America’s Semiconductor Dependence: A Ticking Time Bomb for National Security

Rising geopolitical instability increases the urgency to secure a domestic supply chain for semiconductors.

This article originally appeared on The Defense Post

By: Mike Hutchinson

Our world is more unstable today than it has been in decades. Conflict in the Middle East is escalating, Russia’s invasion of Ukraine is nearing its third year, and China is intensifying its push for Taiwan’s “reunification” and control over trade and technology.

Many of the tacit assumptions that leaders rely on to maintain order are no longer guaranteed. This instability affects key aspects of American governance — from national security and foreign policy to trade and manufacturing.

At the heart of these challenges is the semiconductor industry.

To safeguard critical infrastructure, Congress must prioritize domestic semiconductor design and manufacturing while streamlining procurement processes to attract prime contractors and small businesses to local economies.

Reliance on Foreign Manufacturers

Semiconductors are integral to modern technology, from military systems to smartphones. Demand is soaring, driven by advancements in AI, machine learning, remote work, telehealth, and online education.

At the same time, supply chains have faced unprecedented challenges — from the COVID-19 pandemic to natural disasters — leaving the US heavily reliant on foreign manufacturers.

Malaysia, Taiwan, and China are the largest sources of US semiconductor imports, with Taiwan Semiconductor Manufacturing Company (TSMC) alone controlling 68 percent of the global market.

As geopolitical tensions rise, the longer Washington waits to domesticate the industry, the greater the risk of catastrophe.

Opportunity for Economic Growth

For the US, domestic semiconductor manufacturing won’t just protect against vulnerabilities; it presents an opportunity for economic growth.

These investments create jobs, boost innovation, and reduce reliance on foreign suppliers, safeguarding American defense and technological advancement.

The US currently holds about half of the global semiconductor market, employing over 338,000 people and supporting 1.9 million additional jobs. Expanding this industry into regional markets could drive significant job growth and long-term economic benefits.

However, to build a sustainable domestic semiconductor industry, policies must support and encourage this growth. The federal government can help by incentivizing the Defense Industrial Base to partner with regional and startup businesses, fostering innovation.

In recent years, politicians have taken steps to ensure this. For example, the CHIPS and Science Act has driven significant growth in the US semiconductor industry.

Enacted in 2022, it has already sparked $450 billion in private investments across 28 states and 90 semiconductor projects. It has also created 58,000 high-quality jobs in the semiconductor ecosystem, supporting hundreds of thousands of jobs in the broader US economy.

Local Investment Success

In Rensselaer County, New York, investments in the tech sector — specifically semiconductor design and manufacturing — are already boosting local economic growth.

Partnering with hubs like Rensselaer Polytechnic Institute, the region is leveraging its strengths. The private research university secured over $1.1 million for semiconductor research last year, part of the $52 billion invested in the New York Capital Region’s domestic manufacturing.

To sustain this momentum in Rensselaer and Albany counties and replicate it nationwide, local, state, and federal leaders must promote policies that support this kind of development.

Supporting Small Businesses

To ensure these policies benefit local communities, they must address the needs of small companies and startups entering the semiconductor industry. Streamlining procurement processes and reducing regulatory burdens will help these businesses scale quickly.

Updating the Federal Acquisition Regulation (FAR 19.502-6) to prioritize small businesses focused on integrated circuits and microelectronics would expand the pool of subcontracting partners for prime contractors.

Additionally, Section 8(a) promotes sole-source contracts for qualified commercial partners — particularly those developing novel semiconductor designs, testing, and packaging.

Act Now

America’s national security and economic future depend on a robust domestic semiconductor industry. It’s not a question of if a major disruption will occur, but when.

Congress must act now to facilitate semiconductor design and production within the US rather than wait for disaster to strike.

The CHIPS and Science Act was a bold first step to encourage major investments at the state and corporate level. The next step is to create a bridge that leverages the innovative potential of smaller businesses and local chambers of commerce in places like the New York Capital Region.