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.