Date of Submission

Spring 2012

Academic Program

Economics

Project Advisor 1

Dimitri Papadimitriou

Abstract/Artist's Statement

While Japan marked its success in surpassing the U.S. to dominate the semiconductor industry in 1986, the Chinese semiconductor industry transformed from a small sector into a global competitor. This thesis tracks and compares the developmental histories of this industry between China and Japan and analyzes the differences in government policy, economic systems, comparative advantage and trade policy in both countries, in order to ascertain the two countries’ industrial development strategies and governments’ impacts on the semiconductor industry. This analysis finds that Japan’s development strategy targeted a knowledge- and capitalintensive industry (semiconductor industry, in this case) by providing preferential assistances while deliberately keeping that market protected from foreign competitions to ensure that the industry had a high volume and a profitable base. When the Japanese achieved the economy of scale and cost competitiveness and gained enough production experiences, Japan expanded the market share by aggressive pricing and ultimately dominated the foreign market. On the other hand, China’s development strategy went from a protectionist strategy in a command economy—learning from the Japanese model—which focused on cultivating large stateowned enterprises to be national champions and protecting the market from foreign competition, to an export-oriented strategy in a relatively more market-oriented economy which encouraged foreign investment and leveraged China’s labor-abundant comparative advantage by cooperating with foreign firms.

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