It’s a tradeoff between resilience and efficiency.

You can go for full efficiency if you want, but then like the US auto manufacturers learned during Covid, you don’t have any way to handle disruptions to your business

Maybe instead of all the wealth flowing to a couple huge companies in a couple countries wealth would be distributed more broadly.

Why? The efficiency gains are a matter of size of the average company, not a matter of the total number of companies.

If what you said were true, it would be cheaper for there to be only one flavor of soda (as Bernie Sanders might have put it) rather than dozens.

Competition is better for consumers than monopoly, and that applies even when the consumers are nations.

The premise of this thread is that efficient markets and comparative advantage won’t leave even a large nation with enough of the right competitive local industries for national security or whatever objective.

Thus to sustain those industries (semiconductor fabrication in this case) industrial policy (subsidies, tariffs, government investment, “Buy American” rules, … ) is essential.

I agree that industrial policy is essential for a nation that wants to ensure that competitive industries exist within the nation's economy.

But the justification I replied to was that the nation must inherently suffer material inefficiencies for a nation to do this, due to how economies work, which is not the case (or at least, no real justification was offered other than the heuristic that larger firms are somehow inherently more efficient, which if anything is opposite to my experience in a very large org).

A nation might well implement an industrial policy so as to pessimize its local industries that survive, but that is not required to happen either.

Security, perhaps.

In all seriousness, that’s basically what the Soviets thought they were doing—and why—from (at least) 1945 on.

It really didn’t work out, despite sometimes giving the appearance of a plausible alternative to the capitalist world.

I don’t think the problem with the Soviets was doing everything themselves, which seems to be working okay for China. The problem is that centralized planning doesn’t work, and the system dehumanized people and destroyed incentives for people to innovate.