Securing U.S. Leadership in AI Through Domestic Semiconductor Production

To maintain its competitive edge in the development of artificial intelligence (AI), the United States must bolster its domestic production of semiconductor chips and processors, experts assert.

The United States faces a pressing challenge in the race to lead the development of artificial intelligence (AI). Industry experts warn that the nation's reliance on offshore production and manufacture of semiconductor chips and processors poses a significant obstacle.

"If you're not making things and all you're doing is designing the software, and maybe designing the chips, but they're completely built and packaged elsewhere, you don't end up innovating as much when you literally have people's hands making some of these technologies," Jonathan Klamkin, CEO of semiconductor company Aeluma, told Fox News Digital.

According to Klamkin, domestic production fosters innovation across the supply chain, including advancements in manufacturing equipment, operating procedures, and chip design. For the U.S. to maintain its global standing in semiconductors, vertical integration is crucial, encompassing not only chip design but also software development.

The global demand for semiconductor chips and microprocessors has skyrocketed alongside the growing interest in AI models and platforms. Chip manufacturer Nvidia reported a remarkable 206% revenue increase in its latest quarter, driven by the surge in AI demand.

The Semiconductor Industry Association (SIA) projects a significant 13.1% jump in global chip sales to $595.3 billion this year, following a drop of 8% in 2023.

In response to this market growth and the strategic importance of AI, nations worldwide are investing heavily in chip production. The United Kingdom, for example, has pledged to dedicate hundreds of millions of pounds towards chip acquisition and development, recognizing the crucial role of AI in shaping the future of global innovation and competitiveness.

The high demand and limited supply of chips have prompted countries to explore alternative options, such as utilizing less advanced chips to compensate for the shortage of advanced chips.

Gregory C. Allen, director of the Wadhwani Center for AI and Advanced Technologies at the Center for Strategic and International Studies, emphasizes the critical role of AI in the global technology landscape.

"Many different companies are being created to pursue AI technology, and so many major technology giants are remaking themselves around AI technology, especially after the more recent breakthroughs in generative AI and foundation models," Allen told Fox News Digital.

However, the United States currently produces only a fraction of the global supply of chips. As of the passage of the CHIPS Act in 2022, the U.S. produced 12% of the advanced chips, compared to 37% in the 1990s. Taiwan dominates the market for advanced chip production, while China is rapidly expanding its manufacturing capabilities.

To mitigate these supply chain vulnerabilities, experts advocate for a more robust domestic production capacity.

"I'm not saying we need to make 100% of those chips, but maybe the number should be 30 or 40%," Klamkin said. "So, that's what the CHIPS Act is doing, and I think that's good. That's about supply chain and national security, but it also means we're going to be innovating and inventing more technologies in the U.S., and that has to be a big thing."

Klamkin emphasizes the importance of long-term government investment in semiconductor development, recognizing past instances where ambitious goals were not fully met.

"In my experience, what's happened in the semiconductor industry in the past, the government has made investments that were seemingly very ambitious," Klamkin said. "Sometimes they invested in the short term and expected it to just sustain itself very quickly, and it didn't."

OpenAI CEO Sam Altman has initiated efforts to secure trillions of dollars in investment to boost chip production and accelerate AI development, the Wall Street Journal reported. Altman has met with investors from the United Arab Emirates and Softbank in recent weeks to explore funding options. The project aims to transform global manufacturing and drive the advancement of advanced AI technologies.

The domestic production of semiconductor chips and processors is essential for the United States to maintain its competitive edge in AI development. By bolstering its supply chain and investing in long-term innovation, the nation can secure its technological leadership and shape the future of AI for generations to come.