WASHINGTON—The global semiconductor shortage during the pandemic has intensified the battle for technological dominance between the world’s two largest economies. Supply chain shocks and growing tensions with China are forcing the U.S. government to enter the subsidy war to protect American leadership in semiconductors and future technologies. Microchips smaller than postal stamps are the brains of modern electronics. They enable many products from smartphones and computers to cars and industrial equipment. They are also essential for artificial intelligence (AI), quantum computing, and advanced wireless networks such as 5G. The United States remains the global leader in semiconductor design, as well as research and development. American companies control almost half of the market share in global sales of microchips. However, a big portion of their manufacturing has shifted to Asia over the years. Today, roughly 80 percent of semiconductor foundries and assembly and test operations are concentrated in Asia, with Taiwan …