Throughout 2021, stories have dominated headlines of a chip, or semiconductor, shortage generated by the demand spike due to the COVID-19 pandemic. Yet the short-term commercial pain from a semiconductor shortage pales in comparison to the long-term economic and national security damage of failing to invest in U.S. semiconductor leadership. Semiconductors are foundational to the information and communications technologies underpinning the modern global economy — powering AI and machine learning, biotech, quantum computing, self-driving vehicles, and the Internet of Things, all linked through high-connectivity 5G — and as a result, represent the keys to innovation, productivity and economic growth, and national security.
As Stephen Ezell and Jeffrey D. Bean write in War on the Rocks, if the United States intends to retain its longstanding advantage in critical technologies essential for national defense and economic growth, it needs to surmount coming policy challenges tied to semiconductors. The Biden administration will need to prioritize responding effectively to major policy challenges in industrial policy, defense applications, human capital, export controls, and allied cooperation. Calibrating semiconductor policy responses through legislation, interagency deliberation, consultation with allies, and stakeholder engagement, especially with industry leaders, is fundamental to ensure that the United States maintains national security advantages and drives private enterprise-led, market-based, and rules-governed global commerce. Failing to do so will hand a distinct advantage to U.S. competitors for decades to come.
The Biden administration will need to effectively navigate the opportunities and challenges briefly explored here if the United States is to remain a world-leading semiconductor player and if competition across the broader global industry is to unfold on private enterprise-led, market-based, rules-governed terms.