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Noah Smith

How to Win the Global Battle for Microchip Dominance

Creating new markets with novel products will keep the U.S. a step ahead of China and other rivals.

Today’s most jealously guarded industry.

Today’s most jealously guarded industry.

Source: Bloomberg

The world is gearing up for a titanic battle over semiconductors. To secure its position in this most strategic of all industries, the U.S. will have to weigh its strategy carefully and learn the lessons of the past. The right balance of support for both production and innovation will distinguish the winners.

Of all modern industries, semiconductors — i.e., computer chips — are the most jealously guarded and sought-after by national governments, for many reasons. First of all, they’re militarily important — pretty much all weapons are computerized now, and in a war you need to be able to make your own chips. On top of that, semiconductor manufacturing is a very high-value activity that generates a lot of revenue and a lot of good-paying jobs. And since computer chips are key inputs into a huge variety of other high-tech industries, having semiconductors located in your country supports an entire ecosystem of high-value economic activity.