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Executive Summary The substantial impact of information technologies on the growth and resilience of the U.S. economy represents a development now recognized at the highest level of U.S. policy making.1 Maintaining this positive linkage between improvements in information technology and better economic performance is an appropriate goal for public policy. Semiconductors are pervasive and an important source of productivity in the modern economy. Their rapid technological evolution—characterized by continuously increasing productivity and contemporaneously decreasing cost—is a source of growth throughout the economy, both in emerging industries and in more traditional industrial sectors.2 A significant element of the strong performance of the U.S. economy in the last decades is rooted in investment in and subsequent application of information technologies, which are ultimately driven by advances in semiconductor technology.3 Semiconductors also play a crucial role in ensuring our national security by allowing advances in the capabilities of 1 Alan Greenspan, Technological Innovation and the Economy, Remarks Before the White House Conference on the New Economy, Washington, D.C. April 5, 2000, Federal Reserve Board. 2 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. 3 See National Research Council, U.S. Industry in 2000: Studies in Competitive Performance, Washington, D.C.: National Academy Press, 2000.
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new devices and new applications for national defense. The pervasive impact of the microelectronics sector on the nation’s well-being—through improved communications, advances in health care, and better national security technologies— underscores the importance of the United States’ role as the world’s preeminent semiconductor producer. This report focuses attention on the regional and national programs that have emerged around the world both to nurture local semiconductor industries and to help maintain the industry’s exceptional growth rates. Specifically, the report highlights public-private partnerships in Europe, Japan, Taiwan, and the United States that seek to address the technical challenges faced by the global semiconductor industry. A unique feature of this report is that it provides the views of leaders in semiconductor research (from industry and academia) from Japan, Europe, Taiwan, and the United States. These experts came together to discuss common technical challenges facing the industry and the programs various nations and regions have undertaken to address them. In addition, the report contains original research, including an assessment of the major U.S. consortium, SEMATECH, and a summary of the programs of major producing countries and regions of the world. The diversity and scale of these programs underscore the sustained policy attention and support the industry receives in many parts of the world. Most policy makers understand and accept that U.S. industry competes in a global marketplace. It is less widely appreciated that while the competition may be global in scope, the outcomes of this competition have important local and, ultimately, national consequences. Globalization therefore implies the need to learn about the policies and programs of all participants in this industry. Learning the scope, structure, and focus of other nations’ programs is potentially valuable, both as a point of comparison and as a means of learning from the experiences of others in designing and managing cooperative programs. KEY ISSUES OF THE REPORT This report addresses three significant developments and the associated policy implications of these developments. Productivity Growth The first development, noted above, is the major contribution of the semiconductor industry to the productivity growth that has characterized the U.S. economy in the latter half of the 1990s as well as the early part of the new decade.4 Given the industry’s positive impact on economic growth, sustaining the 4 The contribution of semiconductors to the economy is not reviewed here. Recent analysis by the Board on Science, Technology, and Economy Policy does document this impact of information tech
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technical advance that has made increases in semiconductor power possible is of major policy interest. Growing Technical Challenges—Declines in Research Support The second development concerns the technical challenges faced by the industry as it strives to sustain the remarkable technological progress predicted by Moore’s Law.5 Leading figures in the industry and academic experts are concerned that the federal government is not allocating adequate resources to the basic research required to maintain technical advance in what is now the largest manufacturing industry in the United States. At the very least, the analysis suggests that measures should be taken to reverse the disturbing decline in U.S. public support for the basic research on which this industry ultimately depends. Significant Program Growth Abroad The third development involves the significant growth in programs abroad that support national and regional semiconductor industries, how this support is fueling the structural changes, and its consequences in the global industry. The emergence of specialized design firms (referred to as “fabless” semiconductor companies because they do not engage in the production of the actual memory chip but rather only design them) and the rise of specialized manufacturing firms (the dedicated foundries), especially in Taiwan and mainland China, represent a structural shift in the industry that may present a challenge to U.S. firms over time. These structural changes may be accelerating in part as a result of programs to support national industries. A further development involves the perception that SEMATECH contributed to the resurgence of the American industry. This perception has led to its emulation in many producing countries—often on a significantly larger scale and nologies on productivity. See National Research Council, Measuring and Sustaining the NewEconomy. See also Dale W. Jorgenson and Kevin J. Stiroh, “Raising the Speed Limit: U.S. Economic Growth in the Information Age.” Brookings Papers on Economic Activity. No 1:125-211, 2000. 5 In 1965, just seven years after the invention of the integrated circuit, Gordon Moore predicted that the number of transistors that would fit on an integrated circuit, or chip, would double every year. He tentatively extended this forecast for “at least 10 years.” Dr. Moore’s extrapolation proved to be highly accurate in describing the evolution of the transistor density of a chip. By 1975, some 65,000 transistors fit on a single chip. More remarkably, Moore’s general prediction has held true to the present day, when microcircuits hold hundreds of millions of transistors per chip, connected by astonishingly complex patterns. Beyond its technical accuracy, the implications of “Moore’s Law” have been far-reaching. Since the doubling in chip density was not accompanied by commensurate increases in cost, the expense of each transistor was halved with each doubling.
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with greater underlying political support.6 In light of the growing significance of R&D collaboration in both the equipment and device industries, providing policy and financial incentives to encourage such cooperation is increasingly important to support the transition to successive generations of new, enabling technologies. Given the recognition of the contribution of semiconductors to the U.S. economy and the fundamental technical and structural challenges facing the industry, this report identifies measures that can be undertaken involving the industry, universities, and public policy to ensure continued U.S. leadership in this enabling technology. COMMITTEE RECOMMENDATIONS The Committee’s recommendations outline a series of modest steps that nonetheless may prove important to the long-term welfare, economic growth, and security of the United States. Resources for University-based Semiconductor Research To better address the technical challenges faced by the semiconductor industry and to better ensure the foundation for continued progress, more resources for university-based research are required. The Committee believes that universities have an important role in maintaining a balance between applied science and fundamental research. This balance is key in generating ideas for future research. The Committee suggests consideration of the development of three-way partnerships among industry, academia, and government to catalyze progress in the high-cost area of future process and design. These partnerships would: Sponsor more initiatives that encourage collaboration between universities and industry, especially through student training programs, in order to generate research interest in solutions to impending and current industry problems. Increase funding for current programs.7 Research programs that are already operational, such as the Focus Center Research Program devel 6 See Part IV in the Recommendations and Findings. See also Thomas Howell’s discussion of foreign programs in “Competing Programs: Government Support for Microelectronics,” in this volume. See also Kenneth Flamm and Qifei Wang’s research in this volume, “Sematech Revisited: Assessing Consortium Impacts on Semiconductor Industry R&D.” 7 The president’s FY 2003 budget makes important steps in this direction. It calls for a 3 percent increase, to $1.9 billion, in the Networking and Information Technology Research and Development
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oped by the SRC, could usefully be augmented through substantially increased direct government funding. These centers also represent opportunities for collaborative research with other federal research programs, such as those supported by the National Science Foundation. Create Incentives for students. A key role for universities is to ensure the flow of technical innovation and skills that originate with students. In order to address the undersupply of talented workers and graduate students in the industry, more incentive programs should be established. Since professors typically respond to appropriate research incentives, augmented federal support for programs that encourage research in semiconductors would attract professors and graduate students.8 In addition, specific incentive programs could be established to attract and retain talented graduate students. Program (NITRD). This particular program could play a key role in funding the basic research that confronts the technical challenges in the semiconductor industry. The NITRD coordinates key ad-vanced information technology research across multiple agencies to make broad advances in comput-ing and networking. These advances manifest themselves in the development of new technologies such as computing platforms and software, which can support advances research in physics, materials science and engineering as well as biomedical and earth and space sciences. The 2003 budget envi-sions emphasizing critical areas of research such as networks security issues; high-assurance software and systems; micro- and embedded-sensor technologies; and revolutionary architectures to reduce cost, size, and power requirements of high-end computing. The budget emphasizes research on the social and economic impacts of developments in the fields of information technology. For the text of the president’s proposed initiatives, see Fiscal Year 2003, Analytical Perspectives, Budget of the United States Government, U.S. Government Printing Office, Washington, D.C., 2002, p. 164. 8 See Paula Stephan and Grant Black, “Bioinformatics: Emerging Opportunities and Emerging Gaps,” in National Research Council, Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies, Washington, D.C.: National Academy Press, p. 244.
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