Semiconductor Imports and U.S. National Security

The Secretary of Commerce has initiated a Section 232 investigation to determine the effects on the national security of imports of semiconductors and semiconductor manufacturing equipment, and their derivative products. In this submission, we analyze how these imports impact U.S. national security and provide four recommendations for the Department's consideration.

Semiconductor imports implicate U.S. national security in multiple ways. Integration with foreign markets can strengthen U.S. national security in the semiconductor sector: foreign imports provide access to semiconductors at competitive prices, enabling more efficient spending on defense industrial base priorities. However, reliance on imports in the semiconductor industry can create vulnerabilities for U.S. national security, particularly from the People’s Republic of China’s (PRC) growing role in the global semiconductor supply chain.

Given the complex set of national security interests at stake, the United States needs a comprehensive national strategy for strengthening capabilities in the semiconductor sector to address national security risks arising from the PRC’s growing role in the global supply chain. We recommend the Department adopt a broad examination of potential remedies.

Recommendation: Negotiate a sectoral agreement on semiconductor supply chains to promote trade and economic security with like-minded partners

The administration should explore negotiating a sectoral trade and economic security agreement with partners and allies that share U.S. concerns associated with the PRC’s influence on the global semiconductor supply chain. By creating an integrated market of trusted suppliers, the United States and its partners can build a market large enough to maintain competition and investment in R&D while negating the national security risks posed by the PRC and other foreign adversaries. Such an agreement should include measures to deepen market integration among participants as well as alignment on common trade protection, export control, investment security, and related defensive measures.

Recommendation: Invest in and properly resource tools to enhance supply chain visibility

To better identify and proactively alleviate national security risks associated with semiconductor imports, the U.S. government needs deeper visibility into semiconductor supply chains. Without better supply chain visibility for both industry and government, firms will be vulnerable to unforeseen shocks and policies risk imprecision and unintended consequences. Given the complexity and dynamic nature of these networks, the government should seek to advance public-private cooperation to improve supply chain visibility.

Recommendation: Align any trade protection measures on semiconductors with the U.S. strategy for AI dominance

The administration has identified advancing U.S. AI dominance as a key national goal. Semiconductor policy should align with these objectives, given the fundamental role that computing power driven by semiconductors plays in advancing the AI frontier. Raising U.S. semiconductor costs in the near term—even in service of longer-term rebalancing—would carry significant strategic risk. It could slow the pace of domestic compute buildout at a critical moment, making the United States a less attractive location for training and deploying hyperscale AI systems and eroding associated U.S. leverage to shape global AI norms and prevent exploitation of compute-intensive AI capabilities by adversaries.

Recommendation: Minimize any negative spillovers on the U.S. defense industrial base

The U.S. defense industrial base is dependent on commercial off-the-shelf components in the semiconductor sector, including for both leading-edge and legacy chips as well as derivative downstream products. Given pre-existing stresses on the U.S. defense industrial base, any near term cost increases and supply chain shocks to semiconductors could introduce significant vulnerabilities to U.S. warfighting capabilities. In the course of the Section 232 investigation, as part of the Department’s consultation with the DoD as mandated by statute, the U.S. government should thoroughly assess both immediate and longer term impacts of trade protection measures on the U.S. defense industrial base.