Many technologies invented and developed in the United States are ultimately manufactured at scale in China, giving Beijing near-monopolies on products that could be weaponized by withholding supply during a geopolitical conflict. These include lithium iron phosphate batteries for electric vehicles, solar panels, and three-dimensional LiDAR systems that allow self-driving cars to "see," according to an analysis by L. Rafael Reif, president emeritus of the Massachusetts Institute of Technology, in Foreign Affairs.
The core problem is what Reif called a lack of "patient capital," "Hvylya" reports. American private-sector investors typically prefer software startups that require relatively little investment and offer quick returns - nearly half of all new venture capital funding in 2024 went to software companies. Innovative startups trying to build physical products based on science and engineering breakthroughs need years and billions of dollars to invent manufacturing processes and build supply chains from scratch.
China, where the government is the business community's largest lender and investor, has plenty of patient capital. In December, Beijing launched a new fund intended to steer hundreds of billions of dollars over 20 years into early-stage tough-tech companies. Reif acknowledged that China's model is imperfect - local governments often indiscriminately support companies in favored industries, creating a deflationary spiral and massive overproduction. But so far, the overwhelming investment has more than balanced out the disadvantages.
Existing federal programs that support innovation are "piecemeal efforts, and they are too dependent on politics," Reif wrote. "Innovation policies implemented by one administration are easily undone by the next." One example is Sublime Systems, a startup that received an $87 million Department of Energy grant in 2024 to commercialize electrochemical cement production - a technology with enormous strategic potential, since cement accounts for eight percent of global carbon emissions. In October 2025, the Trump administration canceled the grant, forcing Sublime to pause construction on its first manufacturing plant.
Research from the Federal Reserve has found that tariffs actually reduce innovation in the long run by decreasing domestic companies' incentives to innovate and shrinking their available markets. The government has also taken ownership stakes in Intel, negotiated a "golden share" in U.S. Steel, and demanded a cut of Nvidia's and AMD's sales in China. "When the government is both regulator and owner, conflicts of interest abound," Reif warned.
"Hvylya" previously examined the cost mismatch that threatens U.S. competitiveness in strategic technologies.