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Leveraging interdependence for economic statecraft : The structure of power in the supply chain for semiconductors

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Title: Leveraging interdependence for economic statecraft : The structure of power in the supply chain for semiconductors
Author(s): Kristeri, Tomi
Contributor: University of Helsinki, Faculty of Social Sciences
Degree program: Master's Programme in Politics, Media and Communication
Specialisation: World Politics
Language: English
Acceptance year: 2023
Global politics of the 21st century has witnessed two distinct developments: a rise in economic statecraft, or the use of economic means in international influence attempts, and the fragmentation of production into global supply chains. This thesis investigates how these phenomena coexist by analysing how interdependencies in global supply chains can be leveraged in acts of economic statecraft. Specifically, it looks at the structure of interdependencies in the supply chain for semiconductor devices, and how they have been weaponized in the contemporary U.S.–China trade war. For this, a unique theoretical framework is developed by bringing over insights from Power-Dependence theory, network analysis, and Global Value Chain analysis into International Relations theory on economic statecraft and international interdependence. Arguing that interdependence is a type of power resource, this thesis posits that the interdependent exchange relations between individual firms in a supply chain together constitute a power structure. The topology of this power structure is determined by how interdependence asymmetries are distributed across it. States who are in control of advantageous positions of this topology can leverage interdependencies in acts of economic statecraft against other states. This structure is not fixed and can be shaped by state action, including economic statecraft, that can be motivated either by power balancing or power maximisation. Alternatively, a state may assume a strategy of cost-reduction which is aimed at accepting the state of dependence and power imbalance. This thesis maps the power structure of the semiconductor supply chain by looking at the chain at the level of the individual firm. The structure is assessed with the help of the Herfindahl-Hirschman index, based on data about where the market on each chain segment of the supply chain is nationally concentrated in. The results of this mapping reveal that the U.S., and to a lesser extent South Korea and Taiwan, are in control of strategically important positions in the supply chain, allowing them to leverage this position against others. China especially is shown to be vulnerable due to its high level of dependence on other countries in the chain. The thesis also shows that the power structure has both motivated China’s attempts at achieving ‘semiconductor independence’ and enabled the U.S.’s use of economic sanctions against China.
Keyword(s): economic statecraft international interdependence weaponized interdependence global value chains supply chains semiconductors US–China relations geoeconomics

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