Politics are a factor but economics is a bigger one. With any technology, each successive generation inevitably requires larger and larger capital investments. Ideally governments should do more to preserve competition but when it costs >$10B to develop a new microchip manufacturing process that inherently limits how many players the market can support. And if one company bets on the wrong technology or gets the timing wrong that can leave them too financially weak to survive.

> when it costs >$10B to develop a new microchip manufacturing process that inherently limits how many players the market can support.

Does it though? TSMC's market cap is over a trillion dollars. Likewise Nvidia. What's $10B compared to these numbers? Less than 1%. Maybe we couldn't have a thousand of them, but why couldn't we have ten?

Not only that, this technology isn't a single invention, so why does it have to be a single company? Couldn't some companies make the fabs and other ones operate them, causing them each to require less capital and be easier to compete with on its own? Couldn't the various pieces of equipment in the fabs each be developed by a separate company?

"It costs >$10B to do this as a vertically integrated conglomerate" is bad, so maybe don't have that.

Mostly the reason that these things are so capital intensive is due to market consolidation. If you want to do something useful and stay small, you have 2 choices: get crushed by a bigco or get absorbed.

That's politics.

Economics (allocation of scarce resources) is mostly defined by politics. For instance how you said that companies have to shut down if they take one bad risk and they don't get another chance - there was an explicit political decision that companies should work that way.