Crossgrain No. 4: America's Fifth Round
For thirty years, the United States has left more of its chipmaking to others. Why is it now so loud about who may do the work?
The questions
- IWhat does the United States hold in semiconductors?
- IINoise
- IIIIs America trying to make them itself?
- IVDid America never have the ability to make them?
- VIs Congress in the way?
- VIDoes China stop making chips because America is loud?
- VIIBe loud on the layer where your rival stands, and you bind your rival to that layer.
- VIIIThen why build factories on the layer it is leaving, and even buy equity?
- IXWhom does the loudness bind, and where?
- XWhy are the bound worn down?
- XIThen what does the one who leaves gain?
- XIINow, what does the door look like?
- XIIIWhy did the rival believe it?
- Sources
What does the United States hold in semiconductors?
Nvidia designs the chip in Synopsys software; Applied Materials supplies equipment for the factory. All three companies are American.
But the factories that print advanced chip designs onto wafers are in Taiwan and Korea. The extreme ultraviolet (EUV) lithography machines those factories depend on come from a single maker: ASML of the Netherlands.
Noise
In October 2022, America barred its chipmaking equipment from Chinese factories capable of making advanced chips unless they obtained a license. The restriction turned on what the factory could make, and American engineers were barred from helping those factories.
As gaps appeared, America closed the routes by which equipment reached China through other countries. It also narrowed the scope for factories in Taiwan and Korea to print chips to Chinese orders.
To stop China printing advanced chips itself, America has staked its own equipment, software, and engineers. China was one of the largest markets for American equipment makers.
Is America trying to make them itself?
Nations that wanted to make things themselves have always done two things. They brought in other people’s workers and kept their own from leaving. The nation that knows this best is America.
In the 18th century, Britain banned the export of textile machinery and the emigration of the skilled workers who ran it. Samuel Slater began as an apprentice in a British spinning mill. Then word reached him that America was paying bounties to anyone who brought textile technology over. The machines could not be carried out. So he put the structure of Arkwright’s spinning frame in his head, disguised himself as a farmer, and boarded a ship. In December 1790, his mill began turning in Pawtucket, Rhode Island, and the mechanics and workers he trained spread spinning mills across America.
Today America does only half of it. It has barred American engineers from helping Chinese factories. That is what Britain did to Slater. But it does not do what America did for Slater: bring in other people’s workers. It draws Korean companies’ chip and battery factories in with subsidies, yet it does not open the door to the people who would run them.
America knows the door is there. In April 2013, a bill (H.R.1812) was introduced to grant Korean professionals up to 15,000 E-4 visas a year. It did not pass. It came back session after session, and in July 2025 it was introduced again as H.R.4687.
Two months later, at the construction site of the Hyundai–LG battery plant in Georgia, one of the very factories those subsidies drew in, some 300 Koreans were detained in an immigration raid and sent home.
Did America never have the ability to make them?
No. The transistor and the integrated circuit both came out of America. In 1990, 37% of the world’s chipmaking capacity was on American soil. In 2020, 12%. The current arrangement, holding design and tools while leaving printing to others, was not there from the start. It was built over thirty years.
Through those thirty years, one American company kept printing its own leading-edge chips: Intel. For a long time Intel led the world in process. In its 2022 annual report to the Securities and Exchange Commission, Intel wrote it down itself: adoption of its 10-nanometer process had been badly delayed, the process then called 7-nanometer had slipped because of defects, and in the meantime competitors using Taiwanese foundries had pulled ahead.
Intel did not lose for lack of machines. Intel was one of the companies that funded ASML’s development of the EUV machine, and it was the first to take delivery of the next generation. Everyone buys equipment from the same few companies. So, process defects are the work of people.
But the prescription went to buildings. The 2022 CHIPS Act set aside $39 billion of its $52.7 billion for new factories on American soil. A green card cap exemption for STEM PhDs, in the House version, was dropped from the final law. In August 2025, the U.S. government converted CHIPS Act subsidies into equity and took nearly 10% of Intel.
Is Congress in the way?
No. When America wants something, it does not wait long for Congress. On September 29, 2008, the House voted down the bailout bill. The administration did not back down. Four days later, on October 3, an amended bill passed the House.
The door for chip workers did not move like that in twelve years. There is also a door whose terms the executive sets without Congress: the H-1B visa, the largest door through which foreign engineers come to work in America. The executive used that discretion in the opposite direction. A September 2025 presidential proclamation put a $100,000 fee on new H-1B visas.
A “no” from the U.S. Congress can be reversed in four days. If one held for twelve years, it was a choice. America is not trying to grow the ability to print chips at home. Yet it is loud about that very work.
Does China stop making chips because America is loud?
In August 2023, the very week U.S. Commerce Secretary Gina Raimondo was in Beijing, Huawei released a new smartphone, the Mate 60 Pro. The chip inside was printed by China’s SMIC at the 7-nanometer class. It was made without EUV equipment. SMIC took machines a generation older, ones it already had, and printed the same pattern in several passes.
The man who led that process was Liang Mong-Song. He had been a key process engineer at TSMC, passed through Samsung, and came to SMIC in 2017. After that, SMIC climbed from 28 nanometers to 14, and then to 7. Like Slater’s spinning frame, the process crossed the sea in his head.
Money followed. In May 2024, China set up a new national semiconductor fund of 344 billion yuan, about $47 billion. It is larger than the two earlier funds combined. The very thing America tried to stop, China is doing.
Be loud on the layer where your rival stands, and you bind your rival to that layer.
China is making chips. Is America failing, then?
The blocked side has to prove it can make them. It builds substitute equipment, brings in people, raises yields. If it succeeds, it invests in the next factory. It cannot abandon the technology and facilities it has built up, so it must succeed again in the next generation. It runs toward self-reliance, but where it must stand on its own is decided by where America placed its blocks. The cheaper and better the chips get, the lower the cost of the next business that runs on them. The producer invests again for the next process, and the buyer uses the improvement to choose what to do next.
America has fought over chips once before.
In 1985, Intel withdrew from DRAM. The next year, America was loudest about DRAM. In the 1986 U.S.–Japan Semiconductor Agreement, it demanded price floors and market access from Japan, and in 1987 it imposed retaliatory tariffs on $300 million of Japanese goods. Intel went to microprocessors.
Japan made better memory, and Intel made processors to run with that memory. The more Japan improved its memory, the more computers could do.
Winning did not end the race for Japan. The prices the agreement held in place gave Korea, a late entrant, room to breathe. Japan, pursued, poured money into the next generation again. The DRAM businesses of Hitachi, NEC, and Mitsubishi merged into one company, Elpida, and Elpida went bankrupt in 2012. The company that bought it the next year was America’s Micron. Meanwhile, Intel’s chips became the CPUs of the world’s computers.
Now America is loud on the layer that prints advanced chips. China tries to break America’s ban, and Korea and Taiwan try not to be caught by China. As China moves one step closer, Korea and Taiwan must run one step further ahead. America buys the chips printed this way, and chooses what to do next.
Then why build factories on the layer it is leaving, and even buy equity?
A country that leaves manufacturing to others still needs what they make. If their factories stop, its designs produce nothing. It has reason to keep those factories within reach, though its next business lies elsewhere.
In August 2025, the government agreed to take a 9.9 percent stake in Intel for $8.9 billion. It took no board seat. Instead, it received a five-year right to buy about five percent more of Intel at $20 a share. It could exercise that right if Intel’s ownership of its foundry business fell below 51 percent. Shareholders who hoped to gain by selling the foundry would first have to count the dilution. Intel’s obligations to supply secure chips to the Department of Defense remained in place.
In 2024, TSMC received an award of up to $6.6 billion in direct grants toward an Arizona investment plan of more than $65 billion. Samsung received up to $4.745 billion toward more than $37 billion in Texas. Tax credits add to the public cost. The companies find the rest of the money, build the plants, and run them. A grant of a few billion dollars decides where tens of billions are spent.
Micron went on making memory after Intel left DRAM. American companies could find new uses for memory while an American maker stayed in the trade.
Whom does the loudness bind, and where?
America holds production in place so that it is never cut off. The nations entrusted with that production hold on so that none falls behind the others.
China’s money is already going into factories. SMIC alone spent $7.33 billion on capital expenditure in 2024. Its revenue that year was $8.03 billion. If it breaks through a blocked process, the investment becomes proof it was right, and money goes into the next process too. The more bans it escapes one by one, the deeper it goes into the work the bans assigned it.
American subsidies go to Korean and Taiwanese companies. They come with guardrails. A company that takes them cannot materially expand advanced semiconductor capacity in a country of concern such as China for ten years.
Go to Dalian, China, and you can see what that clause binds. In 2020, Intel agreed to sell its NAND business to SK Hynix. The NAND factory in Dalian went with it. That factory cannot grow now. The subsidy conditions block it, and in 2025 even the blanket authorization for bringing in American equipment was withdrawn.
To stay ahead of China, Korea and Taiwan must keep investing, and America decides where that investment goes. Their effort to beat one another holds them to that layer. What binds tighter is success. The winner is left with a bigger factory, more people come to live off that factory, and there are more reasons to win again in the next generation.
Why are the bound worn down?
You can be worn down while making money.
Korea, Taiwan, and China make semiconductors superbly. They win orders, expand factories, and equip those factories with machines and people.
But what they must be competent at is decided by others. For Korea and Taiwan, the buyer sets performance and launch dates. For China, the ban sets the line to cross.
The harder day comes when today’s advantage stops mattering. Then the sensible thing is to step back, yet the bound side cannot easily do it, because the factory has grown, more people trained there now live off it, and it cannot be made smaller without sending some of them home. So the bound side stays and solves the next problem others set for it.
Then what does the one who leaves gain?
The next competition gets cheaper.
When those who print compete, the same money buys more computation.
In January 2025, China’s DeepSeek released R1. It came close to the performance of America’s best models at low cost. It was built under the ban. On January 27, nearly $600 billion of Nvidia’s market value vanished in one day.
Two days later, on January 29, Microsoft put R1 on Azure AI Foundry and GitHub. Customers could choose DeepSeek inside Microsoft’s environment and connect it to their own work and products. The next day Amazon Web Services announced support for deploying R1. On March 10 it offered R1 as a fully managed service.
The winner can take the people his rival trained.
With Germany, America fought over chemicals. During World War I it seized the American property of German companies. Bayer’s American business was sold at auction in 1918, and the Bayer name went with it. The next year, some 4,500 seized German chemical patents went for about $250,000 to the Chemical Foundation, set up by American industry, and were licensed cheaply to American companies. The Tariff Act of 1922 levied duties on imported dyes based on the American selling price and pushed German dyes out of the American market. In the early 1920s, DuPont brought over Bayer chemists the German authorities had tried to stop. In 1938, in DuPont’s dye laboratory at Deepwater, a chemist discovered Teflon. That same year DuPont announced nylon.
With Britain, America fought over the trading order of the empire. Through Lend-Lease and the postwar loan, it went after imperial preference and the convertibility of the pound. For the next twenty years Britain clung to the value of the pound. In 1947 convertibility lasted five weeks. The pound was devalued in 1949 and again in 1967. Meanwhile the door for people stood open. In 1963 Britain’s Minister for Science told Parliament that American companies, universities, and government agencies were sending people to Britain to recruit its scientists in an organized way.
With the Soviet Union, America fought over arms. The Strategic Defense Initiative handed the Soviets the problem of the next weapon, and CoCom blocked the computers and semiconductors they needed to solve it. Toward people, America moved the other way. In 1974 the Jackson–Vanik amendment tied trade benefits to freedom of emigration. In 1992, after the Soviet collapse, America changed the law so that former Soviet scientists and engineers in certain advanced and defense fields could apply for permanent residence without an American job offer.
Now, what does the door look like?
Last time, the door opened on the next layer. America stayed loud about memory after Intel had left it, and in 1990 the Immigration Act created the H-1B visa. The professionals who came through it filled America’s software and internet industries.
This time, the door is narrowing. In July 2022, Intel, Samsung and seven other semiconductor companies told Congress that thousands of technical jobs stood unfilled and that training at home could not fill them in time. They asked Congress to lift the per-country green card caps for STEM master’s and doctoral graduates. Congress passed the money for factories. It left the exemption out.
The H-1B, the door that opened last time, now charges $100,000 for each new visa.
Why did the rival believe it?
The American noise was not free.
In the fight with Germany, tariffs raised dye prices, and American textile makers paid. In the fight with Britain, America lent $3.75 billion. In the fight with the Soviet Union, it increased defense spending and would not give up the Strategic Defense Initiative even at the negotiating table. In the fight with Japan, memory prices jumped, and American computer makers paid. In the fight with China, it has staked one of its equipment makers’ largest markets.
Only noise that has been paid for sounds sincere. The rival saw what America was willing to pay and thought it knew what America wanted. The rival was so intent on beating America on that layer that it did not look at the door America was opening elsewhere.
America is loud again, this time about semiconductors, but with the door to the next layer still unopened, this is not yet the fifth round.
Sources
I. What does America hold in semiconductors?
- TrendForce. Report on advanced-node chipmaking capacity by region, citing data of the Semiconductor Industry Association and the Boston Consulting Group. 2024.
- CNBC. Report from inside ASML, the sole maker of extreme ultraviolet lithography machines. 2022.
II. Noise
- U.S. Department of Commerce, Bureau of Industry and Security. Export controls on advanced computing and semiconductor manufacturing items to the People’s Republic of China. October 7, 2022.
- Bureau of Industry and Security. Additions to the foreign-produced direct product rules for advanced computing and semiconductor manufacturing items. Federal Register, December 2024.
- Bureau of Industry and Security. Due diligence measures for foundries producing advanced integrated circuits. Federal Register, January 2025.
- Applied Materials, Inc. Annual Report on Form 10-K, fiscal year 2024. China accounted for 37 percent of revenue.
III. Is America trying to make them itself?
- American Heritage. On Samuel Slater and the Pawtucket mill of 1790.
- U.S. Congress. H.R. 1812, Partner with Korea Act. 113th Congress, introduced April 2013.
- Office of Representative Young Kim. Announcement of the introduction of H.R. 4687, Partner with Korea Act. 119th Congress, July 2025.
- NBC News. Report on the detention of Korean workers at the Hyundai–LG battery plant in Georgia. September 2025.
IV. Did America never have the ability to make them?
- Boston Consulting Group and Semiconductor Industry Association. Government Incentives and US Competitiveness in Semiconductor Manufacturing. September 2020. U.S. share of world chipmaking capacity, 1990 and 2020.
- Intel Corporation. Annual Report on Form 10-K, fiscal year 2022.
- ASML Holding N.V. Report on Form 6-K, Customer Co-Investment Program with Intel. July 2012.
- Bloomberg, as reported by Data Center Knowledge. ASML ships its first High-NA EUV machine to Intel. December 2023.
- FedScoop. On the signing of the CHIPS and Science Act. 2022.
- The Wire China. On what was dropped from the CHIPS Act. 2022.
- Intel Corporation. Current Report on Form 8-K, agreement with the United States government. August 2025.
V. Is Congress in the way?
- Goodwin Procter. On the passage of the Emergency Economic Stabilization Act of 2008. October 3, 2008.
- Presidential proclamation restricting entry of certain nonimmigrant workers and requiring a $100,000 payment for new H-1B petitions, as published by the U.S. Department of State. September 2025.
VI. Does China stop making chips because America is loud?
- Reuters. Teardown of Huawei’s Mate 60 Pro. 2023.
- TechInsights. Analysis of SMIC’s 7-nanometer process.
- EE Times Asia. On Liang Mong-Song joining SMIC. 2017.
- Taipei Times. On Liang Mong-Song and SMIC’s process progress. 2020.
- Reuters. On China’s third national semiconductor fund, 344 billion yuan. May 2024.
VII. Be loud on the layer where your rival stands
- Andrew S. Grove and Gordon E. Moore. Letter to Intel shareholders, 1986. Cited from a summary.
- Douglas A. Irwin. “Trade Politics and the Semiconductor Industry.” In The Political Economy of American Trade Policy, edited by Anne O. Krueger. National Bureau of Economic Research.
- Richard E. Baldwin. “The Impact of the 1986 US–Japan Semiconductor Agreement.” Japan and the World Economy, 1994.
- Korea JoongAng Daily. On Korea’s entry into DRAM.
- On the history of Elpida Memory, from the merger of the Hitachi, NEC, and Mitsubishi DRAM businesses to its bankruptcy in 2012.
- Micron Technology, Inc. Annual Report on Form 10-K, fiscal year 2013.
VIII. Then why build factories on the layer it is leaving, and even buy equity?
- Intel Corporation. Current Report on Form 8-K. August 25, 2025.
- U.S. Department of Commerce. CHIPS Incentives Award with TSMC Arizona. November 15, 2024.
- National Institute of Standards and Technology. Samsung Electronics (Texas). CHIPS funding award.
- Internal Revenue Service. Advanced Manufacturing Investment Credit.
- U.S. Department of Commerce. Final National Security Guardrails for CHIPS for America Incentives Program. September 2023.
- Micron Technology. Company Timeline.
IX. Whom does the loudness bind, and where?
- Semiconductor Manufacturing International Corporation. Announcement of annual results for 2024.
- U.S. Department of Commerce. National security guardrails for CHIPS Act funding. 2023.
- Intel Corporation. Current Report on Form 8-K, sale of the NAND memory business to SK hynix. 2020.
- National Institute of Standards and Technology. CHIPS award to SK hynix. 2024.
- Bureau of Industry and Security. Revocation of validated end-user authorizations in the People’s Republic of China. Federal Register, 2025.
XI. Then what does the one who leaves gain?
- Reuters. On the DeepSeek selloff and Nvidia’s record one-day loss in market value. January 27, 2025.
- SD Times. DeepSeek R1 on Azure AI Foundry and GitHub. January 2025.
- Amazon Web Services, AWS News Blog. DeepSeek-R1 as a fully managed model in Amazon Bedrock. March 2025.
- Smithsonian Institution, National Museum of American History. Records of Sterling Drug, Inc., including the 1918 sale of Bayer’s American business.
- United States v. Chemical Foundation, Inc., 272 U.S. 1 (1926).
- Office of Alien Property Custodian. Records of the seizure and sale of German property and patents.
- Steen. “A Tariff to Dye For: The Tariff of 1922.”
- Prausnitz. “DuPont in the Nation’s Service.” On DuPont’s dye program and its hiring of Bayer chemists.
- Southland Times. “Germany’s Dye Secrets.” 1922.
- Encyclopedia.com. On Bayer AG and the 1925 merger that formed I.G. Farben.
- Hagley Museum and Library. Records of the DuPont Company’s Jackson Laboratory at Deepwater, New Jersey, established in 1917 for dyestuffs, including Roy J. Plunkett’s laboratory notebook on the discovery of Teflon, 1938.
- E. I. du Pont de Nemours & Company. Announcement of nylon. October 27, 1938.
- U.K. Government, History of Government Blog. On the Anglo-American Financial Agreement of 1945.
- U.S. Department of State. Foreign Relations of the United States, 1947, vol. III. On the suspension of sterling convertibility.
- Lord Hailsham, Minister for Science, House of Lords, February 27, 1963. Reported in Science, March 8, 1963, p. 893, and in The Times of India, March 17, 1963.
- Congressional Research Service. On the Jackson–Vanik amendment.
- Soviet Scientists Immigration Act of 1992, Public Law 102-509.
XII. Now, what does the door look like?
- Immigration Act of 1990, Public Law 101-649.
- Pew Research Center. Key facts about the H-1B visa program.
- Chief human resources officers of Advanced Micro Devices, Ampere Computing, ASML US, Broadcom, GlobalFoundries, Infineon Technologies Americas, Intel, Samsung Semiconductor, and Texas Instruments. Letter to Speaker Nancy Pelosi, Majority Leader Charles Schumer, Republican Leader Mitch McConnell, and Republican Leader Kevin McCarthy. July 27, 2022.
- The Wire China, on what was dropped from the CHIPS Act. See IV.
- Presidential proclamation on H-1B entry, September 2025. See V.
- Becker’s, citing the Association of American Universities Data Exchange. On applications to doctoral programs, fall 2026.
- Office of Representative Young Kim, on H.R. 4687; NBC News, on the Georgia detentions. See III.
XIII. Why did the rival believe it?
- Steen, “A Tariff to Dye For.” See XI.
- History of Government Blog, on the Anglo-American Financial Agreement. See XI.
- Ronald Reagan. Press conference on the Reykjavik meeting and the Strategic Defense Initiative. 1986.
- Baldwin, “The Impact of the 1986 US–Japan Semiconductor Agreement.” See VII.
- Applied Materials, Form 10-K, fiscal year 2024. See II.
- Presidential proclamation on H-1B entry; Becker’s, on doctoral applications; Office of Representative Young Kim; NBC News. See V and XII.