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Answering the China Chip Challenge: Recommendations for U.S. Semiconductor Policy

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Answering the China Chip Challenge: Recommendations for U.S. Semiconductor Policy

December 17, 2020

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Five years ago, the People’s Republic of China (PRC) announced a decade-long campaign dubbed “Made in 2025,” designed to secure for itself global dominance in ten key economic and national security sectors, including the crucial semiconductor industry, where an investment of more than $150 billion is underway.

American policymakers have long recognized the importance of semiconductors for U.S. economic and national security. The U.S. semiconductor sector was created with the support of government investment and has been protected by industrial policy over the past 70 years. Today, a bipartisan consensus among national policymakers has embraced a new national semiconductor industrial policy aimed to counter the Chinese challenge. Recent policy measures including increasing federal R&D support and initiating new trade controls and other actions to prevent technology transfer to China.

In a new report, “Answering the China Chip Challenge: Recommendations for U.S. Semiconductor Industrial Policy in 2021,” Lincoln Network Director of Cyber and National Security Dan Lips examines the history of U.S. semiconductor industrial challenge, the People’s Republic of China’s (PRC) current strategy, and recent policy developments and options. Moving forward, the Biden administration and the 117th Congress should continue and extend the current strategy for U.S. semiconductor industrial policy to address the China challenge while promoting American economic and security interests.

The case for continuing and extending the current direction of U.S. semiconductor industrial policy and countering China’s drive for semiconductor independence rests on two key arguments. First, the history of U.S. industrial policy shows that federal investment in R&D in the semiconductor manufacturing industry has led to innovation that has advanced American economic and national security. Second, the PRC’s drive to achieve technological independence and superiority poses a historic threat to global liberty, given its totalitarianism and plans to export their brand of digital authoritarianism.

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