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Light reflects through an integrated circuit. (Lawrence Manning/Getty Images)

No modern army could last a minute without microelectronics. Radios, sensors, and targeting systems all depend on silicon chips, not to mention the technology that underpins our economy. Despite being a critical element of the national infrastructure, the U.S. has never secured its supply line of semiconductors, the essential building block of microelectronics—an omission that could put the nation at a grave disadvantage in its increasingly adversarial relationship with China.

In their new report, Regaining the Digital Advantage: A Demand-Focused Strategy for US Microelectronics Competitiveness [[link removed]], authors Bryan Clark [[link removed]] and Dan Patt [[link removed]] propose a four-part framework to ensure that U.S. semiconductor supply chains remain resilient, secure, and globally competitive. By leveraging advanced semiconductor technology and incentivizing allied investments, policymakers can ensure the future of a free and open microelectronics market. Given the Chinese Communist Party's growing efforts to monopolize market share and set global standards, this investment is imperative for the United States.

See key takeaways from Bryan and Dan's report below, and join us next week for forward-looking discussions on Iran's nuclear program [[link removed]], industrial cybersecurity [[link removed]], the annual Transatlantic Think Tank Conference [[link removed]], and an interview with Congressman Rick Larsen [[link removed]].

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Key Takeaways

1. Boost Demand Rather Than Supply

The microelectronics industry currently produces more than 100 chips per year per human—triple the output of five years ago. Given the industry’s dynamism, expecting supply-side policies to effectively shape microelectronics ecosystem structure is naïve. Demand should therefore be a significant consideration in the development of policies designed to improve the U.S. microelectronics ecosystem. Government initiatives that do not support customer expectations with respect to price, performance characteristics, and availability are unlikely to have a lasting impact.

2. US Microelectronics Must Move Up the Value Chain to Compete

With its recent legislation, the U.S. government has a historic opportunity to steal a march on competitors by exploiting the transition from increasingly dense CMOS chips to new designs that offer specialization, performance, and security. This movement up the value chain would also improve the resilience of the U.S. microelectronics ecosystem by diversifying production through the addition of fabrication and packaging facilities for new chip architectures. However, these opportunities will likely be missed if most U.S. government microelectronics funding goes to building current-generation chip fabrication plants that are unlikely to compete with committed and deep-pocketed foreign rivals.

3. A Coalition to Protect the Free and Open Microelectronics Market

Although labor and regulatory costs in Europe may be similar to those in the United States, allied governments might be willing to invest in construction and operation of large-node or legacy foundries as a national priority. The U.S. government could incentivize such allied investments with a combination of technology-sharing arrangements with U.S. firms and agreements to purchase allied nations’ chip production for U.S. defense or critical infrastructure applications.

To mitigate the impact of China’s growing role in both microelectronics supply and demand and curb malign behavior by the Chinese Communist Party, the U.S. could assemble a coalition of major integrated circuit (IC) customer countries that would then be able to influence IC production by exerting their collective buying power.

Quotes have been edited for length and clarity.

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Intel's Woes Offer an Opportunity for Resilience [[link removed]]

America is at risk of losing its strategic advantage in technological innovation, write Nadia Schadlow [[link removed]] and Anthony Vinci in RealClear Policy [[link removed]]. In recent years, the loss of semiconductor manufacturing capability has put U.S. national security at risk. Policymakers and business leaders must forge a sound industrial policy with incentives to keep the manufacturing and innovation of critical goods like semiconductors on shore.

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Maintaining US Semiconductor Leadership [[link removed]]

The severity of the semiconductor shortage in the U.S. has highlighted a critical vulnerability in the nation's advanced technology supply chains. Hudson's Thomas Duesterberg [[link removed]] convened a distinguished panel of policy experts and technologists to discuss the public policies needed to maintain U.S. leadership in domestic manufacturing and innovation.

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The US Needs A Strategy To Secure Microelectronics – Not Just Funding [[link removed]]

Despite being home to six of the top ten semiconductor sellers, facilities in the United States only manufacture about 11 percent of the world’s chips, write Bryan Clark [[link removed]] and Dan Patt [[link removed]] in Breaking Defense [[link removed]]. Before dropping billions of dollars on semiconductor fabrication, the government needs a strategy that is informed by market forces and funds next-generation technologies.

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