America's Fantasy of Home-Grown Chipmaking

To remain the world's foremost technological power, the country needs its friends.

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How low mighty Intel has fallen. Half a century ago the American chipmaker was a byword for the cutting edge; it went on to dominate the market for personal computer chips and in 2000 briefly became the world's second-most valuable company.

Yet these days Intel, with a market capitalization of US$100 billion (S$128 billion), is not even the 15th-most valuable chip firm, and supplies practically none of the advanced chips used for artificial intelligence (AI).

Once an icon of America's technological and commercial prowess, it has lately been a target for subsidies and protection. As we published this, US President Donald Trump was even mulling over quasi-nationalization.

More than ever, semiconductors hold the key to the 21st century. They are increasingly critical for defense; in the AI race between America and China, they could spell the difference between victory and defeat.

Even free traders acknowledge their strategic importance, and worry about the world's reliance for cutting-edge chips on Taiwan Semiconductor Manufacturing Company (TSMC) and its home of Taiwan, which faces the threat of Chinese invasion. Yet chips also pose a fiendish test for proponents of industrial policy. Their manufacture is a marvel of specialization, complexity and globalization. Under those conditions, intervening in markets is prone to fail—as Intel so vividly illustrates.

To see how much can go wrong, consider its woes. Hubris caused the firm to miss both the smartphone and the AI waves, losing out to firms such as Arm, Nvidia, and TSMC. Former US president Joe Biden's Chips Act, which aimed to spur domestic chipmaking, promised Intel US$8 billion in grants and up to US$12 billion in loans. But the company is floundering.

A fab in Ohio meant to open in 2025 is now expected to begin operations in the early 2030s. Intel is heavily indebted and generates barely enough cash to keep itself afloat.