Semiconductor Industry Calls for More Robust, Strategic Industrial Policy

Why It Matters

The gap in semiconductor capacity threatens U.S. dominance in AI and broader economic security, making decisive policy action essential for maintaining global tech leadership.

Key Takeaways

• China outspends the U.S. on AI‑focused semiconductor R&D.
• U.S. semiconductor capacity fell >25% since 1990, threatening leadership.
• Intel pledged >$190 billion for U.S. fabs and R&D since 2020.
• CHIPS Act spurred $500 billion private investment, yet policy gaps persist.
• Experts call for proactive industrial policy, streamlined permits, and targeted export controls.

Pulse Analysis

The semiconductor race has become the frontline of the U.S.-China technology rivalry, with AI driving demand for ever more powerful chips. China’s aggressive spending—estimated at well over $1 trillion in global fab construction through 2030—has already eclipsed U.S. investment, prompting industry leaders to warn that without a coordinated response, America could lose its historic edge in design and manufacturing. The stakes extend beyond profit: advanced‑node chips power everything from autonomous vehicles to cloud‑based AI services, making supply‑chain resilience a national security priority.

Congressional hearings highlighted two intertwined challenges: dwindling domestic capacity and a fragmented policy framework. Since 1990, U.S. fab output has contracted by more than a quarter, while the CHIPS and Science Act has generated roughly $500 billion in private funding and $29.5 billion in federal awards. Yet experts argue that the current approach—largely reactive and burdened by permitting delays—fails to match China’s state‑driven model. They advocate a robust industrial policy that combines targeted subsidies, streamlined approvals, and reliable electricity supply, mirroring successful sectors like agriculture and aerospace.

The path forward demands balance. While restricting technology transfer to adversaries can protect intellectual property, overly broad export bans risk choking U.S. revenue and R&D, potentially eroding the very competitiveness they aim to safeguard. A nuanced strategy—focused on proactive investments, selective export controls, and transparent allocation of CHIPS funds—could preserve the United States’ leadership in AI‑enabled semiconductors and secure its economic future.