Electronic Products

John VerWey
(202) 205-2022
John.VerWey@usitc.gov

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Change in 2017 from 2016:

• U.S. total exports of electronic products: increased by $7.9 billion (3 percent) to $268 billion
• U.S. general imports of electronic products: increased by $34.3 billion (7.6 percent) to $484 billion

From 2016 to 2017, although U.S. total exports of electronic products grew by $7.9 billion (3 percent) to $268 billion, there was a $90 million (0.1 percent) decrease in total domestic exports.^[1] The decrease in domestic exports was due primarily to a decline in exports of semiconductors and integrated circuits as well as telecommunications equipment. U.S. domestic exports to Vietnam and Thailand posted the largest percentage declines for the electronic products, while domestic exports to South Korea and Germany saw the largest percentage growth (table EL.1).

From 2016 to 2017, U.S. general imports of electronic products grew by $34.3 billion (7.6 percent) to $484 billion, reflecting a notable increase in imports of computers, peripherals, and parts, as well as telecommunications equipment. The largest percentage increases in imports of electronic products involved imports from China and Taiwan, up by $25.2 billion (14 percent) and $1.2 billion (7.3 percent), respectively.

Table EL.1: Electronic products: U.S. exports and general imports, by selected trading partners, 2013–17

Source: Compiled from official statistics of the U.S. Department of Commerce.
Note: Import values are based on customs value; export values are based on free along ship value, U.S. port of export. Calculations based on unrounded data. The countries shown are those with the largest total U.S. trade (U.S. general imports plus U.S. domestic exports) in these products in the current year.

U.S. Exports^[2]

U.S. total exports of electronic products grew by $7.9 billion to $268 billion in 2017. U.S. domestic exports, however, declined slightly (by $90 million) to $160 billion in 2017. The largest absolute change in U.S. total exports within this product group occurred in the navigational instruments and remote control apparatus product sector, total exports of which grew by $705 million (23.7 percent) between 2016 and 2017. Kuwait, the Marshall Islands, and Saudi Arabia accounted for most of the increase in this sector, with purchases of radar apparatus and antennas and of parts for radar.^[3] Kuwait and Saudi Arabia received several hundred million dollars of U.S. military sales for the development of airfield operations, command and control systems, and radar and sensors in 2017.^[4] Part of this increase is also explained by the fact that both countries are investing in new ports.^[5] In addition, the Kwajalein Atoll, a part of the Republic of the Marshall Islands, is home to the Ronald Reagan Ballistic Missile Defense Test Site. This U.S. military facility is used for missile defense testing, as well as space surveillance and satellite identification, and has been undergoing a major upgrade that was nearing completion in 2017, which required new equipment.^[6] Exports of optical goods, including lasers (other than laser diodes), also recorded a notable increase in absolute and percentage change. These exports were driven primarily by demand from China and Japan, where they are used by contract electronics manufacturers.^[7]

The slide in U.S. domestic exports occurred against the backdrop of slowing economic growth in key international markets, combined with growing overseas production capacity. The two sectors that recorded the most significant decrease in domestic exports were semiconductors and integrated circuits, down $1.4 billion (4.9 percent), and telecommunications equipment, down $943 million (5.7 percent) (table EL.2). U.S. domestic exports of electronic products declined the most to Mexico, where they were down $1.3 billion (6.3 percent), followed by those to Vietnam, down $556 million (27 percent).

Table EL.2: Electronic products: Leading changes in U.S. exports and imports, 2013–17

Source: Compiled from official statistics of the U.S. Department of Commerce.
Note: Import values are based on customs value; export values are based on free along ship value, U.S. port of export. Calculations based on unrounded data.

Developments in the personal computing and smartphone industries, which are downstream consumers and users of semiconductor and telecommunications equipment, may explain part of the decline in the sector’s domestic exports. Trade publications indicate that increasing competition from foreign suppliers and slowing growth in the global personal computing and smartphone industries have both cut into the international market for U.S. goods in this sector.^[8] The decline in the semiconductor sector was partially offset by growth in the cryptocurrency market stemming from an increase in specialized chips used for cryptocurrency servers.^[9]

Industry reports indicate that emerging countries, especially in East Asia, have used high-tech corridors, tax incentives, and industrial policies to promote the development of domestic semiconductor manufacturing at the expense of the U.S. industry.^[10] Notably, in 2015 the Chinese government announced its “Made in China 2025” initiative, part of which directed up to $150 billion to develop its semiconductor industry and replace imports with domestic production.^[11] However, in spite of this decline in U.S. domestic exports, semiconductors and integrated circuits remained the largest share of U.S. exports of electronic products and were behind only aircraft, automobiles, and refined oil in terms of total U.S. exports by value across all industries.^[12]

Trade publications indicate that the U.S. telecommunications industry has faced revenue declines over the past five years as import competition has forced many U.S. manufacturers to outsource production to lower-cost countries and orient domestic production towards higher-value products. ^[13] An example of this adjustment is the growth of U.S. exports of high-end, technologically advanced telecommunication networking equipment to Mexico (though these exports increasingly face competition from low-cost international manufacturers).^[14] Industry analysis suggests that exports of telecommunications networking equipment have decreased at an annualized rate of 4.8 percent and that this trend will continue.^[15]

U.S. Imports

U.S. general imports increased for 9 of the 10 largest trading partners^[16] within the electronic products sector from 2016 to 2017. Although imports of electronic products increased by $34.3 billion (7.6 percent) to $484 billion in 2017, nearly 75 percent of this increase ($25.2 billion) was due to a rise in imports from China. U.S. imports of computers, peripherals, and parts and of telecommunications equipment had the largest increase by value in 2017, with these two subsectors together accounting for over half of the total absolute increase in imports. In terms of percent change, U.S. general imports of electronic products increased the most from China, up $25.2 billion (14 percent), followed by imports from Taiwan, which grew by $1.2 billion (7.3 percent).

Taiwan remained the world’s top consumer of semiconductor materials in 2017 for the eighth year in a row^[17] due to the presence of large semiconductor foundries and advanced packaging facilities there. Taiwan remains a major source of U.S. imports in this sector. However, given the global value chain of consumer electronics, many of these Taiwanese semiconductors derive part of their value from U.S. inputs. This pattern means that some of the increase in imports from Taiwan likely benefits U.S. firms, even though the increase may not be captured in U.S. export statistics for the electronics product group. For example, U.S. producers of semiconductor manufacturing equipment supplied 30–40 percent of the Taiwanese market in 2017,^[18] enabling Taiwanese foundries to fabricate chips that are then incorporated into consumer electronics imported to the United States.

China maintained a hold on second place for global semiconductor material consumption and continued to be a notable producer of consumer electronics.^[19] Of the $11.6 billion increase (10.3 percent) in U.S. general imports of computers, peripherals, and parts, China alone accounted for over $6 billion. Additionally, China is the world’s largest manufacturer of computer hardware products,^[20] while for its part, the United States has the highest penetration of personal computers in the world, estimated at 168.3 per 100 people.^[21]

The increase in electronic product imports from Taiwan and China was partially offset by a $271 million reduction in U.S. imports from Malaysia, which saw a notable drop in its exports of diodes for semiconductor devices to the U.S. market. Elsewhere in semiconductor manufacturing, Malaysia is home to many facilities specializing in outsourced assembly, testing, and packaging,^[22] which together make up the final step of the semiconductor manufacturing process. The upstream decline in U.S. domestic exports of semiconductors and integrated circuits globally may explain part of the decline in subsequent U.S. imports of these goods from Malaysia, as Malaysia completes the final packaging of semiconductor products for U.S. firms and consumption.^[23]

U.S. telecommunications equipment imports increased by $8 billion in 2017; nearly all of these imports consisted of cellular phones from China. This increase was partially offset by a decline in imports of these goods from Mexico and South Korea. Sustained U.S. consumer demand was driven by the introduction of new products, such as integrated home speaker systems^[24] and virtual reality headsets, as well as mobile devices that promise new functionality. Apple, which has maintained a 30–40 percent share of the U.S. smartphone market with its iPhone, introduced three new smartphones and a watch with cellular connectivity in 2017.^[25]

Country-specific circumstances were factors affecting two major suppliers of electronic goods that saw U.S. imports of their products fall. Driven primarily by relatively low labor costs and access to the North American market, a number of multinational electronics manufacturers have established factories in Mexico, making it second only to China in supplying technology to the United States. ^[26] Despite an overall increase in imports from Mexico, the United States imported fewer electronic products from Mexico in 2017. The trade press indicates that uncertainty surrounding the renegotiations for the North American Free Trade Agreement (NAFTA) may have contributed to this decline. ^[27] In addition, South Korea-based Samsung instituted a worldwide recall of its flagship smartphone in October 2016 due to a risk of battery fires, which reportedly reduced consumer demand for its products. This well-publicized difficulty was followed by a severe/significant decline in U.S. imports during 2017.^[28]