US Policy Evolution and 'Weaponized Interdependence'

Key Insight

For several decades, U.S. tech policy was deeply entrenched in a philosophy of globalization and a belief in 'running faster,' influenced by intense industry lobbying and a prevailing intellectual consensus in Washington. Many policymakers had a limited understanding of semiconductors and widely assumed that technological diffusion was an unstoppable force, with other nations' advancements naturally serving U.S. interests. This led to the conviction that 'unilateral action is increasingly ineffective' and that policy could only delay, but not halt, technology's spread. These assumptions, however, lacked empirical evidence, as the reality was a 'Taiwanization' of chip fabrication, not true globalization.

This unwavering adherence to platitudes about free trade and open competition, coupled with a palpable fear of antagonizing China or TSMC, inadvertently contributed to the erosion of America's technological leadership in critical areas like fabrication and lithography. While Washington advocated for market-driven competition, many Asian governments actively supported their domestic chip industries. A contrasting perspective, however, began to gain traction within the U.S. national security bureaucracy. This segment of the government viewed China's tech industry and its increasing leverage over vital technology systems with deep skepticism, fearing that Beijing would exploit its manufacturing dominance for espionage.

Under the Trump administration, while the initial focus remained on trade and tariffs, a significant, quiet transformation in technology policy was engineered by 'China hawks' within the National Security Council. They rejected the 'running faster' strategy as a mere guise for inaction, asserting that 'everything we’re competing on in the twenty-first century... all of it rests on the cornerstone of semiconductor mastery.' This new, confrontational, zero-sum approach emerged from the belief that America’s position had dangerously weakened. The semiconductor industry, caught between needing government support and fearing Chinese retaliation, resisted altering its multinational business model. Publicly, executives urged cooperation with China, yet privately conceded this strategy was futile, anticipating state-backed Chinese competitors would seize market share.