displays with comprehensive strategies and generous subsidies, the U.S. has struggled to compete. The financial crisis of 2008 has made it even more difficult for U.S. technology companies to raise the capital needed to turn designs into prototypes and prototypes into products made in large volumes.

In recent years, the Science, Technology, and Economic Policy Board of the National Academies has extensively studied the competitive challenges facing a number of important high-tech industries. The STEP board also has studied the policies adopted other nations and compared them to those of the United States.

This chapter explores the major policy issues in four of these industries—semiconductors, photovoltaic products, advanced batteries, and pharmaceuticals. Each of these industries can be regarded as strategic to the United States. Integrated circuits are the building blocks of all electronics products and have enabled the breathtaking advances in information technology that drive productivity gains across all industries. American leadership in semiconductors also is vital to the technological superiority of the U.S. military. Photovoltaic cells are the enabling technology of solar power, a key source of renewable energy that can serve America’s national interests in reducing dependence on petroleum and cutting greenhouse gas emissions. Advanced batteries and their electrical management systems are the core components of hybrid and electric vehicles, much as internal combustion engines have been to conventional gasoline-powered cars and trucks. A strong domestic battery industry, therefore, is regarded as crucial to the future competitiveness of the U.S. auto industry. Lightweight, long-lasting, rechargeable energy-storage systems also are required for advanced weapons systems being developed by the U.S. military and for storing renewable energy for utility power grids. The pharmaceuticals industry is likewise strategic, producing medicines and vaccines that are essential to the well-being of Americans and indeed the world’s people. U.S. leadership in this sector has been secured through enormous federal investments, though the industry faces numerous challenges in terms of litigation, regulatory pressure, and counterfeit drugs.

Each of these three industries shares another characteristic. The core technologies are the fruits of decades of research at U.S. universities and national laboratories at considerable American taxpayer expense. Many of the early U.S. companies that pioneered these industries, moreover, were supported over the years through federal research grants, small-business loans, and government and military procurement.

As they reached the point of large-scale commercial production, each of these U.S. industries encountered severe global competitive challenges2. Concerted Japanese government policies to facilitate joint R&D, transfer


2 See Glenn Fong, “Breaking New Ground, Breaking the Rules—Strategic Reorientation in U.S. Industrial Policy,” International Security 25:2 pp 152ff.

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