An American Playbook for Tech Leadership

Whether it’s the recent news of Nvidia quietly backing away from its proposed acquisition of Arm or other global matters, the issue of US tech leadership keeps coming back.

EnergyX’s recent play for Bolivian Lithium is an all too rare example of the US working to claw its way back. But we're more accustomed to hearing about its losses, for example, America’s failure to safeguard its supply of cobalt, an essential raw material used in the production of electric car batteries. Indeed, there has been a series of missteps that have caused the US to cede high-tech frontrunner-ship to other countries. With the government in Beijing placing restrictions on the creativity of a once dynamic Chinese tech industry, now is the perfect time for the US to take steps to regain its leadership.

It's no secret that the US has allowed its high-tech competitive edge to erode at a time when other nations aggressively pursue an advantage in the rapidly evolving high-tech industrial world. Over the past several decades, America's share of global semiconductor manufacturing has fallen from 40% to 12%, creating supply vulnerabilities that currently are causing major distress in the US automotive industry, the defense sector, communication companies, and a range of manufacturers. Although the US remains a clear leader in chip technology design, zero percent of leading-edge, 3-nanometer chips are currently fabricated here.. American high-tech exports have grown by a tepid 1% annual rate since the 1990s.

6 Ways the US Can Forge a New Path

We posit that the erosion of America’s tech leadership, relative to the rest of the world, stems not from a lack of technological ability and sophistication. The US possesses both in abundance but it lacks the will for collective initiative. Moving into active engagement in this high-stakes competition will only happen by taking concrete steps to collaborate with other players on the world stage.

We see six approaches as indispensable:

1. Competitiveness incentives. Unlike South Korea, Taiwan, and other countries that are strategically incentivizing semiconductor and tech manufacturing, the US government essentially offers no such incentives, and recent efforts in Congress to address this strategic disadvantage have been met by a confounding complacency.

2. Rare earth mineral supply chains. As the essential building blocks of the modern economy, rare earth minerals (REMs) pose a prominent source of US vulnerability. These 17 strategic elements are essential to more than $7 trillion in global finished products, from cell phones and hard drives to defense systems, batteries, and electric vehicles. China holds more than half of the world’s refined production and accounts for 80% of America’s supply. At dire risk of being cut off from a crucial pipeline, the US needs to accumulate new sources by cementing stronger supply agreements and making infrastructure investments in Australia, Brazil, India, and Vietnam, which together possess more than 48% of the world’s REM reserves.

3. Circumspect outsourcing. Outsourcing will always be a valuable strategic option, but the rules of the game are becoming markedly more complex. China has established its control through policies that ensure domestic companies hold leading positions in their marketplace. American companies need to adopt a more circumspect approach to outsourcing, one that recognizes that the power to shape the operating environment rests in the hands of entities whose interests may not coincide with our own.

4. STEM workforce. As it currently stands, there will be a shortage of qualified talent to fill more than 1.2 million STEM jobs by 2024, putting a major damper on the nation's tech growth potential. The US government must work in tandem with the private sector to foster STEM skill development through targeted funding and innovative program design. Vocational program architectures should reflect the complexity of the tech world, which comprises very specific niches across a massive and diverse value chain.

5. Public-private alliance. American industry was indispensable to the Allied victory in World War II and it could never have prevailed had not US public and private sectors worked as one to meet an existential challenge. A public-private alliance is badly needed once again. Though the contest for global tech leadership is more a race than a war, it may prove no less consequential. Better informed government policymakers would be more equipped to grasp the fast-accelerating innovation necessary to improve American tech leadership.

6. Global tech coalition. The US needs to develop a comprehensive global tech coalition of like-minded technology powerhouses to serve as a counterbalance to the narrow national self-interest that prevails today. A bold approach would include countries far beyond the customary G7 partners (France, the UK, Canada, Germany, Italy, and Japan) to include leading Indo-Pacific region partners such as India, Australia, Taiwan, and South Korea, along with several nations in the Middle East. Challenges include the potential for technological espionage and the necessity for the US -- long accustomed to leading -- to accept more of a follower role in instances where fellow coalition members have earned the right to lead.

We believe that only by recognizing how urgently necessary multinational cooperation is in the highly competitive modern technology environment can the US resolve this critical issue and regain a foothold in the tech race. The private sector, world governments, and private citizens alike will benefit from more mutually supportive and resilient technology supply chains, joint-funded research, and tech strategies grounded in shared values -- the protection of personal privacy and human liberty.

About the Authors:

Bharat Kapoor is a partner and Americas Tech practice lead and Mike Hales is a partner in global consultant Kearney’s Strategic Operations practice. Ben T Smith IV is a senior partner and leads Kearney’s Communications Media and Technology practice. Drew DeLong is an associate and policy advisor to Kearney. They can be reached, respectively, at [email protected], [email protected], [email protected], and [email protected].