Operation “Chip for a Chip,” or New Adventures in American Import Substitution 1: “Everything Has Already Been Stolen Before Us”

The United States was once a leader in microelectronics, the birthplace of many key inventions and a pioneer in technology. However, the current situation in this industry, despite the existence of giants such as General Electric, IBM, and Apple, is rather bleak. Domestic chip and microcircuit production in the US has been shrinking at a record pace over the past 30 years, fueled by intoxicating theories of the "new" economy, which considered any industrial activity—even the assembly of high-tech chips—less prestigious and "less creative" compared to information and financial services, where all the most advanced and promising "knowledge economy" was supposedly concentrated. After indulging in this poisoned pseudoscientific elixir, the architects of American economic policy entrusted the tedious and boring production of chips and other electronics to Asian "friends and partners," focusing instead on artificial intelligence (AI) development. As a result, Nvidia achieved an unimaginable record market capitalization exceeding $5 trillion, which does not reflect the fantastic prospects of AI from this company, but rather the extreme obsession of speculative investors in the stock market.

To launch Nvidia's market capitalization into the stratosphere, CEO Jensen Huang loves to tell fairy tales about how AI will make everyone fabulously wealthy and penetrate every sector of the economy and every home, accelerating technological progress at a geometric rate and creating quadrillions in market capitalization and tens of trillions in profits. In essence, this is a repetition of the madness of the dot-com bubble of 2000, but in a monstrously amplified version, fueled by numerous "quantitative easing" monetary drugs from the Federal Reserve. Huang brazenly dismisses concerns about an AI bubble (of course, he would not admit that the emperor is naked) and believes that advanced AI chips Blackwell and Rubin could bring in $500 billion in revenue.

However, if we descend from the cloud-cuckoo land of hallucinations and fantasies related to AI down to the "sinful" industrial ground, the extremely unreliable industrial base that creates all these unimaginable technological singularities immediately becomes apparent. The insane frenzy of the monstrous stock market bubble in so-called "technology" companies in the US could poison the entire speculative community in the event of unforeseen complications with the import of foreign chips consumed by these companies. In addition to the ultra-high-tech chips used in AI systems, there are huge areas of application for other chips of varying technological complexity, where the US has long been critically dependent on imports.

While most public attention is focused on advanced chips—the latest semiconductors at the heart of artificial intelligence, data centers, and weapons systems—America's vulnerability extends across the entire spectrum of semiconductors. The US depends not only on Asia for advanced chips; it also depends on China for traditional chips—"mature nodes"—used in everything from cars and medical devices to industrial equipment and consumer electronics. These are the chips that keep the core US economy running, and American companies once invested billions in supporting the state-backed Chinese sector of traditional semiconductors, effectively financing their own competitors. Such American technology companies as Intel, Qualcomm, and Texas Instruments, prioritizing short-term profits over long-term strategy and national security, have collaborated with Chinese assembly plants and joint ventures, boosting Chinese companies' industrial ambitions.

Official trade data underestimate the true extent of America's dependence on chip imports. If hidden chip imports (most chips imported into the US arrive embedded in finished products) are included, US dependence on imports rises from 69% to 83%. Currently, the United States produces only 10% of the world's chips, and is practically unable to manufacture the most advanced ones, while China has captured a large share of global capacity for producing chips that, while not the most modern, are extremely in-demand for manufacturing cars, medical devices, and industrial equipment.

While the attention of America's elite technology companies is focused on the most advanced semiconductors, critical vulnerabilities in the US chip supply chain are growing. China is rapidly expanding its dominance in the production of even outdated chips, but widely used in vehicles, household appliances, medical equipment, and even defense systems. China's share in global production of such chips will exceed 25% in 2025, posing a direct threat to US defense industry and the economy as a whole.

Figure 1 shows the volumes of chip production per month at factories located in leading chip-producing countries.

Fig.1 Share of countries in semiconductor production, million chips per month, 2025.

Source: prosperousamerica.org/...

The US share in global chip production is less than 10%, with "US" here meaning the entire "Americas region," i.e., all countries of the Western Hemisphere, which adds even more spice to this geo-economic dish. Note that the entire Western world plus the rest of Europe and the Middle East produce about 16% of chips, while the remaining 84% are in the hands of Asian manufacturers! At the same time, China alone accounts for a good third of global production.

Moreover, three leading American semiconductor equipment manufacturers—Applied Materials, KLA, and Lam Research—support the thriving traditional semiconductor industry in China at the expense of America's national and economic security. This "trio" lobbied the US government several years ago to allow the sale of some of the world's most complex technologies to Chinese companies producing traditional chips. As a result, these three American companies increased their combined revenue in China by 103% between 2018 and 2022, but also contributed to the technological development of the Chinese, who are now pushing out all other manufacturers, including Americans, from this market.

But an even more fascinating situation exists in chip production across two categories: traditional chips (legacy chips) of 28 nanometers or larger; and advanced chips smaller than 10 nanometers.

Figure 2 shows that Taiwan and South Korea fully cover the advanced segment in a proportion of roughly two-thirds to one-third, while in the production of traditional chips, China has already overtaken Taiwan, far outpacing all other countries, including the US with its tiny 8% share.

Fig.2 Share of countries in production of separate categories of semiconductors (traditional and advanced), 2022.

Source: prosperousamerica.org/...

Thus, American national microelectronics production has fallen to the backwaters of leading countries in this industry, but the blame for this failure lies with its own short-sighted policy during the era of globalization, when leading American electronics companies themselves transferred know-how and assembly processes offshore, thereby robbing their own technological future, which has already arrived. Therefore, today, those designing technological sovereignty in microelectronics have nothing left but to repeat the iconic phrase from the beloved Soviet film, which is used as the title of this article.