of the import growth by value. U.S. imports from China rose across all but one of the subsectors within the electronic products sector; however, cellphones—which are in the telecommunications equipment subsector—and consumer electronics accounted for the majority of import growth. China is the global leader in the production of electronic goods, including the iPhone 6. This smartphone has achieved unprecedented sales both globally and in the United States in recent months, and it accounted for an estimated one-quarter of total shipments of smartphones during 2014.¹⁴ Moreover, the United States is the world’s largest market for consumer electronics, and U.S. consumer confidence—which reached a seven-year high during 2014—buoyed demand for these goods and other electronic products.¹⁵

A $2.9 billion increase in imports from Malaysia also contributed to U.S. import growth, with semiconductors representing more than 80 percent ($2.3 billion) of the increase. FTZs in the United States conduct upstream manufacturing for various electronic products, assembling imported components—such as chip boards and other material used in semiconductors—into a finished chip and then exporting them abroad for final assembly into a finished good.¹⁶ Manufacturing within FTZs has increased since 2012, as the application process and other operational procedures have been streamlined to facilitate more activity.¹⁷

The growth in U.S. imports was slightly attenuated by a $1.3 billion decline in imports from Japan, led by a $402 million reduction in imports of computers and associated peripherals. As previously discussed, China represents a growing share of the world’s production of electronic goods, and most Japanese companies rely on Chinese production for these goods, including computers and peripherals.¹⁸ As a result, U.S. imports from Japan of these goods have declined in each of the past five years.