One of the most pressing concerns today is the growing dominance of China’s heavily state-subsidized electronics manufacturing industry. What has not been widely discussed is its rapidly growing hold on the digital display market. This dominance not only threatens the economic health of the U.S. electronics sector but also poses significant national security risks that demand urgent attention. As someone who served three years on the National Security Council as the Senior Director for Resilience, I have witnessed firsthand the intricate and often unseen ways in which global supply chains impact national security.

China’s rise as a global leader in electronics manufacturing is no accident. It is the result of a deliberate, strategic, and heavily subsidized effort by the Chinese government to dominate critical technological sectors, exemplified by the “Made in China 2025” initiative. Billions of dollars in state subsidies have been funneled into companies that produce everything from smartphones to advanced digital displays. This has allowed Chinese firms to grow their market share in the LCD market dramatically, from 13 percent in 2016 to 45 percent in 2023.

In the digital display market, which includes everything from televisions to computer monitors and smartphones to military hardware, Chinese companies have made significant inroads. Firms like BOE Technology and TCL have become household names, often supplying major brands with the critical components needed for their devices. The consequence is a market heavily dependent on Chinese manufacturing capabilities.

The economic implications of this dominance are profound. By subsidizing their industries, China distorts the global market, making it nearly impossible for companies in countries like Japan, South Korea, and the United States to compete on a level playing field. We have seen this play out before. Firms struggle to match the low prices offered by their Chinese counterparts, leading to a decline in domestic manufacturing and a loss of jobs. This erosion of the domestic electronics industry weakens the overall economic resilience of the United States and our allies while increasing an unhealthy reliance on Chinese supplies.

While the economic impacts are severe, the national security implications are even more alarming. The dependence on Chinese-manufactured digital displays and other electronic components creates several vulnerabilities.

There are huge similarities between display and semiconductor manufacturing, providing China with a backdoor opportunity to utilize its display talent and technology for its semiconductor ambitions. According to industry experts, the process similarities between display and semiconductor technical processes are close to 70 percent. This could enable China to accelerate its progress in semiconductor technology, bypassing some of the barriers that have traditionally slowed new entrants into this critical field. A successful overtaking of the semiconductor industry by China would be the fait accompli without having to fire a single shot.

Adding to this, the scale of the Chinese government’s subsidies for the display industry is staggering. These subsidies can reach up to 90 percent of the CAPEX (in the case of solar technology), allowing Chinese firms to invest without concerns for ROI in other emerging technologies, such as microdisplays. This relentless financial support enables continuous innovation and market expansion, further entrenching China’s position in global electronics manufacturing.

Addressing this multifaceted threat requires a comprehensive strategy that encompasses economic policy, technological innovation, and national security measures. The United States will not defeat China on its own. Washington must reconsider its approach to trade with Beijing, particularly in the electronics sector. Working with allies and partners to develop a coordinated response to China’s market practices can help mitigate the risks.

Investing in domestic manufacturing capabilities is essential. This includes not only providing financial support but also fostering an environment that encourages innovation and the development of cutting-edge technologies. Public-private partnerships could play a crucial role in this effort.

Ensuring the integrity of supply chains is critical. This involves rigorous vetting of foreign-manufactured components and developing secure, domestically produced alternatives. Enhanced cybersecurity measures must be implemented to protect against potential espionage and cyber threats.

The dominance of China’s state-subsidized electronics manufacturing industry poses a clear and present danger to the United States’ economic stability and national security. It is imperative that we recognize and address this threat with a multifaceted approach that strengthens our relationships with allies while building domestic capability, ensures the integrity of our supply chains, and maintains our technological edge. Failure to act now could leave the United States vulnerable in an increasingly digital and interconnected world.

Brian J. Cavanaugh served on the National Security Council from 2018–2021 as the Senior Director for Resilience under both Presidents Trump and Biden. He is currently the Senior Vice President of Homeland Security and Technology at American Global Strategies, a firm founded by former National Security Advisor Robert O’Brien and NSC Chief of Staff Alex Gray.

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