Why German firms resist US pressure to sever ties with China
In the ongoing chip war standoff
New research reveals why German firms resist US pressure to sever ties with China in the ongoing semiconductor chip trade conflict. The study by the University of Sussex and King’s College London highlights a strong connection between German automotive manufacturers and the country’s semiconductor sector as a critical factor in this resistance.
The study indicates that major German car makers, including Mercedes-Benz, BMW, and Volkswagen, maintain significant business relationships with China. This has influenced German semiconductor companies to continue trading with Chinese markets despite US embargoes.
Dr Steven Rolf, Research Fellow at the Digital Futures at Work Research Centre at the University of Sussex Business School, explained: “China’s expenditure on semiconductor imports surpasses its spending on oil, making it a crucial player in the global chip market. The US has pressured European firms to halt sales to China, but German companies are holding firm.”
Dr Rolf added: “The deep integration between German automotive and semiconductor industries illustrates why Germany resists US demands. The country is caught between US technological pressures and its critical trade relationships with China.”
Crucial semiconductors
Semiconductors, often described as ‘the world’s most critical technology’, are integral to various modern electronics, including smartphones and medical devices. The industry, valued at over $500 billion, is projected to double by 2030.
The study reveals that while German semiconductor firms have similar levels of dependence on Chinese markets as their counterparts in Japan and South Korea—countries that have supported US efforts and severed ties with China—Germany’s automotive sector has created a unique situation.
This ‘secondary exposure’ through automotive links has led German firms to resist the US embargo.
Dr Julian Germann, Senior Lecturer in International Relations at the University of Sussex School of Global Studies, noted: “Despite Germany’s semiconductor industry not being the largest, its strategic significance in the US-China chip conflict is clear. The current stance of German firms suggests that any future US administration will need to intensify pressure on Germany to enforce tech sanctions against China.”
The paper, published today, analyses new trade data and company reports to explore how global businesses navigate US-led efforts to decouple from China. The research provides insight into the intricate choices facing companies caught between conflicting geopolitical and economic interests.
Featured image: Major German car makers, including Mercedes-Benz, BMW, and Volkswagen, maintain significant business relationships with China. Credit: Mercedes-Benz
