When the Chips are Down.

• Author: Tonelson, Alan

One of the leading features, and weakness[es], of globalist U.S. foreign policy has been the tendency to look mainly to foreign policy to solve problems that domestic policy could likely handle better. That's because all else equal, conditions at home are much easier to change and control than conditions overseas. Even an avowed non-globalist like President Donald Trump has sometimes been guilty of this.

To solve its energy shortage problem, the United States has long sought to stabilize the Middle East rather than develop alternative fossil fuels or green energy sources. To eradicate, or at least reduce, jihadist terrorism, administrations from both parties mired the nation in costly and protracted foreign wars rather than secure the homeland. And many presidents have fought "wars on drugs" in Latin America and other regions more energetically than they've attacked the social and economic ills that fuel domestic narcotics use. The wisdom and track record of these strategies has been unimpressive at best.

Now, news from an unexpected source could kick off another misguided and potentially even dangerous foreign policy-heavy effort to solve a mainly domestic problem. Semiconductor manufacturer Intel's latest quarterly corporate report ominously noted some serious potential technological vulnerabilities capable of undermining America's prosperity as well as its national security.

Intel, of course, is America's largest producer of semiconductors, and one of the world's biggest microchip manufacturers. In fact, it's the only major U.S.-owned producer that still manufactures state-of-the-art logic chips domestically--or at least is still trying to. This capability matters decisively for national technological competitiveness because these are the products whose current capabilities and vast potential drive the so-called process innovation that enables the entire microelectronics industry to create faster, more powerful products. Most of the rest of the semiconductor sector--both in the United States and elsewhere in the world--has transitioned to a so-called "fabless" business model, in which companies develop and design semiconductors while letting contract manufactures handle the challenge of building and operating ever more expensive multi-billion-dollar fabrication facilities (or "fabs" for short).

Semiconductors, therefore, (a) play a central role in making information technology hardware and enabling it to use all the software developed for these devices--including the networking gear that houses the Internet; and (b) are the keys to creating new and vastly better generations of civilian machinery and equipment throughout industry--along with state-of-the-art weapons systems.

It's easy to understand then why alarm bells have gone off on Wall Street and in the American national security community: Intel not only announced that it had bungled its effort to mass manufacture a new family of chips incorporating the latest generation of performance-improving technology, but raised the prospect of exiting semiconductor manufacturing altogether. Worse, this was Intel's second straight failure to introduce such next-generation processors. In an industry where product cycles keep getting shorter, such a setback can significantly magnify the longer-term cost of a company lagging behind technologically.

The news so far has been more disheartening for investors though than for the national security community. The former fear Intel's possible abandonment of the core competence that led to its longtime success. The latter, on the other hand, understand that the U.S. economy and military could...