Technological security: the great comeback of industrial policy?

Since the mid-2010s, tech­no­lo­gic­al com­pet­i­tion has increas­ingly exten­ded bey­ond indus­tri­al per­form­ance and innov­a­tion alone. Semi­con­duct­ors, arti­fi­cial intel­li­gence, quantum tech­no­lo­gies, and crit­ic­al min­er­als have become cent­ral to nation­al strategies aimed at strength­en­ing eco­nom­ic secur­ity, tech­no­lo­gic­al autonomy, and geo­pol­it­ic­al influ­ence¹. This shift has been accom­pan­ied by a renewed role for the state in sec­tors long shaped by mar­ket dynam­ics. In the United States, the CHIPS and Sci­ence Act adop­ted in 2022 alloc­ated more than $52 bil­lion to sup­port domest­ic semi­con­duct­or man­u­fac­tur­ing, research, and work­force devel­op­ment². China, mean­while, has pur­sued an indus­tri­al strategy designed to strengthen indi­gen­ous tech­no­lo­gic­al cap­ab­il­it­ies across a range of stra­tegic sec­tors³.

Glob­al value chains are also being reor­gan­ised around con­cerns that extend bey­ond effi­ciency alone. Amer­ic­an restric­tions on advanced semi­con­duct­or exports to China, along­side Chinese export con­trols on crit­ic­al min­er­als, illus­trate how tech­no­lo­gic­al eco­sys­tems, indus­tri­al capa­cit­ies, and access to raw mater­i­als have become key instru­ments of geoe­co­nom­ic com­pet­i­tion⁴. These devel­op­ments have giv­en rise to what sev­er­al schol­ars describe as “techno-secur­ity state­craft,” a frame­work in which tech­no­lo­gic­al innov­a­tion, indus­tri­al policy, geoe­co­nom­ics, and nation­al secur­ity are becom­ing increas­ingly intertwined[5].

Among the research­ers work­ing on these devel­op­ments, Tai Ming Cheung, pro­fess­or at the Uni­ver­sity of Cali­for­nia San Diego and Dir­ect­or of the Insti­tute on Glob­al Con­flict and Cooper­a­tion, has devoted much of his research to the role of tech­no­logy in inter­na­tion­al com­pet­i­tion. In his book Innov­ate to Dom­in­ate: The Rise of the Chinese Techno-Secur­ity State, he exam­ines how states mobil­ize tech­no­lo­gic­al cap­ab­il­it­ies, sup­ply chains, and innov­a­tion eco­sys­tems as instru­ments of power⁵.

Tai Ming Cheung. This shift has been under­way since the mid-2010s and is closely tied to the evol­u­tion of the US-China rela­tion­ship. Until then, China was largely viewed by the United States and its West­ern allies as an integ­ral part of the glob­al eco­nom­ic and tech­no­lo­gic­al sys­tem. The pre­vail­ing assump­tion was that tech­no­lo­gic­al cooper­a­tion and eco­nom­ic integ­ra­tion cre­ated mutu­ally bene­fi­cial out­comes. That per­cep­tion gradu­ally changed dur­ing the Obama admin­is­tra­tion, accel­er­at­ing under Don­ald Trump. Poli­cy­makers increas­ingly came to view tech­no­lo­gic­al and eco­nom­ic rela­tions through a zero-sum lens. Areas that had tra­di­tion­ally been con­sidered eco­nom­ic issues, such as semi­con­duct­ors or advanced tech­no­logy trade, star­ted to be framed as nation­al secur­ity concerns.

This trans­form­a­tion also reflec­ted a shift in the bal­ance of influ­ence with­in poli­cy­mak­ing circles. Tra­di­tion­ally, eco­nom­ic act­ors ten­ded to view trade and tech­no­lo­gic­al exchange as pos­it­ive-sum pro­cesses, where­as nation­al-secur­ity com­munit­ies approached inter­na­tion­al com­pet­i­tion in more zero-sum terms. Over time, secur­ity con­sid­er­a­tions gained increas­ing influ­ence, both in West­ern coun­tries and in China. The first stage was the emer­gence of what could be described as techno-secur­ity think­ing in the mid-2010s. The second was the rise of eco­nom­ic secur­ity as a cent­ral policy concept, encom­passing sup­ply-chain resi­li­ence, tech­no­lo­gic­al self-reli­ance and indus­tri­al resilience.

More recently, we have entered a third phase char­ac­ter­ised by a grow­ing mil­it­ar­isa­tion of eco­nom­ic and tech­no­lo­gic­al sys­tems. Europe’s response to Russia’s inva­sion of Ukraine illus­trates this evol­u­tion, with renewed efforts to strengthen defence-indus­tri­al cap­ab­il­it­ies and eco­nom­ic secur­ity. Over­all, we have moved away from the glob­al­isa­tion paradigm that dom­in­ated before the mid-2010s and toward a world increas­ingly defined by stra­tegic competition.

The semi­con­duct­or sec­tor illus­trates a broad­er real­isa­tion that gov­ern­ments must play a more act­ive role in tech­no­lo­gic­al and indus­tri­al devel­op­ment. From the 1970s through the early 2000s, the dom­in­ant view in the United States was that mar­kets were bet­ter posi­tioned than gov­ern­ments to alloc­ate resources, identi­fy prom­ising tech­no­lo­gies and sus­tain long-term growth. China chal­lenged that assump­tion. Unlike the Soviet Uni­on, whose highly cent­ral­ised mod­el failed to gen­er­ate broad tech­no­lo­gic­al and eco­nom­ic suc­cess, China developed a sys­tem in which state inter­ven­tion played a major role in shap­ing tech­no­lo­gic­al devel­op­ment. Over time, and espe­cially under Xi Jin­ping, this approach pro­duced res­ults sig­ni­fic­ant enough to prompt a reas­sess­ment in many West­ern countries.

As a res­ult, gov­ern­ments increas­ingly con­cluded that emer­ging and dis­rupt­ive tech­no­lo­gies could not be left entirely to mar­ket forces. Private firms nat­ur­ally focus on prof­it­ab­il­ity and short-term incent­ives, where­as gov­ern­ments are con­cerned with long-term stra­tegic and nation­al-secur­ity object­ives. Semi­con­duct­ors became the clearest example of this shift. From 2017 onwards, the United States imposed export con­trols tar­get­ing Chinese tech­no­logy firms such as Hua­wei and ZTE, pla­cing semi­con­duct­ors at the centre of stra­tegic com­pet­i­tion. Yet China respon­ded by lever­aging anoth­er crit­ic­al area of depend­ence: rare earths and crit­ic­al min­er­als. Through its dom­in­ant pos­i­tion in pro­duc­tion and refin­ing, China acquired con­sid­er­able lever­age over sup­ply chains that are essen­tial to advanced technologies.

Recent nego­ti­ations between Wash­ing­ton and Beijing reflect this mutu­al depend­ence. The United States has shown some flex­ib­il­ity regard­ing cer­tain semi­con­duct­or exports, while China has eased some restric­tions on rare-earth exports. This demon­strates that tech­no­logy eco­sys­tems have become instru­ments of power, embed­ded in a broad­er stra­tegic rivalry that extends far bey­ond semi­con­duct­ors alone.

Effi­ciency remains an import­ant con­sid­er­a­tion, but secur­ity con­cerns now play a much lar­ger role than they did in the past. What we are wit­ness­ing is the gradu­al emer­gence of a two-tier sys­tem. For tech­no­lo­gies and indus­tries con­sidered stra­tegic, sup­ply-chain resi­li­ence has become a cent­ral object­ive. Gov­ern­ments increas­ingly seek to ensure that com­pet­it­ors or poten­tial adversar­ies can­not con­trol crit­ic­al inputs, infra­struc­ture or pro­duc­tion cap­ab­il­it­ies. As the defin­i­tion of what is con­sidered stra­tegic con­tin­ues to expand, so does the scope of these efforts.

Before the mid-2010s, glob­al­isa­tion largely revolved around optim­ising effi­ciency and min­im­ising costs. Com­pan­ies sought the most com­pet­it­ive sup­pli­ers regard­less of loc­a­tion. Today, con­cerns about choke­points, vul­ner­ab­il­it­ies and eco­nom­ic coer­cion have sig­ni­fic­antly altered those cal­cu­la­tions. Although con­cepts such as decoup­ling or de-risk­ing are dif­fi­cult to imple­ment fully, gov­ern­ments are pri­or­it­ising the most sens­it­ive sec­tors first. The emphas­is is no longer simply on effi­ciency but on resi­li­ence and secur­ity. This sug­gests a struc­tur­al shift rather than a tem­por­ary adjust­ment. It is highly unlikely that the glob­al eco­nomy will return to the pre-2010s mod­el of globalisation.

This has become increas­ingly dif­fi­cult for mul­tina­tion­al firms because their busi­ness mod­els are inher­ently glob­al. How­ever, in sec­tors that gov­ern­ments have iden­ti­fied as stra­tegic pri­or­it­ies, com­pan­ies often have little room for man­oeuvre. Export con­trols, invest­ment restric­tions and sup­ply-chain reg­u­la­tions leave firms with lim­ited flex­ib­il­ity. Semi­con­duct­or com­pan­ies provide a clear example. Many relied heav­ily on the Chinese mar­ket, but reg­u­lat­ory changes have forced them to scale back cer­tain activ­it­ies regard­less of com­mer­cial con­sid­er­a­tions. Firms con­tin­ue to lobby gov­ern­ments and occa­sion­ally secure exemp­tions or adjust­ments, as com­pan­ies such as Nvidia have recently demon­strated. Nev­er­the­less, the bal­ance of power has shif­ted. In stra­tegic sec­tors, gov­ern­ments increas­ingly set the rules, and mul­tina­tion­al firms are expec­ted to adapt.

China has pur­sued a strategy known as mil­it­ary-civil fusion, more recently reframed under the broad­er concept of nation­al stra­tegic integ­ra­tion. The under­ly­ing idea is that the tra­di­tion­al sep­ar­a­tion between civil­ian and defence sec­tors, which char­ac­ter­ised much of the Cold War peri­od, is no longer suited to con­tem­por­ary tech­no­lo­gic­al com­pet­i­tion. The most import­ant tech­no­lo­gies of the future — arti­fi­cial intel­li­gence, space tech­no­lo­gies, quantum tech­no­lo­gies, bio­tech­no­logy and oth­ers — are increas­ingly dual-use. Their civil­ian and mil­it­ary applic­a­tions are deeply inter­twined. China there­fore seeks to integ­rate these domains more closely.

The chal­lenge is that China’s insti­tu­tion­al struc­ture was his­tor­ic­ally built around strong com­part­ment­al­isa­tion between the defence sec­tor and the civil­ian eco­nomy. Even when polit­ic­al lead­ers pri­or­it­ise integ­ra­tion, entrenched bur­eau­crat­ic struc­tures and ves­ted interests can slow pro­gress. In some respects, the United States remains ahead in this area. Amer­ic­an uni­ver­sit­ies, research insti­tu­tions and com­pan­ies have long oper­ated with­in a sys­tem where civil­ian and defence research over­lap extens­ively. China is mak­ing a determ­ined effort to close that gap, but the pro­cess remains com­plex and incomplete.

Fin­an­cial resources alone are not enough. Build­ing tech­no­lo­gic­al cap­ab­il­it­ies requires strong found­a­tions in research insti­tu­tions, uni­ver­sit­ies and human cap­it­al. In many stra­tegic tech­no­lo­gies, suc­cess depends on sus­tained invest­ment in fun­da­ment­al research over long peri­ods of time before com­mer­cial applic­a­tions emerge. This cre­ates dif­fer­ent chal­lenges for great powers and middle powers. Coun­tries such as the United States and China pos­sess the resources to invest sim­ul­tan­eously across a broad range of emer­ging tech­no­lo­gies, from arti­fi­cial intel­li­gence and quantum tech­no­lo­gies to bio­tech­no­logy and fusion energy.

Middle powers, by con­trast, must be more select­ive. Coun­tries such as France or the United King­dom can­not afford to invest at the same scale across every tech­no­lo­gic­al domain. They must identi­fy areas where they pos­sess com­par­at­ive advant­ages and con­cen­trate resources accord­ingly, often while strength­en­ing inter­na­tion­al cooper­a­tion. This approach car­ries sig­ni­fic­ant risks. Choos­ing the wrong tech­no­lo­gic­al tra­ject­ory can lead to sub­stan­tial losses after years of invest­ment. Yet mov­ing too quickly without a clear strategy can be equally dangerous.

In the cur­rent tech­no­lo­gic­al revolu­tion, gov­ern­ments face a dif­fi­cult bal­ance between urgency and stra­tegic dis­cip­line. Suc­cess depends not only on spend­ing money, but on mak­ing informed choices about where cap­ab­il­it­ies can real­ist­ic­ally be developed and sus­tained over time.

Interview by Aicha Fall