America’s priority should be chip design leadership

Chips are the key economic and military enablers of the industrial world. South Korean President Yoon Suk Yeol recently described chip technology leadership as paramount to a country’s economic survival (Wall Street Journal, June 5, 2024). The impact on military matters is overwhelming. As David Goldman and I wrote in the the Wall Street Journal on December 23, 2018: “Silicon, not Steel, will win the Next War.”

In that spirit, hundreds of billions of dollars are being allocated from national funds to develop the industry in countries including China, Taiwan, Japan, South Korea and the US. In the US, the CHIPS Act allocated $50 billion to support manufacturing investments. These large amounts committed must be viewed in the context of the cost of a state-of-the-art, full-scale factory – between $20 billion and $30 billion. And such plants become obsolete in a few years. Staying at the cutting edge of chip manufacturing technology is a major national undertaking.

As the original developer of the industry, the US is facing major new competition. The first priority in the US should be to maintain leadership in innovative product design because that leadership impacts economic growth and the US still leads the world in this regard.

While the industry developed in the US, much of the manufacturing and packaging of chips has moved overseas. However, the key to the value creation process – sophisticated high-end product innovation – remains largely in the US. Well over 50% of the leading-edge chips are designed in the US and marketed and supported by US-based corporations. This is the case because of the large design technology base in the US, consisting of many companies focused on design, a large academic community of