The Death of the US Tech Sector: Part 1
By Peter Zeihan
We’re doing a two-part series on the tech sector. Today, we’ll be looking at the disruption caused by deglobalization and Trump’s policies.
Core Thesis
Zeihan argues that modern tech manufacturing is fundamentally incompatible with de-globalization and tariff-driven trade policy. The global supply chains that make advanced electronics possible are so complex and geographically dispersed that disrupting them risks outright collapse of tech production—not reshoring.
1. Tech Manufacturing Is Not “Made in China”
Zeihan pushes back on the common belief that tech products are simply built in China.
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China is primarily an assembly hub, not the origin of most components
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A single device (phone, laptop) contains hundreds to thousands of parts
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Each component has its own supply chain, often crossing multiple countries
A finished tech product typically touches 5–11 countries before reaching consumers.
2. East Asia Functions as an Integrated Manufacturing System
Modern electronics depend on a finely tuned regional ecosystem:
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Taiwan → advanced chips and GPUs
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South Korea → memory (DRAM)
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Japan → photomasks, precision materials
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Netherlands → lithography machines
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United States → lasers, specialized materials
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China / Vietnam → wiring, injection molding, assembly
No single country can replicate this system alone. It works only because different countries specialize in different stages.
3. Supply Chains Are Fragile by Design
Zeihan stresses the “paperweight problem”: If a device has 1,000 parts and one part is missing, the entire product becomes worthless.
This means even minor trade disruptions can halt production entirely. Because 80–85% of tech manufacturing is Asia-centric, any regional breakdown creates cascading failures across the entire industry.
4. Tariffs Actively Break Supply Chains
Zeihan argues U.S. trade policy—especially tariffs—is counterproductive:
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Tariffs raise costs on cross-border inputs
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They discourage U.S. firms from participating in global supply chains
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Firms respond by moving production out of the U.S., not into it. If importing components to add value in the U.S. becomes expensive, companies simply relocate that value-add step to Asia.
5. Result: “De-Americanization” of Tech Manufacturing
Rather than reshoring, Zeihan says tariffs cause:
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Remaining U.S. tech manufacturing steps to leave
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Reduced American involvement in advanced production
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Fewer domestic capabilities to fall back on
The U.S. wasn’t doing much tech manufacturing already—but now even the niche, high-value pieces have incentives to exit.
6. De-Globalization Makes the Problem Existential
Looking ahead, Zeihan warns that globalization is weakening, China’s long-term instability threatens the system and the U.S. is not building replacement capacity. If the Asian manufacturing system fractures, the U.S. will not simply “pick up the slack.” Instead, it may lose access to tech products altogether, at least temporarily.
Final Takeaway
Zeihan’s conclusion for Part 1 is stark:
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Advanced tech manufacturing requires hyper-global supply chains
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Tariffs and de-globalization break those chains
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Breaking the chains does not bring production home—it eliminates production.
If the goal is to rebuild domestic tech manufacturing, Zeihan argues tariffs are the worst possible tool, because they actively accelerate America’s exit from the system it still partially relies on.
The Death of the US Tech Sector: Part 2
Continuing our discussion on the US tech sector, let’s break down how demographics and rising capital costs are stifling innovation.
The tech boom relied upon a few things: a young, highly-skilled workforce concentrated in hubs like Silicon Valley and cheap and abundant capital. I don’t know if you’ve noticed, but the US doesn’t have the young workers or the capital environment to fund long-term tech development.
Core Thesis
Zeihan argues that the conditions that powered the last 20 years of explosive tech innovation are structurally ending. The problem is not just manufacturing—it begins earlier, at the idea-generation and product-development stage—and it is driven by demographics and capital.
1. Tech Innovation Is a Social, Physical Process
Zeihan emphasizes that breakthrough tech is not created by lone geniuses or remote systems. It comes from:
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Dense clusters of social, highly skilled workers
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Physical proximity (people in the same room, networking constantly)
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U.S.-based hubs like Silicon Valley, Austin, DC, Boston, etc.
These groups imagine products first, then operationalize them, and only later hand them off for coding or manufacturing. This front-end creative process is labor-intensive, slow, and expensive.
2. Millennials Were the Ideal Tech Workforce—Temporarily
The tech boom coincided with a unique demographic moment:
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Millennials delayed family formation 6–7 years longer than prior generations
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From ~2005 to recently, this created a large pool of Social, Mobile, Risk-tolerant and Work-obsessed tech workers
That demographic window is now closing. Millennials are aging into family life, different priorities, and less tolerance for the startup grind. The “young, disposable-time” workforce that fueled nonstop innovation no longer exists at scale.
3. Tech Requires Enormous Amounts of Cheap Capital
Zeihan stresses that tech does not generate revenue for a long time:
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Brainstorming → no money
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Planning → no money
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Designing → no money
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Coding/building → still no money
Every stage costs a lot—especially because skilled tech labor is expensive. This model only works when capital is abundant and cheap.
4. The Cheap-Money Era Is Over
From 2005 until recently, the U.S. had exactly the right financial conditions: baby Boomers were still working, they were aggressively funding retirement accounts, capital flooded markets, and interest rates were low. This enabled: zero-percent loans, asset bubbles, massive tech investment, and explosive growth in everything from social media to AI.
Now that over two-thirds of Boomers are retired, they’ve shifted money into low-risk assets like T-bills. That removes capital from productive, high-risk sectors like tech.
Result:
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Less capital available
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Much higher cost of capital (4–5x higher than five years ago, per Zeihan)
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Fewer investors willing or able to absorb losses
5. Structural Consequences for Tech
According to Zeihan, this leads to unavoidable outcomes:
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Fewer startups
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Slower innovation
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Smaller breakthroughs
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Longer development timelines
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Less tolerance for failure
Tech companies can still issue stock, but with fewer buyers, valuations and funding capacity fall. The ecosystem that allowed “burn money now, profit later” is breaking down.
6. Manufacturing Makes the Problem Worse
Even if breakthroughs occur, scaling them is harder:
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U.S. manufacturing capacity is declining
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More production has shifted to East Asia
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East Asia faces severe demographic decline
China is central to this system, and Zeihan argues that when China destabilizes, access to the broader East Asian manufacturing network will fracture. Japan and Korea face similar demographic pressures.
Final Takeaway
Zeihan’s conclusion is blunt:
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The demographic workforce that fueled tech is aging out
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The capital that funded tech is drying up and getting expensive
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Manufacturing pathways are becoming less reliable
As a result, future tech innovation will be slower, rarer, smaller, and harder to scale. The golden age of rapid, massive tech breakthroughs is ending—the demographic and financial foundations that made it possible no longer exist.
