United States is losing the tech race to China

The United States is in the midst of a high-stakes competition with China for dominance in the next wave of technological innovation. Despite a flurry of activity at the federal level over the past three years, Washington has for the most part been playing catch-up. This summer, with the CHIPS and Science Act, the U.S. government committed to provide the semiconductor chip industry with more than $50 billion in federal investment over the next five years. But that was only after a supply-chain crisis had roiled the U.S. economy for two years as a result of the COVID-19 pandemic, and after the Pentagon had warned that it had become dependent on East Asian suppliers for 98 percent of the commercial chips it uses. In 2019, the United States ramped up a diplomatic campaign to thwart China’s bid to dominate the world’s 5G infrastructure. But that was only after the massively state-subsidized Chinese companies Huawei and ZTE undercut major Western competitors, seemingly cemented positions in the communications networks of U.S. allies, and flooded the zone in standard-setting bodies. And last year, the National Security Commission on Artificial Intelligence (on which both of us served) delivered its final report, calling for a comprehensive approach to sustaining U.S. leadership in education, research, and applications in AI that would mean an infusion of millions in new federal investment and a sustained government focus. But that report came out four years after China had already launched its national strategy on artificial intelligence, which generated billions in new funding, identified national-champion companies, and integrated AI into Beijing’s military-civil fusion strategy. This reactive approach is hardly a recipe for future success. The United States needs to win on these tech battlegrounds and make sure it is not caught by surprise again. Even taking into account the important steps Washington has taken in the past three years, it is hard to say with any confidence that the United States is now better positioned or organized for the long-term contest. Washington cannot sit by and allow Beijing to gain an advantage on the next round of emerging technologies, which will extend beyond the digital domain to include biotechnology, smart manufacturing, and new methods for producing and storing energy. Technology is at the heart of the U.S.-Chinese competition to build a thriving society, a growing economy, and sharper instruments of power. At stake is the future of political freedom, open markets, democratic government, and a world order rooted in democratic values and cooperation rather than authoritarianism and coercion. Washington needs a national plan that brings together commercial, academic, and government sectors to carry out a techno-industrial strategy. And the federal government needs to make a serious commitment to revamp the instruments of U.S. statecraft, including the military, to weather a prolonged period of danger. LOSING IS AN OPTION As Washington fiddled, Beijing’s centralized system for high-tech research and development churned, investing billions of dollars, training students, and subsidizing tech companies. It is entirely possible to imagine a future where systems designed, built, and based in China dominate world markets, extending Beijing’s sphere of influence and providing it with a military advantage over the United States. Under that scenario, countries that come to rely on technology made in China, including some U.S. allies, could be pulled into Beijing’s political orbit, slowing international progress on issues such as climate change, human rights, and the fight against corruption and eventually eroding the U.S.-led, rules-based international order. What is more, as China’s demographic trends darken and growth slows, the Chinese Communist Party could fear that its window of opportunity is closing and decide to press its newfound technological advantages in dangerous ways. The United States has a withering technology manufacturing base. It is fair to wonder how Washington allowed things to get this bad. The explanation is rooted in a paradox: the United States is a technological superpower that nevertheless suffers from significant technological vulnerabilities. On the one hand, the country seems to have it all: enormous companies with huge global platforms, the world’s leading chip designers, a rich startup ecosystem, and innovation hubs sprouting far beyond Silicon Valley. The United States still boasts the best universities in the world and serves as the destination of choice for global talent in technology. On the other hand, there is plenty of evidence that something is amiss: a withering technology manufacturing base, a military that struggles to adapt quickly to innovations, and a general paralysis when it comes to new technologies such as AI. For most of the post–Cold War era, the high-tech ecosystem in the United States evolved according to the logic of globalization rather than in response to strategic considerations. High-margin and high-value-chain investments and the search for cheap suppliers abroad made good business sense for U.S. companies and investors but devastated the U.S. technology manufacturing landscape. The absence of national technology priorities set by the federal government and a relative decline in government-funded R & D allowed commercial interests to drive the tech agenda, indifferent to the international strategic implications or U.S. competitiveness. Additionally, the rise of venture capital added a powerful new category to the so-called innovation triangle that had long brought together government, industry, and academia. Venture capitalists jolted the innovation landscape but largely stayed away from “deep tech” (technology requiring major scientific research, engineering innovation, and significant capital) and from attempts to commercialize basic R & D —both of which would have required enormous patience and less promise of sizable returns. The government’s relative power to shape and drive innovation weakened, and Washington lost its focus on national technology priorities.