SECURING THE FUTURE

Regional and National Programs to Support the Semiconductor Industry

CHARLES W. WESSNER, EDITOR

Board on Science, Technology, and Economic Policy

Policy and Global Affairs

NATIONAL RESEARCH COUNCIL
OF THE NATIONAL ACADEMIES

THE NATIONAL ACADEMIES PRESS
Washington, D.C.
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SECURING THE FUTURE Regional and National Programs to Support the Semiconductor Industry CHARLES W. WESSNER, EDITOR Board on Science, Technology, and Economic Policy Policy and Global Affairs NATIONAL RESEARCH COUNCIL OF THE NATIONAL ACADEMIES THE NATIONAL ACADEMIES PRESS Washington, D.C. www.nap.edu

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THE NATIONAL ACADEMIES PRESS 500 Fifth Street, N.W.Washington, DC 20001 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project. International Standard Book Number 0-309-08501-2 Limited copies are available from Board on Science, Technology, and Economic Policy, National Research Council, 500 Fifth Street, NW, W547, Washington, DC 20001; 202-334-2200. Additional copies of this report are available from the National Academies Press, 500 Fifth Street, N.W., Lockbox 285, Washington, DC 20055; (800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); Internet, http://www.nap.edu Copyright 2003 by the National Academy of Sciences. All rights reserved. Printed in the United States of America

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THE NATIONAL ACADEMIES Advisers to the Nation on Science, Engineering, and Medicine The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce M. Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Wm. A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. Wm. A. Wulf are chair and vice chair, respectively, of the National Research Council. www.national-academies.org

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Steering Committee for Government-Industry Partnerships for the Development of New Technologies* Gordon Moore, Chair Chairman Emeritus, retired Intel Corporation M. Kathy Behrens Managing Director of Medical Technology Robertson Stephens Investment Management and STEP Board Michael Borrus Managing Director The Petkevich Group, LLC Iain M. Cockburn Professor of Finance and Economics Boston University Kenneth Flamm Dean Rusk Chair in International Affairs LBJ School of Public Affairs University of Texas at Austin James F. Gibbons Professor of Engineering Stanford University W. Clark McFadden Partner Dewey Ballantine Burton J. McMurtry General Partner Technology Venture Investors William J. Spencer, Vice-Chair Chairman Emeritus International SEMATECH, retired and STEP Board Mark B. Myers Visiting Executive Professor of Management The Wharton School University of Pennsylvania and STEP Board Richard Nelson George Blumenthal Professor of International and Public Affairs Columbia University Edward E. Penhoet Chief Program Officer, Science and Higher Education Gordon and Betty Moore Foundation and STEP Board Charles Trimble Chairman U.S. GPS Industry Council John P. Walker Chairman and Chief Executive Officer Axys Pharmaceuticals, Inc. Patrick Windham President, Windham Consulting and Lecturer, Stanford University *   As of October 2002.

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Project Staff* Charles W. Wessner Study Director Sujai J. Shivakumar Program Officer Adam Korobow Program Officer Alan Anderson Consultant David E. Dierksheide Program Associate Christopher S. Hayter Program Associate Tabitha M. Benney Program Associate McAlister T. Clabaugh Program Associate *   As of October 2002.

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For the National Research Council (NRC), this project was overseen by the Board on Science, Technology and Economic Policy (STEP), a standing board of the NRC established by the National Academies of Sciences and Engineering and the Institute of Medicine in 1991. The mandate of the STEP Board is to integrate understanding of scientific, technological, and economic elements in the formulation of national policies to promote the economic well-being of the United States. A distinctive characteristic of STEP’s approach is its frequent interactions with public and private-sector decision makers. STEP bridges the disciplines of business management, engineering, economics, and the social sciences to bring diverse expertise to bear on pressing public policy questions. The members of the STEP Board* and the NRC staff are listed below. Dale Jorgenson, Chair Frederic Eaton Abbe Professor of Economics Harvard University M. Kathy Behrens Managing Director of Medical Technology Robertson Stephens Investment Management Bronwyn Hall Professor of Economics University of California at Berkeley James Heckman Henry Schultz Distinguished Service Professor of Economics University of Chicago Ralph Landau Consulting Professor of Economics Stanford University Richard Levin President Yale University William J. Spencer, Vice-Chair Chairman Emeritus International SEMATECH, retired David T. Morgenthaler Founding Partner Morgenthaler Mark B. Myers Visiting Executive Professor of Management The Wharton School University of Pennsylvania Roger Noll Morris M. Doyle Centennial Professor of Economics Stanford University Edward E. Penhoet Chief Program Officer, Science and Higher Education Gordon and Betty Moore Foundation William Raduchel Chief Technology Officer AOL Time Warner Alan Wm. Wolff Managing Partner Dewey Ballantine *   As of October 2002.

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STEP Staff* Stephen A. Merrill Executive Director Russell Moy Senior Program Officer Craig M. Schultz Research Associate Camille M. Collett Program Associate Christopher S. Hayter Program Associate David E. Dierksheide Program Associate Charles W. Wessner Program Director Sujai J. Shivakumar Program Officer Adam Korobow Program Officer McAlister T. Clabaugh Program Associate Tabitha M. Benney Program Associate *   As of October 2002.

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National Research Council Board on Science, Technology, and Economic Policy Sponsors The National Research Council gratefully acknowledges the support of the following sponsors: National Aeronautics and Space Administration Office of the Director, Defense Research & Engineering National Science Foundation U.S. Department of Energy Optoelectronics Industry Development Association Office of Naval Research National Institutes of Health National Institute of Standards and Technology Sandia National Laboratories Electric Power Research Institute International Business Machines Kulicke and Soffa Industries Merck and Company Milliken Industries Motorola Nortel Procter and Gamble Silicon Valley Group, Incorporated Advanced Micro Devices Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the authors and do not necessarily reflect the views of the project sponsors.

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Contents PREFACE   xv EXECUTIVE SUMMARY   1 I.INTRODUCTION   9 II.FINDINGS AND RECOMMENDATIONS   65 III.PROCEEDINGS     Opening Remarks Bill Spencer, SEMATECH   93 Panel I:   The U.S. Experience: SEMATECH Moderator: Clark McFadden, Dewey Ballantine   95     The SEMATECH Contribution Gordon Moore, Intel Corporation   96     The Impact of SEMATECH on Semiconductor R&D Kenneth Flamm, University of Texas at Austin   104     Current Challenges: A U.S. and Global Perspective Michael Polcari, IBM   111     Discussant: David Mowery, University of California at Berkeley   117

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programs.2 These same leading figures also discuss the research challenges facing the semiconductor industry. Also included are the Committee’s specific recommendations concerning public support needed for research in the disciplines that underpin this enabling industry. Semiconductors are pervasive and an importance source of productivity in the modern economy. Their rapid technological evolution—characterized by continuously increasing productivity and contemporaneously decreasing cost—has been a source of growth in emerging industries, while concurrently revitalizing more traditional industrial sectors.3 The strong performance and development of the U.S. economy in recent years is rooted in the investment in and subsequent application of information technologies ultimately driven by modern semiconductor technology.4 Semiconductors also play a crucial role in ensuring our national security by allowing advances in the capabilities of new devices, new technologies, and new applications for national defense. The pervasive impact of the microelectronics sector on economic growth—through improved communications, advances in health care, and better national security technologies—underscores the importance of the United States’ position in semiconductor production and development. The discussion and research in this report clarify the extent to which the SEMATECH model, developed in the United States in response to needs of the industry in the 1980s, has been emulated abroad.5 Correspondingly, it notes the degree to which the principle of cooperative government-industry research activ 2   This report focuses on programs in Europe, Japan, Taiwan, and the United States. The scope of the analysis was expanded, through the analysis in the Introduction and the paper by Thomas Howell in this volume, to cover Korea and Singapore. Nonetheless, the Committee does not intend the report to be interpreted as a full account of all programs; the report is an overview of the some of the major programs in some of the main semiconductor-producing nations. 3   The U.S. electronics industry, which includes semiconductors, is larger than the U.S. steel, automobile, and aerospace industries combined. As of August 2001, the semiconductor industry employed some 284,000 people in the United States alone. The industry, in turn, provides the enabling technologies for the $425 billion U.S. electronics industry. For an analysis of the role of new information technologies in the recent trends in high productivity growth, often described as the “New Economy,” see Council of Economic Advisers, Economic Report of the President, H.Doc.107-2, Washington, D.C.: USGPO, January 2001. Also see National Research Council, Measuring and Sustaining the New Economy, Report of a Workshop, D. Jorgenson and C. Wessner, eds.,Washington, D.C.: National Academy Press, 2002. 4   See National Research Council, U.S. Industry in 2000: Studies in Competitive Performance, Washington, D.C.: National Academy Press, 2000. 5   As noted by Macher, Mowery, and Hodges, “The SEmiconductor MAnufacturing TECHnology (SEMATECH) consortium was created in 1987 to develop semiconductor manufacturing technology, using a combination of industry and federal government funding.” See Jeffrey T. Macher, David C. Mowery, and David A. Hodges, “Semiconductors,” U.S. Industry in 2000: Studies in Competitive Performance, David C. Mowery, ed., Washington, D.C.: National Academy Press, 1999, p. 247. Its initial membership included 14 firms constituting 80 percent of the U.S. semiconductor manufacturing industry. In their comprehensive review of the consortium, Browning and Shetler write that “at least three goals emerged in the early days of SEMATECH: (1) to improve manufacturing processes;

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ity has been adopted and accelerated—often with success—in other semiconductor-producing countries and regions. The considerable technical challenges that must be addressed by the industry, and the ambitious foreign programs designed to do this, are reminders that continued U.S. leadership cannot be taken for granted. In fact, the development of new production models, such as the foundry system, as well as increases in national support for domestic production facilities, present serious competitive challenges to the U.S. industry. Overcoming these and other challenges will require continued policy engagement and public investment through renewed attention to basic research and cooperative mechanisms such as public-private partnerships. This type of cooperative activity to develop promising technologies is not new.6 Indeed, beginning with the mid-1980s, the United States has undertaken a remarkably wide range of public-private partnerships in high-technology sectors.7 There are public-private consortia of many types and multiple aims; some leverage the social benefits associated with federal R&D activity, while others seek to enhance the position of a national industry. Still other public-private consortia address the need to deploy R&D to meet other government missions.8 The U.S. economy continues to be distinguished by the extent to which individual entrepreneurs and researchers take the lead in developing innovations and starting new businesses, yet, in doing so, they often harvest crops sown on fields made fertile by the government’s long-term research investments.9 Americans have long held the conviction that new technologies offer the best means of meeting societal challenges, whether in the realms of defense, energy, or the environment.10 The substantial federal investment in research and devel     (2) to improve factory management; and (3) to improve the industry infrastructure, especially thesupply base of equipment and materials.” See Larry D. Browning and Judy C. Shetler, SEMATECH:Saving the U.S. Semiconductor Industry, College Station: Texas A&M University Press, 2000, p. 205. 6   For a brief summary of this tradition of partnerships, see National Research Council, The Advanced Technology Program: Assessing Outcomes, Charles W. Wessner, editor, Washington, D.C.: National Academy Press, 2001. 7   See Chris Coburn and Dan Berglund, Partnerships: A Compendium of State and Federal Cooperative Technology Programs, Columbus, OH: Battele Press, 1995. 8   See Albert Link, “Public/Private Partnerships as a Tool to Support Industrial R&D: Experiences in the United States.” Paper prepared for the working group on Innovation Policy, Paris, 1998, p. 20. Partnerships can also be differentiated by the nature of public support. Some partnerships involve a direct transfer of funds to an industry consortium. Others focus on shared use of infrastructure, such as laboratory facilities. 9   David B. Audretsch and Roy Thurik, Innovation, Industry, Evolution, and Employment, Cambridge, UK: Cambridge University Press, 1999. 10   See Linda R. Cohen and Roger G. Noll, The Technology Pork Barrel, Washington, D.C.: The Brookings Institution, 1991. The authors observe that “the government’s optimism about technology knows neither programmatic, partisan, nor ideological bounds” (p.1). They cite William Ophuls’ observation that American public policy has a long history of technological optimism. See William Ophuls, Ecology and the Politics of Scarcity: Prologue to a Political Theory of the Steady State, San Francisco: Freeman, 1977.

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opment reflects this conviction. Around the globe, policy makers now recognize that the breadth of potential applications of new technologies, their greater complexity, and the rising costs and technical risks of developing these new technologies require a supportive policy framework.11 Against this background, various forms of public-private cooperation are increasingly seen as effective means to bring new, welfare-enhancing and wealth-generating technologies to the market.12 THE ROLE OF THE BOARD ON SCIENCE, TECHNOLOGY, AND ECONOMIC POLICY Since 1991 the National Research Council’s Board on Science, Technology, and Economic Policy (STEP) has undertaken a program of activities to improve policy makers’ understanding of the interconnections of science, technology, and economic policy and their importance for the American economy and its international competitive position. The Board’s activities have corresponded with increased recognition by policy makers of the importance of technology to economic growth. The new economic growth theory emphasizes the role of technology creation, which is believed to be characterized by significant growth externalities.13 A consequence of the renewed appreciation of growth externalities is recognition of the economic geography of economic development. With growth externalities coming about in part from the exchanges of knowledge among innovators, certain regions become centers for particular types of high-growth activities.14 Some economic analysis suggests that high technology is often characterized 11   For a review of the policies and programs to support the development of national industries, see the paper by Thomas Howell, “Competing Programs: Government Support for Microelectronics,” in this volume. 12   See David Vogel, Kindred Strangers: The Uneasy Relationship Between Politics and Business in America, Princeton: Princeton University Press, pp. 113-137, 1996. Vogel notes that arguments, both for and against government participation in the development of new technologies, largely overlook the prevailing tradition in U.S. industrial policy. He points out that, given the constraints of the American federal system and the strength of private capital markets, U.S. industrial policy focuses more on government-industry partnerships, in contrast to the direct subsidies or government ownership found in other countries. 13   Paul Romer, “Endogenous Technological Change,” Journal of Political Economy, 98(5):71-102, 1990. See also Gene Grossman and Elhanan Helpman, Innovation and Growth in the Global Economy, Cambridge, MA: MIT Press, 1993. 14   Paul Krugman, Geography and Trade, Cambridge, MA: MIT Press, 1991, p. 23, points out that the British economist Alfred Marshall initially observed in his classic, Principles of Economics, how geographic clusters of specific economic activities arose from the exchange of “tacit” knowledge among businesses.

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by increasing rather than decreasing returns, justifying to some the proposition that governments can capture permanent advantage in key industries by providing relatively small but potentially decisive support to bring national industries up the learning curve and down the cost curve.15 In part, this is why the economic literature now recognizes the relationship between technology policy and trade policy.16 Recognition of these linkages and the corresponding ability of governments to shift comparative advantage in favor of the national economy provide intellectual underpinning for government support for high-technology industry.17 Another widely recognized rationale for government support for high technology exists in cases in which a technology generates benefits which cannot be fully captured by the innovating firms. These benefits to other firms in the economy are often referred to as spillovers.18 There are also cases in which the cost of a given technology may be prohibitive for individual companies, even though potential benefits to society are substantial and widespread.19 EARLY PARTNERSHIPS Recognition of the benefits of new technologies and the need to provide incentives to the private sector to develop them dates back to the origins of the Republic.20 Driven by the exigencies of national defense and the requirements of 15   Paul Krugman, Rethinking International Trade, Cambridge, MA: MIT Press, 1990. 16   In addition to Krugman, Ibid, see J. A. Brander and B. J. Spencer, “International R&D Rivalry and Industrial Strategy,” Review of Economic Studies, 50(4):707-722, 1983, and “Export Subsidies and International Market Share Rivalry,” Journal of International Economics, 18(1-2):83-100, 1985. See also A. K. Dixit and A. S. Kyle, “The Use of Protection and Subsidies for Entry Promotion and Deterrence,” American Economic Review, 75(1):139-152, 1985, and P. Krugman and M. Obstfeldt, International Economics: Theory and Policy, 3rd ed., New York: Addison-Wesley Publishing Company, 1994. 17   For a review of governments’ efforts to capture new technologies and the industries they spawn for their national economies, see National Research Council, Conflict and Cooperation in National Competition for High-Technology Industry, Washington, D.C.: National Academy Press, 1996, p. 28–40. For a critique of these efforts see Paul Krugman, Peddling Prosperity, New York: W. W. Norton Press, 1994. 18   See, for example, Martin N. Baily and A. Chakrabarti, Innovation and the Productivity Crisis, Washington, D.C.: The Brookings Institution, 1998; and Zvi Griliches, The Search for R&D Spillovers, Cambridge, MA: Harvard University Press, 1990. 19   See Ishaq Nadiri, Innovations and Technological Spillovers, NBER Working Paper No. 4423, 1993; and Edwin Mansfield, “Academic Research and Industrial Innovation,” Research Policy, 20(1):1-12, 1991. See also, Council of Economic Advisers, Supporting Research and Development to Promote Economic Growth: The Federal Government’s Role, Washington, D.C.: Executive Office of the President, 1995. 20   The earliest articulation of the government’s role with regard to the composition of the economy was Alexander Hamilton’s 1791 Report on Manufactures, in which he urged that the federal government provide incentives to industry. Although controversial at the time and still a subject of debate today, U.S. policy has largely reflected Hamilton’s belief in the benefits of an active federal role in the development of the American economy.

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transportation and communication across the American continent, the federal government has played an instrumental role in developing new production techniques and technologies. To do so, government has often turned to individual entrepreneurs with innovative ideas. For example, in 1798 the federal government laid the foundation for the first machine tool industry with a contract to the inventor, Eli Whitney, for interchangeable musket parts.21 A few decades later, in 1842, a hesitant Congress appropriated funds to demonstrate the feasibility of Samuel Morse’s telegraph.22 Both Whitney and Morse fostered significant innovations that led to whole new industries. Indeed, Morse’s innovation was the first step on the road toward today’s networked planet. The support for Morse’s new invention was not an isolated case. The federal government increasingly saw economic development as central to its responsibilities. Examples of federal contributions to U.S. economic development abound. The government played a key role in the development of the U.S. railway network, the growth of agriculture through the Morrill Act (1862) and the creation of the agricultural extension service, and support of industry through the creation of the National Bureau of Standards in 1901.23 Throughout the 20th century, the federal government had an enormous impact on the structure and composition of the economy through regulation, procurement, and a vast array of policies to support industrial and agricultural development. Between World War I and World War II, these policies included support for the development of key industries with commercial and military applications, such as radios and aircraft frames and engines. The requirements of World War 21   Whitney missed his first delivery date for the arms and encountered substantial cost overruns, a set of events that is still familiar. However, his focus on the concept of interchangeable parts, and the machine tools to make them, was prescient. In David A. Hounshell’s excellent analysis of the development of manufacturing technology in the United States, he suggests that Simeon North was ultimately the most successful in achieving interchangeability and the production of components by special-purpose machinery. See David A. Hounshell, From the American System to Mass Production, 1800-1932, Baltimore: Johns Hopkins University Press, 1985, p. 25-32. By the 1850s, the United States had begun to export specialized machine tools to the Enfield Arsenal in Great Britain. The British described the large-scale production of firearms, made with interchangeable parts, as “the American system of manufactures.” See David C. Mowery and Nathan Rosenberg, Paths of Innovation: Technological Change in 20th Century America, New York: Cambridge University Press, 1998, p. 6. 22   For a discussion of Samuel Morse’s 1837 application for a grant and the congressional debate, see Irwin Lebow, Information Highways and Byways, New York: IEEE, 1995, pp. 9-12. For a more detailed account see Robert Luther Thompson, Wiring a Continent: The History of the Telegraph Industry in the United States 1823-1836, Princeton, NJ: Princeton University Press, 1947. 23   See Richard Bingham, Industrial Policy American Style: From Hamilton to HDTV, New York: M.E. Sharpe, 1998, for a comprehensive review. In the case of the transcontinental railroad, Stephen Ambrose describes Abraham Lincoln as the “driving force” behind its development. Lincoln was intimately involved, helping to decide the project’s route, financing, and even the gauge of the tracks: Nothing Like It in the World: The Men Who Built the Transcontinental Railroad, 1863-1869. New York: Simon and Schuster, 2000.

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II generated a huge increase in government procurement and support for high-technology industries. At the industrial level, there were “major collaborative initiatives in pharmaceutical manufacturing, petrochemicals, synthetic rubber, and atomic weapons.”24 An impressive array of weapons based on new technologies was developed during the war, ranging from radar and improved aircraft to missiles and, not least, the atomic bomb. Many of these military technologies found civilian applications after the war. Both during and after the war, the government made unprecedented investments in computer technology.25 During the war it played a central role in creating the first electronic digital computers, the ENIAC and the Colossus.26 Following the war, the federal government began to fund basic research at universities on a significant scale, first through the Office of Naval Research and later through the National Science Foundation (NSF) and the Public Health Service.27 At the same time, the continued reluctance of commercial firms, such as IBM and NCR, to invest large sums in what they considered to be risky research and development projects with uncertain markets forced the government to continue sponsoring the development of the new technology now referred to as computers.28 In this early phase, the National Bureau of Standards [the precursor of the National Institute of Standards and Technology (NIST)] made a significant contribution, through its SEAC machine, to the development of the modern computer.29 Throughout the Cold War, the United States continued to emphasize 24   David Mowery, “Collaborative R&D: How Effective Is It?,” Issues in Science and Technology, Fall 1998, p. 37. 25   Kenneth Flamm, Creating the Computer, Washington, D.C.: The Brookings Institution, 1988, Chapters 1-3. 26   For a detailed account of ENIAC’s creation, see Scott McCartney, ENIAC: The Triumphs and Tragedies of the World’s First Computer, New York: Walker and Company, 1999; and Flamm, op. cit., p. 39. 27   The National Science Foundation was initially seen as the agency that would fund basic scientific research at universities after World War II. However, disagreements over the degree of Executive Branch control over the NSF delayed passage of its authorizing legislation until 1950, even though the concept for the agency was first put forth in 1945 in Vannevar Bush’s report, Science: The Endless Frontier. The Office of Naval Research bridged the gap in basic research funding during these years. For an account of the politics of the NSF’s creation, see G. Paschal Zachary, Endless Frontier: Vannevar Bush, Engineer of the American Century, New York: The Free Press, 1997, p. 231. See also Daniel Lee Kleinman, Politics on the Endless Frontier: Postwar Research Policy in the United States, Durham, NC: Duke University Press, 1995. Computer science did not, however, mature as a separate academic discipline until the 1960s. In the interim, the military supported the fledgling computer industry on national security grounds. 28   See Flamm, op. cit. , p. 75. 29   As Kenneth Flamm observes, besides being the first operational von-Neumann-type stored-program computer in the United States, the Bureau of Standards’ SEAC, or Standards Eastern Automatic Computer, pioneered important technology concepts. All of the logic was implemented with newly

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technological superiority as a means of ensuring U.S. security. Government funds and cost-plus contracts helped to support systems and enabling technologies such as semiconductors and new materials, radar, jet engines, advanced computer hardware and software, and missiles. In the post-Cold War period, the evolution of the American economy continues to be profoundly marked by government-funded research in areas such as microelectronics, robotics, biotechnology, and the human genome, and through earlier investments in communications networks such as ARPANET—the fore-runner of today’s Internet. PROJECT PARAMETERS To advance our understanding of the operation and performance of partnerships, the STEP Board has undertaken a major study of programs relying on public-private collaboration for the development of new technologies. The project’s multidisciplinary Steering Committee30 includes members from academia, high-technology industries, venture capital firms, and the realm of public policy. The intent of the study is to focus on best practices rather than general questions of principle regarding the appropriateness of government involvement in partnerships. The Committee’s charge is to take a pragmatic approach to address such issues as the rationale and organizing principles of government-industry cooperation to develop new technologies, current practices, sectoral differences, means of evaluation, the experience of foreign-based partnerships, and the roles of government laboratories, universities, and other non-profit research organizations. As a program-based assessment of partnerships, the study has given particular attention to generic partnership programs such as the Small Business Innovation Research Program (SBIR) and Advanced Technology Program (ATP), and to the needs emerging from the growth in health-related funding and the relative decline in R&D support in areas such as information technologies. A series of 10 reports on these programs and topics contributes to the Committee’s Summary report. The Committee’s analysis has included a significant but necessarily limited portion of the wide variety of cooperative activity that takes place between the government and the private sector.31 The selection of specific programs to re     developed germanium diodes (10,000 were used); the vacuum tubes within (750) were only for pro-viding power and electrical pulse-shaping circuitry. The computer also used standardized, replace-able circuit modules, an innovation soon adopted throughout the industry. Thus the first computer to use solid-state logic was also the first modern computer to be completed in the United States. See Flamm, op. cit., p. 74. 30   For the Committee membership, see the front matter of this volume. 31   For example, DARPA’s programs and contributions have not been reviewed. For an indication of the scope of cooperative activity, see Coburn and Berglund, op. cit.; and the RaDiUS database, <HtmlResAnchor www.rand.org/services/radius/>.

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view has been conditioned by the Committee’s desire to carry out an analysis of current partnerships directly relevant to contemporary policy making. The Committee also recognizes the importance of placing each of the studies in the broader context of U.S. technology policy, which continues to employ a wide variety of ad hoc mechanisms developed through the government’s decentralized decision-making and management process. The Committee’s desire to ensure that its deliberations and analysis are directly relevant to current policy making has allowed it to be responsive to requests from both the Executive Branch and Congress for examinations of various policies and programs of current policy relevance. These would include a White House and State Department request for an evaluation of opportunities for greater transatlantic cooperation as a result of the signature of the U.S.-E.U. Agreement on Science and Technology Cooperation, a request by the Defense Department’s Under Secretary for Technology and Acquisitions to review the Fast Track initiative of the SBIR program at the Department of Defense, and a request by NIST for an assessment of the Advanced Technology Program, in compliance with Senate Report 105-235.32 The Committee has also focused its attention on the emerging needs, synergies, and opportunities between the fields of biotechnology and computing, with special attention directed to the differences and similarities in government support for technology development in biotechnology and computing, the different uses of intellectual property in these sectors, and the need for balanced investments across disciplines. To meet its proposed objectives, the study has focused on the assessment of current and proposed programs, drawing on the experience of previous U.S. initiatives, foreign practice, and emerging areas (e.g., bioinformatics) resulting from U.S. investments in advanced technologies. A summary of the partnerships taken up by the study is included in Box A. SUPPORT FOR ANALYSIS OF COOPERATIVE PROGRAMS There is broad support for this type of objective analysis among federal agencies and the private sector. Government agencies supporting this analysis include the Department of Defense, the Department of Energy, the National Science Foundation, the National Institutes of Health, especially the National Cancer Institute and the National Institute of General Medical Sciences, the National Aeronautics and Space Administration, the Office of Naval Research, and the National Institute of Standards and Technology. Sandia National Laboratories and the Electric 32   See Senate Report 105-235, Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriation Bill, 1999. Report from the Committee on Appropriations to accompany bill S. 2260, which included the Commerce Department FY1999 Appropriations Bill.

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Box A Partnerships Reviewed by theGovernment-Industry PartnershipsStudy The NRC study of Government-Industry Partnerships for the Development of New Technologies has reviewed a wide range of partnerships. The study can be divided into four primary areas: analysis of current U.S. partnership programs, potential partnerships, industry-national laboratory partnerships, and international collaboration and benchmarking. The analysis of current U.S. partnerships has focused on the Small Business Innovation Research Program, the Advanced Technology Program, and partnerships in biotechnology and computing. The review of potential partnerships for specific technologies, based on the project’s extensive generic partnerships analysis, has focused on needs in biotechnology and computing and on opportunities in solid-state lighting. The industry-laboratory analysis has reviewed the potential of science and technology parks at Sandia National Laboratories and NASA Ames Research Center. International collaboration and benchmarking studies have included outlining new opportunities resulting from the U.S.-E.U. Science and Technology Agreement and, in this volume, a review of regional and national programs to support the semiconductor industry, focusing on Japan, Europe, Taiwan, and the United States. Power Research Institute have also contributed. Private support is provided by a diverse group of private corporations. All sponsors are listed in the front matter. ACKNOWLEDGMENTS Highlights of the conference on Regional and National Programs to Support the Semiconductor Industry include presentations by leaders of semiconductor industry in Europe, Japan, Taiwan, and the United States. A complete list of participants is included in Annex B of this volume. The Proceedings section of this volume contains detailed summaries of their presentations and discussions. On behalf of the National Academies, we wish to express our appreciation and recognition for the insights, experiences, and perspectives made available by the participants. We are very much in debt to the senior executives, researchers, and Committee members who joined experts from the United States for this exceptional meeting. Recognition is also due to Thomas Howell of Dewey Ballantine LLP, and Kenneth Flamm of the University of Texas. Both authors have contributed significant original research to this report. Howell’s compendium of national and regional programs, which is largely based on in-country and language-of-origin

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research, is especially rich. No comparable review exists. Similarly, Flamm has prepared a careful analysis of SEMATECH’s contribution to the industry and a review of the existing literature of this exceptional consortium. His empirical analysis and greater rigor cast new light on the contributions of the SEMATECH consortium. Given the quality and the number of presentations, summarizing the papers and conference proceedings has been a challenge. We have made every effort to capture the main points made during the presentations and the ensuing discussions. We apologize for any inadvertent errors or omissions in our summary of the proceedings. A number of individuals with the National Academies deserve recognition for their contributions to the preparation of this report. Among the STEP staff, Adam Korobow contributed a great deal to the preparation of the report and quality and originality of its research. He is joined by Alan Anderson, who prepared the proceedings summary, and Sujai Shivakumar, who also assisted in the preparation of the report. Christopher Hayter and McAlister Clabaugh each contributed a great deal to the preparation and quality of the report. David Dierksheide deserves particular recognition for his skill, persistence, and dedication during the review and preparation of this report. He and Chris Hayter put in many long hours to ensure a quality product. Without their sustained efforts among many other competing priorities, this report would not have been possible. NRC REVIEW This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Academies’ Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. We wish to thank the following individuals for their review of this report: Avram Bar-Cohen, University of Maryland; John Chipman, University of Minnesota; David Hodges, University of California, Berkeley; Thomas Kalil, University of California, Berkeley; Martha Krebs, University of California, Los Angeles; Egbert Maynard, Microelectronics Advanced Research Corporation; Lawrence Thompson, Ultratech Stepper, Inc.; and Rosemarie Ham Ziedonis, University of Pennsylvania. Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations, nor did they see the final draft of the report before its release. The review of this report was overseen by Gerald Dinneen. Appointed by the National

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Academies, he was responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution. STRUCTURE Following the Executive Summary, Part I of this report presents an introduction of the current trends within industry and the policies to encourage its growth, followed by a summary of the conference presentations and the papers. Part II presents the Findings and Recommendations, which are the collective responsibility of the Steering Committee. Part III summarizes the Conference Proceedings. It is especially rich in that it sets out the views of the conference participants in some detail. Part IV presents two commissioned papers which, though subject to NRC editing, remain the responsibility of the authors. The report’s goal is to advance our understanding of the contributions of this unique industry, the exceptional technical challenges it faces, and the substantial programs that are under way around the world to address them. If the American economy is to continue to benefit from the leading position of this industry in the global marketplace, we must renew and strengthen our commitment to the institutions and scientific research that are essential to its continued progress. Gordon Moore William Spencer Charles Wessner