A contest for the future is unfolding. By the end of this decade, we will know if we will live in a world shaped by free expression, tolerance, and self-determination or dictated by censorship and coercion. We will know whether a government for the people or a government that dictates to the people prevails in the contest to organize modern societies. We will know whether a wave of technological innovation is applied to improve society and human welfare or directed for control and conquest. How this future plays out will be shaped by the technology competition between the United States and China.
What Does Losing Look Like? What would it look like if the overall technology competition went the wrong way? Understanding the stakes requires imagining a world in which an authoritarian state controls the digital infrastructure, enjoys the dominant position in the world’s technology platforms, controls the means of production for critical technologies, and harnesses a new wave of general purpose technologies like biotech and new energy technologies to transform its society, economy, and military.1 In that future:
- China dominates the economy of the future and captures the trillions of dollars’ worth of value generated by the next wave of technologies. The United States and its allies lose out on the majority of the jobs and growth promised by the new technologies. Supply chains for the new technologies are built in China. China controls the design and production of solar, wind, and nuclear energy technology and uses its chokehold over other nations’ climate transitions as leverage. Its dominance of tech sectors creates powerful platforms and companies that replace U.S.-based companies in key areas including cloud services, social media, and Internet search.
- China’s tech sphere of influence spans the globe. China uses its techno-economic advantage for political leverage. Nations – including U.S. allies – reliant on China’s tech swing into the PRC’s political orbit. Countries dependent on China’s digital infrastructure and platforms (atop existing hard infrastructure and commercial dependencies) are unwilling to risk crossing Beijing in a global crisis. They support the PRC’s political ambitions in multilateral venues. And they accommodate its voracious demand for data of all kinds that flow through the networks for the PRC’s security and economic ambitions.
- Authoritarian regimes sell the case that they are masters of the modern world. China and Russia make their profession of “no limits” friendship a reality, locking in an authoritarian ascent. Countries begin to emulate the authoritarian governing model, technology-enabled surveillance and social control, and an elevation of the needs of the state over the fate of individuals and the rule of law. They rally around a vision of order espoused by Beijing and Moscow.
- An open internet is compromised, and frictionless digital oppression replaces digital freedom. The PRC’s vision of a “sovereign” internet sweeps the globe atop infrastructure built by platform companies based in China. China’s surveillance state is globalized. PRC-backed platforms replace other global platforms and shape the global discourse using inscrutable algorithms to tailor messages to undermine democracies and support PRC political objectives. The PRC exercises control of the digital payment infrastructure. It collects vast amounts of data that can be applied to target individuals and refine its propaganda. Democracies abandon a global Internet and retreat into their own splinternets to protect their security and digital public squares, but even this is a losing endeavor as TikTok and other PRC-based platforms dominate global markets.
- Nations’ digital infrastructure is cyber-compromised. The world will be dependent on China for most core digital technologies, key electronics components, and finished products woven into every critical system. Energy grids, ports, airports, financial systems, and government offices will be vulnerable to PRC cyber exploits. Beijing uses them as threats during a disagreement and deploys them as cyberattacks in a crisis.
- The U.S. military’s technological edge erodes. The PRC annexes Taiwan. U.S. defense commitments and power projection are threatened. China uses its dominant position in autonomous systems, robotics, and low-cost mass manufacturing, augmented by PRC control of global networks, to build weapons systems that overmatch U.S. capabilities, create new warfighting paradigms, and erode confidence in the U.S. military deterrent. The combination of reduced capability and allies hedging forces the United States to sacrifice its positions on Taiwan.
- The PRC cuts off the supply of microelectronics and other critical technology inputs. Beijing makes good on its threats to cut off the U.S. supply of rare earth minerals – necessary for energy, digital, and defense technologies – and cuts off the supply of leading-edge semiconductors, 92 percent of which are produced in Taiwan.2 America’s military is crippled, and the nation is plunged into a depression. Americans are forced to live in a world where China can turn off the technology tap.
In total, this picture amounts to the unraveling of the order the United States and the democratic world built after World War II and a serious challenge to future U.S. prosperity. The United States and other democracies would become economically dependent, losing their engines of prosperity and freedom of action in the world. Leaders would face hard choices. They would have to compromise beliefs, sacrifice allies to secure a place in a different world order, or fight to sustain the U.S. position from a smaller techno-industrial base, worse geopolitical position, and diminished military advantage.
Even if only some of this came to pass, the world would be a darker place for the United States and democracy. Losing the competition with China is not just about preserving abstract principles and political institutions – it will lead to the transformation of our daily lives in ways that will be impossible to ignore. Already, we have seen how China wields its platform advantages to extract data, coerce compliance, and punish individuals, companies, and nations that do not act in accordance with its wishes or criticize PRC policies.
A losing scenario is plausible. If we consider the state of the technology competition – how we got here, how prepared we are to harness emerging technologies today, and where trendlines suggest we are going – there is ample reason for concern.
How We Got Here: A Story of Strategic Surprise in Three Battlegrounds. Three technology battlegrounds today – microelectronics, fifth-generation wireless technology (5G), and AI – tell the story of a nation (and its allies) coming perilously and unwittingly close to ceding the strategic technology landscape and along with it the capacity to shape the future. These three technologies represent the critical hardware, network infrastructure, and software underpinning every aspect of our lives – the computing power, connectivity, and data flows critical to our economy, society, and national security. Only determined efforts by two U.S. administrations, and by Congress in just the last few years, averted crises that were decades in the making. But the larger story is one of reactive policymaking, positional weaknesses, a disconnect between private sector technological strength and national requirements, being out-organized by a determined rival, and more fundamentally a failure to connect technology developments to strategic competition.
- In microelectronics, the United States stood by as its share of manufacturing for the chips that power every modern machine reached a historic low, with all high-end chip manufacturing done by a few companies located in East Asia.3 98 percent of the chips the Pentagon needs are now built, assembled, or packaged in the PRC’s shadow.4 Congress and the White House stepped in via the CHIPS and Science Act, which includes an emergency infusion of billions of dollars to rebuild manufacturing capacity and drive new leading-edge research at home. But even with swift implementation, regaining manufacturing leadership, addressing the workforce problems, and ensuring supply chain resiliency will require more policy actions and deeper public-private coordination.
- In 5G, PRC-backed companies were on their way to controlling network hardware for swaths of the global Internet. The United States had no market-ready alternative. Only a U.S. diplomatic campaign warning of the risk of dependence on the PRC and U.S. export controls on select microelectronics slowed China’s 5G march. Yet the race is just beginning to develop 5G applications in autonomy, advanced manufacturing, and Internet of Things (IoT).
- AI could represent the next chapter of the industrial revolution. Intelligent systems and applications driven by computing power, algorithms, and data will connect a constellation of technologies to transform entire industries. In 2017, 280 million people in China – close to the entire U.S. population – witnessed AlphaGo defeat their Go champion 3-0.5 China organized for victory. While the United States had no AI strategy linking the tech to national security, China started investing in a national plan to lead the world in AI by 2030. In the United States, a federal commission, the National Security Commission on Artificial Intelligence, had to develop such a plan four years after China.
Three technology battlegrounds today – microelectronics, fifth-generation wireless technology (5G), and AI – tell the story of a nation (and its allies) coming perilously and unwittingly close to ceding the strategic technology landscape and along with it the capacity to shape the future.
The United States needs to win the microelectronics, 5G, and AI battlegrounds and make sure it is not caught by surprise again. Right now, we cannot confidently say that the United States is better positioned to proactively address “the next 5G,” or avoid “the next chips dependence.” We want U.S. government officials working with private sector and international partners to shape the future, not constantly trying to avert strategic checkmates. The United States cannot continue to shoot behind the target on critical technologies, address them piecemeal, or only belatedly connect their impact to the future of geopolitics and democracy once the consequences are too obvious to ignore.
The Geometry of Innovation Has Changed; the United States Has Not Adapted. The battlegrounds tell the story of a larger paradox of a techno-economic superpower suffering from strategically significant technological vulnerabilities. On the one hand, the United States can claim enormous companies with huge platform reach around the world, a rich tech startup ecosystem, the world’s leading chip designers, and innovation hubs sprouting beyond Silicon Valley. It still serves as the destination for global tech talent, and hosts the best universities. In even more basic terms, an economy seeking to lead in technology production needs inputs like capital and a productive workforce; a complex innovation system; and a home market large enough to support innovative enterprises at scale. The United States has it all. On the other hand, a withering technology manufacturing base, a stream of evidence that the U.S. military struggles to adapt leading technology for defense purposes, and a general paralysis on governing technologies like AI even as the EU and others move ahead, suggest something is amiss in the U.S. innovation ecosystem.
Why have these weaknesses emerged? There are many reasons. Here are a few. The tech ecosystem evolved without reference to a geopolitical rivalry and with relative indifference to the strategic implications of tech developments. High margin and high value chain investment and the search for cheap suppliers abroad made good business sense for U.S. companies and investors but devastated the U.S. technology manufacturing landscape. The absence of national technology priorities, and a decline in the share of government funded R&D left commercial priorities to drive the tech agenda. The absence of a modern “moonshot” left no concentrated national effort. And the bigger underlying issue is the changing geometry of the innovation ecosystem. The rise of venture capital (VC) reshaped the Vannevar Bush innovation triangle between government, industry, and academia, reducing the government’s influence. VCs jolted the innovation landscape but largely stayed away from “deep tech” and tried to commercialize basic R&D – both of which required enormous patience and less promise of big returns.
The United States cannot rerun the Cold War playbook and hope it works, because conditions have changed. Rebuilding U.S. strengths and getting ahead of the next wave of technology requires mastering a new geometry of American innovation and harnessing it for national advantage. We cannot rest on the laurels of a strong technology ecosystem, a vibrant private sector, or superior ideals to naturally adapt. A passive U.S. approach to competitiveness based on the assumptions of a previous era leaves us with real vulnerabilities in this tech-enabled competition. We must think, act, and organize to compete by adapting enduring strengths to new challenges and new purposes. We must gather these strengths to compete.
Tech Trendlines are Concerning. The United States is not the world’s sole technology superpower. China’s technological progress is undeniable. The PRC is organized to harness technology for its economic, societal, and military ambitions, and it is backing up plans with resources. In 2019 alone, China spent nearly $250 billion on its industrial policies.6 Anticipating the massive potential of data to create economic value and control society, the PRC is racing ahead with an ambitious digital strategy and a $2.7 trillion campaign to build digital infrastructure.7 In looking at the key dimensions of technology competition, a picture emerges of an intensifying challenge. It is entirely possible to imagine a future where systems designed, built, and based in China dominate world markets with innovative, inexpensive, and centrally-controlled hardware, networks, and platforms; and where China is the leader in deep tech like AI, automation, synthetic biology, new energy, and quantum. History suggests that the nations capable of harnessing these technology waves are best positioned to win the future.
- Sector Competition. Broad sectoral strength matters because it is the basis for specific commercial and national security applications. It is always hard to assess U.S.-China “gaps” in dynamic technology sectors with multiple drivers, but it is clear that China has edged ahead in R&D and applications within several important technology sectors and intends to lead in all of them. In our judgment, China leads the United States in 5G, commercial drones, offensive hypersonic weapons, and lithium battery production. The United States has modest leads in biotech, quantum computing, commercial space technologies, and cloud computing, but these could flip to the China column. In the AI competition, the United States has a small lead with China catching up quickly across the AI stack.8 In all critical emerging technology sectors, China is making massive investments to catch up or take the lead.9
- Platform Competition. As tech platforms become tools of statecraft too powerful to ignore, China is redoubling its strategic play to win what many U.S. stakeholders had mistakenly seen as a purely commercial contest. These platforms have the power to facilitate content, decide what information is shared, how quickly and loudly it is amplified, and who has access to it. In possession of troves of data, digital platforms can help derive penetrating insights about global trends – and specific individuals. Chinese apps like TikTok, WeChat, and AliPay pose a threat to the dominance of U.S. counterparts in global markets. As physical, digital, and biotechnical technologies converge over the next decade, the platform statecraft competition will similarly expand beyond the digital realm.10
- The Future of the Internet. The Internet is being reshaped. A central question is whether the Internet will remain an open space for free expression and the exchange of information and services, or whether physical borders and government control will be replicated in the digital realm. Autocratic governments are building national firewalls. China is pushing to build global telecommunication architectures from undersea cables to 5G networks. The governments in two of the three largest democracies – India and Indonesia – are asserting intrusive control over the flow of digital information. Meanwhile, the Internet’s technological evolution is a wildcard in this contest as the push for a decentralized “web3” built on blockchain technologies could create a new paradigm for restoring a free Internet, fizzle out, or be similarly susceptible to government control.11
- China’s Growing Tech Spheres of Influence. China’s tech advantages are translating into strategic impact through the classic idea of spheres of influence applied through new methods and in new domains. China’s spheres of tech influence range from control of critical inputs like rare earth minerals to network infrastructure through its Digital Silk Road projects, strategic approach to international standards bodies, and export of surveillance technologies. This tech influence is translating to geostrategic leverage around the globe as countries dependent on China vote differently in international bodies, change their position on Taiwan, and toe the PRC’s foreign policy lines on issues ranging from human rights to cyberspace norms.
Beijing’s Counter Narrative. China’s leaders claim the future is theirs. These trends feed the narrative that the trajectory is inevitable. America’s problems, they claim, are part of a broader “disorder of the West,” presaging “the end of the ‘end of history.’” Democracy is in retreat. The United States’ technology advantages are withering, its private sector isn’t public-minded, and its public sector is too paralyzed to act. Economic power is shifting from West to East. The United States’ military advantages have eroded. Meanwhile, China, according to its leaders, has unlocked the secrets of winning the 21st century. It is delivering opportunities for its people to lift their lives. The Chinese Communist Party (CCP)’s plan for the “great rejuvenation of the Chinese Nation” is on track, and the PRC is now the “main driving force” behind the world’s technological and industrial transformation. Its socialist approach “with Chinese characteristics” represents “a brand-new possibility for achieving modernization.”12 As President Xi told President Biden: “Democracies cannot be sustained in the 21st century. Autocracies will run the world.”13
Why 2025-2030. 2025-2030 represents a critical window where tech trends and strategic competition will come to a head in the contest. If we want to alter the trajectory of the competition, we must organize now.
Key aspects of Beijing’s comprehensive plan to bolster its military capabilities and execute its techno-economic strategy must succeed during this decade. Between now and the end of this decade is a window of opportunity that will quickly close for China as its demographic and economic trends darken unless technology provides an escape ramp.14 Economic headwinds in 2022 – “Zero-COVID,” supply chain shocks, and localized financial turbulence – may be accelerating that window’s close. Notably, the People’s Liberation Army (PLA) is building the capability to mount a full-scale invasion of Taiwan, should CCP leadership decide to do so this decade.15 Because China’s leaders know the window will close, the PRC appetite for risk may increase before 2030.
- We are entering a key period of competition to determine which companies and nations establish, adopt, and scale the dominant technology platforms emerging from rapidly maturing general purpose technologies beginning with AI, biotech, quantum, and novel energy paradigms.16 On the digital front, much of the world will be integrated into a new world of IoT with 5G-enabled sensors, autonomy, and connectivity underscoring the importance of who will build and fundamentally control the digital infrastructure that impacts every aspect of human existence.17
- The EU, China, and others are actively developing the regulatory landscape for the digital world, AI, and other technologies, while the United States continues to debate a national approach and relies instead on a patchwork of local and state laws and voluntary frameworks. Without a clear strategy on tech governance – including to rally allied support behind its approach – the United States risks being bound to a global innovation landscape shaped by regulatory regimes decided in foreign capitals.
- At home, 2025 will be an opportunity to initiate the next phase of competitive strategies. It will mark the beginning of a second Biden Administration or the start of a new administration. We will have a better sense of the progress of initial efforts to rebuild microelectronics manufacturing at home, restore supply chain resilience for critical minerals, and provide alternatives to China’s 5G expansion. The United States will need, at that point, the next set of policy recommendations ready to carry a technology competitiveness agenda forward. As a practical matter, we have just one full congressional legislative cycle between now and then. To improve the U.S. position by 2025, we must act now.
Remembering American Advantages. The window for action to shape the future is still very much open. The question we must ask is how to harness American strengths. No single public policy action or technology solution will be sufficient. However, the basic elements for a strong response exist.
- America’s open society provides political, economic, and cultural advantages. Innovation happens in America because an open society inspires, facilitates, and attracts talent to achieve the next generation of technology breakthroughs. It is a culture rooted in the free exchange of ideas that supports scientific breakthroughs and business opportunities.
- The United States is a global talent hub. By leading the world in higher education and offering an open innovative society, it can attract the world’s best talent. The nation’s values and open society make it a welcoming destination for all. The United States is constantly replenishing a strategic reservoir of human capital.
- American financial dynamism is unparalleled. The United States draws on the world’s deepest and most liquid capital markets to generate prosperity and turn ideas into products and platforms at home and around the world. U.S. legal and regulatory institutions have long been the reliable backstop of an efficient and dynamic ecosystem that supports cutting-edge research, development, and commercialization.18
- America is primed for moonshots. If the U.S. Government steps forward to set grand technology objectives, it can spur national enthusiasm, galvanize the private sector to action, and accelerate innovation in strategic sectors. These attributes also enable the innovation ecosystem to constantly reinvent itself. Today novel funding paradigms and a decentralized “crowd” (in science and finance) could fuel additional new discoveries.
Three additional features will help translate advantages for the age of tech competition.
- Innovators and investors recognize the growing international competition. Silicon Valley is undergoing a sea change. The space for private-public collaboration is expanding as a growing segment of the private sector recognizes and wants to respond to tech-based challenges to democracy, particularly from foreign rivals.
- Technology innovation presents an opportunity to harness America’s diversity. Engaging a rising, diverse generation of technology leaders not only draws on a wider pool of talent and ideas, but also offers the chance to build more equitable and inclusive technologies that help America better live its values and demonstrate its power to the world.
- A global network of allies and partners share U.S. strategic concerns and are committed to deepening tech cooperation. America is not competing alone. Allies and partners can tip the balance in a close race, nearly doubling the scale of research and development spending when combined with America.19
We Have Been Here Before. At every critical phase of American history, enduring principles – the centrality of individual rights, the power of free enterprise, and the strength of democratic governance – have been tested by international forces, technological disruption, threats from abroad, and our own domestic struggles to reconcile our principles and our practices. Through the transition from an agricultural society to industrial engine and digital superpower, and a global ideological and strategic contest in the Cold War, we have passed the tests – albeit painfully – and built a stronger and freer United States. We sometimes fell short in living up to our ideals, but that disconnect was not an excuse to abandon competition or a reason to jettison principles.
Today, we must retain confidence in our advantages and our enduring values. We can adapt without abandoning our core beliefs, evolve without sacrificing our values, and exercise our power abroad without losing sight of its purpose. If we can harness the wave of new technologies, then we will put the United States in a stronger strategic position in the world, create a healthier, innovative society with expanding equality of opportunity at home, and present a democratic model worthy of emulation abroad. Success depends on building national consensus on the problem, taking the actions necessary to restore all dimensions of U.S. competitiveness in the world, rebuilding a system of alliances and international order, and adapting our society and economy by harnessing technology to solve practical problems. We know we need to act, but we must agree on how we can win.
1. See Chapter 7 of this report for further discussion of general purpose technologies.
2. Antonio Varas, et al., Strengthening the Global Semiconductor Value Chain in an Uncertain Era, Boston Consulting Group and Semiconductor Industry Association at 5 (2021).
3. 2021 State of the U.S. Semiconductor Industry, Semiconductor Industry Association at 10-19 (2021).
4. Deputy Secretary of Defense Dr. Kathleen Hicks’ Remarks at the White House CHIPS-Plus Act Event, U.S. Department of Defense (2022).
5. Kai-Fu Lee, AI Superpowers: China, Silicon Valley, and the New World Order, Houghton Mifflin (2018).
6. See for instance, Made in China 2025, the Dual Circulation Strategy, National AI Plan, the National Semiconductor Plan, Military-Civil Fusion, the Digital Silk Road. See also Gerard DiPippo, et al., Red Ink: Estimating Chinese Industrial Policy Spending in Comparative Perspective, Center for Strategic International Studies (2022).
7. Barry van Wyk, New Backbones for ‘New Infrastructure’ — China’s Multi-Trillion Dollar New Digital Landscape, The China Project (2022). David Dorman, China’s Plan for Digital Dominance, War on the Rocks (2022).
8. The National Security Commission on Artificial Intelligence defined AI as a stack requiring talent, data, hardware, algorithms, applications, and integration. See Final Report, National Security Commission on Artificial Intelligence at 32 (2021) (citing Andrew W. Moore, et al., The AI Stack: A Blueprint for Developing and Deploying Artificial Intelligence, Proc. SPIE 10635, Ground/Air Multisensor Interoperability, Integration, and Networking for Persistent ISR IX, 106350C (2018); Dave Martinez, et al., Artificial Intelligence: Short History, Present Developments, and Future Outlook, MIT Lincoln Laboratory at 27 (2019)).
9. SCSP acknowledges that a robust public dialogue exists related to comparing the progress of the United States and China on critical technology sectors, with many perspectives on the state of play and each nation’s progress. This report provides our initial assessments – based on a broad assessment of data, trends, and expert views surveyed to date.
10. See Chapter 7 of this report for discussion of physical, digital, and biotechnical technologies on the horizon.
11. See, for example, The Unlimited Potential of Web3 with Alexis Ohanian, Where it Happens (2021); Moxie Marlinspike, My First Impressions of Web3 (2022).
12. Translation of The World is Undergoing Great Changes Not Seen in a Century; What are these Changes?, Center for Security and Emerging Technology (2021).
13. Remarks by President Biden at the United States Naval Academy’s Class of 2022 Graduation and Commissioning Ceremony, The White House (2022).
14. Welcome to the Machine: A Comparative Assessment of the USA and China to 2035 Focusing on the Role of Technology in the Economy, Fathom Financial Consulting at 3 (2022) (SCSP-commissioned work product).
15. Sam LaGrone, Milley: China Wants Capability to Take Taiwan by 2027, Sees No Near-term Intent to Invade, US Naval Institute News (2021); Derek Grossman, Taiwan is Safe Until at least 2027 but with One Big Caveat, RAND Corporation (2021).
16. See Chapter 7 of this report for further discussion of general purpose technologies.
17. Shankar Deka, et al., Towards Cyber-physical Systems Robust to Communication Delays: A Differential Game Approach, arXiv (2021).
18. See Chapter 2 of this report for a discussion of the history of industrial strategy in the United States.
19. Melissa Flagg, Global R&D and a New Era of Alliances, Center for Security & Emerging Technology at 3 (2020).