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2 The Global Research Landscape A n assessment of the global landscape for outlined in Chapter 1: semiconductor devices and research and development (R&D) of advanced circuits, computer architecture, programming systems, computing--especially efforts to address the and applications. The pilot study included an analysis of computing performance challenges outlined in Chapter data from papers presented at 2011 conferences in these 1--must include an examination of research efforts four research areas and a similar analysis of conference related to the technologies described in Chapter 1, papers from 19962011 to show recent changes in including semiconductor devices and circuits, representation at these conferences. The complete results architecture, programming systems, and applications. of the pilot study, along with a methodological overview Further, assessing the global competitiveness in these and discussion of its limitations, are discussed in technologies requires examination of both advanced Appendixes F and G. research and development as well as how successful Section 2.1 provides a brief snapshot of some commercialization of these technologies has been and for preliminary observations and insights that can be gleaned whom. from the pilot study. Section 2.2 uses the conference Research capability is a leading indicator for a publication data to examine how the international nation's future technical competitiveness in science- collaborative nature of these conference papers has intensive technological fields. For the purposes of this changed over time. Section 2.3 provides a description of report, a nation's research capabilities include the the global landscape in commercialization of education provided by and output from universities as semiconductor, as well as computing hardware and well as the training by and output from industry and software, technologies. Section 2.4 presents an analysis government laboratories. This chapter examines two of bilateral (U.S.-China, -Korea, -Taiwan, and -Japan) broad indicators to assess national technological research trade data for U.S. exports and imports of electronics and capabilities and competitiveness: (1) commercialization products specifically relevant to the computing of semiconductors, as well as computing hardware and challenges outlined in Chapter 1. Lastly, Section 2.5 software, technologies; and (2) bilateral trade revenues examines China's growing role as a major consumer and from U.S. exports and imports of advanced electronics supplier of semiconductors, as well as its contribution to and technology products critical to the computing the global semiconductor value chain. performance challenges described in Chapter 1. The committee also conducted a pilot study of a 2.1 Preliminary Observations from Pilot Study of third indicator: national contributions of papers at top Papers at Top Technical Conferences technical conferences. In computer science, papers presented at conferences are an important (and often The committee encountered some methodological underused) measure of research quality, in addition to challenges in its analysis of publication data from journal articles. The committee analyzed authorship-- conference papers (for example, determining whether the specifically, authors' geographical locations--of papers location of a conference can introduce travel biases for at many of the top technical conferences in the four researchers), making it difficult to draw concrete research areas most closely related to the challenges conclusions about the technological research capabilities 17

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18 THE GLOBAL ECOSYSTEM IN ADVANCED COMPUTING of individual countries. There are some interesting 2.1.2 Time series assessment of national and regional observations about overall trends and emerging advanced computing research contributions at top strengths, however, which can be made from this technical conferences preliminary analysis. Longitudinal analysis of conference data from 1996 2.1.1. Current (2011) national and regional advanced 2011 also provides insight into trends in national (see computing research contributions at top technical Tables F-8 through F-11) and regional (see Figures F-7 conferences through F-11) contributions to advanced research. During this time, for the two conference series (IEDM The committee's preliminary assessment of and NANO) in the semiconductor devices area, the U.S. conference papers at selected technical conferences in lead has remained relatively stable with the largest gains 2011 indicates that the United States is strongly made by Taiwan and Belgium (IMEC). For the ISSCC represented in each of the four research areas identified conference series in semiconductor circuits research, the by the committee as critical for meeting the computing United States shows a moderate decline, in tandem with performance challenges outlined in Chapter 1 an overall broadening in international representation. In (semiconductor devices and circuits, architecture, this area, the largest leaps were made by Korea, Taiwan, programming systems, and applications), contributing and the Netherlands. For the four conference series more than half of all papers across each research area. Of (ASPLOS, HPCA, ISCA, and MICRO) in architecture these areas, the United States has the strongest research, the United States has maintained a significant representation in architecture research with no other lead, with no major advances by any other nation or individual nation contributing as significantly. These region. data are consistent with the historical U.S. strengths in For the five conference series (ECOOP, OOPSLA, commercial microprocessors, including Intel, AMD, and PLDP, POPL, and PPoPP) in programming systems IBM, as well as former commercial microprocessors research, the U.S. lead has been challenged somewhat by from DEC, HP, and others (see Table F-5). The increases in Europe by small but steady gains by Israel, committee notes, however, that the UK-based ARM Switzerland, and the UK (as well as by China, India, and processor ecosystem now dominates by processor Korea to a lesser degree). For the seven conference shipment volume, largely based on smartphones and series (Eurographics, OSDI, SC, SIGGRAPH, SOSP, embedded devices. VLDB, and WWW) in applications research, U.S. Limited or no representation at architecture research representation has retained a stable lead over the 15-year conferences may suggest that some nations' universities period with no significant representation by other and industry research institutions are not focused on nations. While only representing a small percentage of mainstream computer architecture. For example, while papers in the applications research areas, China moved Japan has activity and expertise in architecture research, from no representation in 1996 to ~4 percent of notably the custom processors from Fujitsu that are in conference papers in 2011. the K supercomputer, the data suggest its national Strong R&D investments by U.S. universities and research focus may lie in other areas such as advanced industry laboratories over the last 15 years have yielded semiconductor and nanoscale devices and circuits (see numerous innovations and have helped to sustain the Table F-4). As another example, Germany and the U.K., United State's position as a lead contributor of while poorly represented at architecture research conference papers across the four specific technology conferences, have notable representation in advanced areas identified by the committee. Despite this fact, the programming research (see Table F-6). U.S. position is now being challenged by increasing Several interesting observations can also be made technical and manufacturing capabilities in Europe and, about regional representation at these conferences. For in particular, Asia. For example, while showing example, while the United States maintains a significant relatively few contributions to conference papers, China lead over Europe and Asia in paper contributions at continues to make significant contributions to U.S. semiconductor and nanoscale devices conferences, its China trade revenues (discussed in Section 2.4) and contributions in semiconductor circuits research are demonstrates increasing competitiveness in the global comparable to Europe and Asia. In programming semiconductor value chain (discussed in Section 2.5). systems and applications, the United States maintains a The committee expects that these trends will likely lead followed by Europe and distantly by Asia. See continue as nations make greater investments in Figures F-2 through F-6. domestic university and industry research, as well as through multinational, and increasingly global,

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THE GLOBAL RESEARCH LANDSCAPE 19 commercial partnerships and international research 2.3 Commercialization of Technologies collaborations. This section provides a snapshot of the global 2.2 Increased International Collaboration landscape in the commercialization of semiconductor and computing hardware and software technologies Data on coauthored papers presented at several of using data from iSuppli, Gartner, the Hardware Top 100, the sampled conferences1 discussed above and in and the Software Top 100.3 Appendix F were used to examine how international collaborations have changed over time. In the network 2.3.1 Semiconductor Commercialization connectivity graphs2 of Figure 2-1, the nodes (circles) represent individual countries, and the size of each node The committee began by analyzing revenues from represents the number of papers produced by that the largest semiconductor, as well as computing country. The edges (lines connecting two circles) hardware and software, companies. Table 2-1 shows the represent collaborations on coauthored papers, and the top 20 semiconductor companies, ranked by 2010 weight of each edge indicates the number of papers that revenues4 and includes companies that sell share coauthorship between nations. semiconductor components.5 The chart shows the nation In each area except architecture, the network graphs where the company is headquartered, its primary show an increasing geographical diversity in research technology area, whether it has its own in-house and a tremendous increase in international fabrication capability, 2010 revenues in U.S. dollars, and collaborations. The network graphs show that between the fraction of the global semiconductor market. 1996 and 2011, international participation and These top 20 companies account for a total of $197 collaboration between the United States and other billion, which is about two-thirds of the global nations has dramatically increased. In the devices and semiconductor market. Of these top 20 companies, the circuits areas, many of the international collaborations United States accounts for 47 percent of revenue. Japan come from work that spans multiple international sites and Korea account for about 20 percent each, while within the same company. This trend toward greater Europe accounts for 10 percent. Historically, being a collaboration across national boundaries will likely major semiconductor company required owning and continue due to the increasing global investments in operating significant semiconductor fabrication factories. research by both nations and global industries. However, the rising cost of deploying such facilities, International research collaborations in computer both in R&D and capital investments, combined with the architecture have not increased dramatically, although availability of "fab-for-hire" foundry services from more papers are being published as collaborations companies such as Taiwan Semiconductor between U.S. and foreign researchers. The emergence of Manufacturing Corporation (TSMC), have given rise to the ARM architecture in the mobile computing space an increasing number of fabless6 semiconductor provides impetus for foreign investment in architecture companies. Foundries such as TSMC have grown to be research, particularly in Europe, as European funding about 10 percent of the overall semiconductor agencies prefer to invest in activities that are synergistic component market (Gartner7 estimate is U.S. $28.3 with European-based technologies. Today, leading U.S. universities are linking to 3 See www.isuppli.com; www.gartner.com; www.hardwaretop remote campuses in Asia and Europe and are describing 100.org; and www.softwaretop100.org. 4 themselves as "global universities." This trend, as well See http://www.isuppli.com/Semiconductor-Value-Chain/ as the growing number of global companies, may have News/Pages/Intel-Reasserts-Semiconductor-Market-Leadership-in an impact on future U.S. competitiveness. -2011.aspx. Last accessed on August 16, 2012. 5 Companies that supply only fabrication services (such as TSMC with 2010 revenues of over $13 billion) are not included. Systems companies that design their own chips (such as Apple) are included in Table 2-1 below. 6 Fabless semiconductor companies specialize in the design and sale of hardware devices and semiconductor chips, as opposed to 1 Conferences included in each of the four technology areas are device fabrication. 7 as follows: (1) Architecture: ASPLOS, HPCA, ISCA, and "Semiconductor foundry revenue increased 40.5%, reaching MICRO; (2) Programming: ECOOP, OOPSLA, PLDI, POPL, and $28.3 billion in 2010. Foundry fab utilization reached its peak in PPoPP; (3) Applications: SIGGRAPH, SC, VLDB, and WWW; 3Q10 after several quarters of good growth. Leading-edge tech- and (4) Semiconductor Devices and Circuits: IEDM and ISSCC. nologies (65 nm to 45 nm) have been in high demand from found- 2 Coauthor networks were generated with the Science of Science ries, increasing in revenue contribution." Available at (Sci2) Tool: Sci2 Team (2009). Science of Science (Sci2) Tool. http://www.gartner.com/id=1634315. Last accessed on February Indiana University and SciTech Strategies, http://sci2.cns.iu.edu. 7, 2012.

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20 THE GLOBAL ECOSYSTEM IN ADVANCED COMPUTING FIGURE 2-1 International conference collaboration networks. Data compiled from the following conferences: ASPLOS, HPCA, ISCA and MICRO (architecture); ECOOP, OOPSLA, PLDI, POPL, and PPoPP (programming systems); SC, SIGGRAPH, VLDB, and WWW (applications); and IEDM and ISSCC (semiconductor devices and circuits). Collaboration maps were generated using the Science of Science (Sci2) Tool available at http://sci2.cns.iu.edu.

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THE GLOBAL RESEARCH LANDSCAPE 21 TABLE 2-1 Top 20 Largest Semiconductor Companies (by revenue) in 2010 $ Sales % Market Rank Company Country of Origin Primary Market Fab (U.S. millions) Share 1 Intel* USA microprocessors yes 40,394 13.2 2 Samsung* South Korea memory, mobile SoCs yes 28,380 9.3 3 Toshiba Japan memory yes 13,010 4.3 4 Texas Instruments* USA DSP, mobile SOC yes 12,944 4.3 5 Renesas Japan microcontrollers yes 11,893 3.9 6 Hynix South Korea memory yes 10,380 3.5 7 ST Microeletronics France, Italy memory, microcontrollers yes 10,346 3.4 8 Micron USA memory yes 8,876 2.9 9 Qualcomm* USA mobile SOC no 7,204 2.4 10 Broadcom USA communication no 6,682 2.3 11 Elpida Japan memory yes 6,446 2.1 12 AMD* USA microprocessors, GPUs no 6,345 2.1 13 Infineon Germany microcontrollers yes 6,319 2.0 14 Sony Japan LCD, microprocessors yes 5,224 1.8 15 Panasonic Japan microcontrollers yes 4,946 1.7 16 Freescale USA microcontrollers no 4,357 1.4 microcontrollers, mixed 17 NXP Netherlands yes 4,028 1.3 signal 18 Marvell* USA mobile SOCs no 3,606 1.2 19 MediaTek Taiwan communication no 3,553 1.2 20 NVIDIA* USA GPUs, mobile SOCs no 3,196 1.0 Data compiled from isuppli's Preliminary Worldwide Ranking of the Top 20 Suppliers of Semiconductors in 2010 (www.isuppli.com). billion foundry revenue out of roughly U.S. $300 billion for mobile devices such as cell phones and tablets overall semiconductor revenue). This trend has enabled include Samsung, Texas Instruments, Qualcomm, startup companies to grow into large semiconductor Marvell, and NVIDIA. As noted in Chapter 1, while the companies, focused on design. While 13 of the top 20 on dominant instruction set in the PC and server space is the 2010 list have their own semiconductor fabrication x86 (Intel and AMD), the ARM instruction set capability, 6 fabless semiconductor companies make the dominates the mobile computing space. In addition to the list, all of which are from the United States. The mobile processor companies listed above, Apple designs companies in the table that are marked by an asterisk its own multicore ARM-based processors for its mobile design and sell multicore processors. Companies that sell and tablet computers. The openness of the ARM multicore processors for PCs and servers (including architecture and ecosystem, along with ARM's focus on graphics and high-performance accelerators) are Intel, power efficiency, has led it to dominate in this fast- AMD, and NVIDIA. Companies such as IBM and growing space. Oracle also design and sell multicore server processors, It is equally important to assess how but have semiconductor revenues that place them outside commercialization of these semiconductor technologies the top 20. Companies that produce multicore processors

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22 THE GLOBAL ECOSYSTEM IN ADVANCED COMPUTING has changed over time. Table 2-28 ranks the largest in revenue. The top U.S. companies, including semiconductor companies in 5-year intervals between Microsoft, IBM, Oracle, and HP, all have significant 1995 and 2010. While mergers and acquisitions have R&D investments in software and tools for parallel and changed the names of some of the companies, the multicore systems. The companies that produce game country of origin still reflects the relative competitive software all have core competence in parallel and stature of different nations and regions. In general, the multicore systems. United States has become more competitive in the Information technology (IT) companies such as semiconductor sectors. In 1995, 6 U.S. companies were Google and Amazon do not appear in this list because in the top 20, representing 34 percent of the revenue of their business models do not rely on selling software. the top 20 companies. By 2010, 9 U.S. companies were However, they depend on a distributed parallel in the top 20, representing 47 percent of revenue of the infrastructure that is now based on multicore systems. top 20 companies. While South Korea saw a drop in the They are thus both producers and consumers of number of companies in the top 20 from 3 to 2, the multicore hardware and software technology. combined revenue share of Samsung and SK Hynix accounted for 19 percent of revenue of the top 20. 2.3.3 Summary of Commercialization Landscape Japan's representation in the top 20 also dropped, from 7 to 5, with its revenue share dropping even more The degree to which indicators of national research precipitously, from 44 percent to 21 percent of the top capability and productivity, such as those discussed in 20. Appendix F, are correlated with a nation's current commercial competitiveness, is a complex question, 2.3.2 Computing Hardware and Software especially when the lag between research discovery and Commercialization commercialization can be substantial and global information flow makes research results widely In addition to assessing nations' competitive posture available. Similarly, the interplay between a country's in the commercialization of semiconductor technologies, research prowess and its educational systems affect insight can also be gained from monitoring the world's global talent flow and retention in subtle and complex largest computing hardware (including semiconductors, ways. These complexities underlie the longstanding devices, and systems) and software companies. questions about the interplay between basic research and According to the Top 100 Research Foundation,9 in 2010 technology commercialization, with broad implications the world's 20 largest hardware companies accounted for for national, regional, and global economic policies. nearly U.S. $650 billion in annual revenue. Of just these Conversely, a nations' economic competitiveness top 20 companies, alone, the United States accounts for may influence both its research capabilities and the about 35 percent of total revenue, followed by Japan, ability of its companies to capitalize effectively on new South Korea, and Taiwan, each with about 19 percent. research ideas. For example, if an industry can no longer Europe's only entry is Nokia in Finland. China's Lenovo translate the combination of government-funded basic is a relatively recent entry to the global market, research ideas and its own R&D investments into following their acquisition of IBM's laptop business in commercial successes with wide-enough profit margins, 2005. next-generation product development investments can A similar analysis finds that the world's 20 largest become cost-prohibitive. This is akin to an economics software companies account for more than U.S. $160 argument that underlies Moore's Law--that the scaling billion in revenue and nearly half of the overall U.S. rate parameter is significantly driven by the economics $300 billion plus worldwide software market10 in 2010 of internal investment and risk. For industries that can no (see Appendix H). U.S.-based companies account for longer make these investments or take the risks, residing nearly 80 percent of revenues, with European companies at the leading edge of technology is no longer a viable accounting for about 15 percent. The only Asian country business model and new strategies are required to remain represented is Japan, with about 6 percent of the top 20 competitive. In considering a nation's ability to commercialize technological investments, it is important to recognize 8 Reported revenues for each company may not be independent; that most of the world's largest semiconductor, for example, due to the outsourcing of manufacturing across com- hardware, and software companies are global in nature, panies, as well as cross-licensing and use of intellectual property. with R&D and manufacturing facilities worldwide, along 9 See http://www.hardwaretop100.org/. Last accessed on June 16, 2012. with a complex set of technology cross-licensing 10 See http://www.softwaretop100.org/. Last accessed on June agreements and supply chain interdependencies. Very 16, 2012.

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THE GLOBAL RESEARCH LANDSCAPE 23 TABLE 2-2 Largest Semiconductor Companies by Revenue (1995-2010) Company Country of Origin 1995 Rank 2000 Rank 2005 Rank 2010 Rank Intel USA 1 1 1 1 Samsung South Korea 6 4 2 2 Toshiba Japan 3 2 4 3 Texas Instruments USA 7 3 3 4 Renesas Japan N/A N/A 7 5 SK Hynix South Korea N/A 14 11 6 STMicroeletronics France, Italy N/A 6 5 7 Micron USA 18 10 12 8 Qualcomm USA N/A N/A 16 9 Broadcom USA N/A N/A 20 10 Elpida Japan N/A N/A N/A 11 AMD USA N/A 16 15 12 Infineon Germany N/A 8 6 13 Sony Japan N/A 20 13 14 Panasonic Japan N/A N/A N/A 15 Freescale USA N/A N/A 10 16 NXP Netherlands 11 9 9 17 Marvell USA N/A N/A N/A 18 MediaTek Taiwan N/A N/A N/A 19 NVIDIA USA N/A N/A N/A 20 NEC Japan 2 5 8 N/A Matsushita Japan 13 17 14 N/A Sharp Japan 19 19 17 N/A Rohm Japan N/A N/A 18 N/A IBM Microelectronics USA 12 18 19 N/A Motorola USA 5 7 N/A N/A Mitsubishi Japan 9 11 N/A N/A Hitachi Japan 4 12 N/A N/A Agere USA N/A 13 N/A N/A Fujitsu Japan 8 15 N/A N/A Hyundai South Korea 10 N/A N/A N/A SGS Thompson France, Italy 14 N/A N/A N/A Siemens Germany 15 N/A N/A N/A LG South Korea 16 N/A N/A N/A Sanyo Japan 17 N/A N/A N/A National Semiconductor USA 20 N/A N/A N/A Data compiled from www.isuppli.com (2000, 2005, 2010) and www.gartner.com (1995).

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24 THE GLOBAL ECOSYSTEM IN ADVANCED COMPUTING few, if any products are designed, manufactured, and Japan, and Korea. In addition, the ATP trade data may sold entirely within the borders of a single country. also provide useful proxy indicators on the development For example, nearly all Taiwanese companies of technological capabilities in those four countries. maintain manufacturing facilities in China, as does Intel While U.S. ATP exports fared better than other U.S. and other U.S.-based companies. Many of these exports during 2009,12 the recession induced a great deal companies also operate assembly and test factories in of volatility for information technology and electronics lower-cost countries such as Vietnam, Malaysia, Costa ATP exports. For example, U.S. electronics (including Rica, and others. Furthermore, many companies on the integrated circuits) exports fell by 27 percent in 2009 and list outsource manufacturing to other companies on the then increased by 23 percent in 2010. The same volatility list. In particular, Foxconn, Quanta Computer, and can be seen for U.S. ATP exports to Asia. After Compal Electronics each manufacture systems on behalf declining by 15 percent in 2009, U.S. ATP exports to of companies such as Toshiba, Dell, HP, and Apple. This Asia grew by a record 23 percent in 2010, driven by the interconnectedness of international economies rapid growth in both electronics and ICT exports. Here, underscores the need for researchers, as well as policy China emerges as the most important growth determinant makers, to maintain a global awareness of not only of U.S. ATP exports, electronics in particular. In fact, in emerging research capabilities, but also of successes in 2009, electronics accounted for roughly half of U.S. ATP the commercialization of semiconductor, hardware, and exports to China. It is important to emphasize that the software technologies. focus increasingly is on semiconductors (~90 percent of In the last decade, Asia has gained an increasing role U.S. electronics exports to China) intended for use in in the commercialization of technologies, particularly in China's manufacturing plants.13 manufacturing. In the areas centered on design (as exemplified by the U.S. fabless semiconductor industry), 2.4.2 Trade analysis of `Advanced Computing' (AC) ATP the United States still leads in both hardware and exports/imports software. However, other nations seek to climb the value chain from manufacturing to integrated system design. As an additional metric for assessing international Samsung's investment in its own system-on-a-chip competitiveness, U.S. Census Bureau ATP trade data at designs are but one example of that type of activity. the 10-digit level was examined to quantify changes in In the following section, U.S. Census Bureau trade ICT and electronics exports to (and imports from) China, data on advanced technology products are examined to Korea, Taiwan, and Japan between 2006 and 2010.14 In provide a view of how different nations transform innovation from advanced research investments into commercially successful products. are able to process increased volumes of information in shorter periods of time. This includes central processing units, all comput- ers, and some peripheral units such as disk drive units and control 2.4 Growing Complexity in IT Trade Tracing units, along with modems, facsimile machines, and telephonic Shifts in International Competitiveness switching apparatus. Examples of other products included are radar apparatus and communication satellites. Code 5 (electronics) Trade data provide additional information on the concentrates on recent design advances in electronic components global R&D landscape in advanced computing (with the exception of optoelectronic components) that result in improved performance and capacity and, in many cases, reduced technologies and products, and on potential future shifts size. Products included are integrated circuits, multilayer printed in competitive advantages. circuit boards and surface-mounted components such as capacitors and resistors. 2.4.1 U.S. Census ATP Trade Data at the 10-digit Level 12 D. Hill, September 2011, U.S. Exports of Advanced Technol- for Information and Communications (Code 4) and ogy Products Declined Less than Other U.S. Exports in 2009, Electronics (Code 5) InfoBrief, National Center for Science and Engineering Statistics, National Science Foundation. The U.S. Census Bureau defines ATP trade to consist of advanced materials, aerospace, biotech- Analysis of U.S. Census Bureau Advanced nology, electronics, flexible manufacturing, information and Technology Product (ATP) trade data allows a closer communication technology (ICT), life science, optoelectronics, look at changing patterns of trade in Code 4 information nuclear technology, and weapons. Four of these 10 categories (i.e., and communications technology (ICT) products and aerospace, electronics, ICT, and life science) together accounted Code 5 electronics, including integrated circuits (ICs), for 85 percent of U.S. ATP exports in 2010. 13 A. Hammer, R. Koopman, A. Martinez, 2009, U.S. Exports of products11 between the United States and China, Taiwan, Advanced Technology Products to China, U.S. International Trade Commission, October, No. RN-2009-10E. 11 14 The US Census Bureau defines "information and com- This time period allows for a consideration of the effects of munications" (Code 4 of its ATP trade database) as products that the 2008-2009 global recession.

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THE GLOBAL RESEARCH LANDSCAPE 25 particular, the committee selected from the Code 4 and 5 largest share (nearly half) of all U.S. Code 4 AC exports export-import data a narrower set of product groups to Asia in 2010, with Japan in second place (~34 directly relevant to the computer and semiconductor percent). However, Japan's relatively stagnant export R&D and commercial ecosystem.15 These focused market is unlikely to be a challenger (at least in the near product groups are referred to as Code 4 AC (advanced term) as China emerges as a leading market for more computing) and Code 5 AC. These AC products are sophisticated U.S. ICT exports. technologically more complex than the rest of the Code 4 Figure 2-5 shows that China has also become an and Code 5 product groups, and hence may pose higher important market for U.S. Code 5 AC exports, well entry barriers for latecomers like China (discussed in ahead of Taiwan, Korea, and Japan. Even during the Chapter 3). global recession, China's market for U.S. electronics Figure 2-2 compares the growth of U.S. Code 4 AC exports, including semiconductors, continued to and 5 AC exports with that of all U.S. Code 4 and 5 increase, while each of the other Asian markets exports. Between 2006 and 2010, U.S. Code 4 AC (blue experienced significant declines, in particular Korea and triangles) exports grew four times faster than all Code 4 Japan with more than 40 percent reductions. By 2010, (blue circles) exports. In contrast, all U.S. electronics China held the largest share (nearly half) of all U.S. exports were negatively affected by the global recession, electronics exports (both Code 5 and 5 AC) to Asia, with Code 5 AC (red triangles) and Code 5 (red circles) followed by Taiwan (~25 percent) and Korea (~20 exports falling ~11 percent and ~14 percent, percent). As such, China has established itself as a respectively. leading market for sophisticated U.S. electronics exports, For U.S. imports, Figure 2-3 shows that U.S. Code 4 and especially for semiconductors. AC imports (blue triangles) grew more than twice as fast Figure 2-6 shows that China clearly dominates as a as all Code 4 imports (~68 percent compared to ~28 major source of Code 4 AC products, well ahead of percent) between 2006 and 2010. In contrast, both U.S. Korea (which overtook Japan in 2008), Japan, and Code 5 and 5 AC imports show relatively flat growth ( Taiwan (by more than an order of magnitude). Between ~1 percent). During this time, the shares of both U.S. 2006 and 2010, U.S. Code 4 AC imports from China Code 4 AC and 5 AC exports in all Code 4 and 5 exports grew by almost 130 percent. More importantly, by 2010 showed a slight increase of ~34 percent. The same is China held a ~95 percent share of all Code 4 AC exports true for U.S. Code 4 AC and 5 AC imports, with the from Asia to the United States, establishing its role as a share of Code 4 AC imports in all Code 4 imports major source of U.S. imports of sophisticated ICT showing a larger increase of ~7 percent. products. While they do not pose any perceivable threat to China's lead, it is worth noting that an increasing 2.4.3 Changing Patterns of Trade share of U.S. Code 4 imports from Korea and Taiwan,16--but not Japan, which has experienced Figure 2-4 shows changes in total values of U.S. negative growth--now constitute more sophisticated Code 4 and 4 AC exports to four leading Asian Code 4 AC products. countries--China, Japan, Korea, and Taiwan--between Figure 2-7 shows that, despite the trade disruption 2006 and 2010. In 2007, China became the largest resulting from the global recession, Taiwan remains the overseas market for U.S. Code 4 and 4 AC exports, leading source of Code 5 AC imports to the United followed by Japan, Korea, and Taiwan. Since then, the States, ahead of Korea, Japan, and China. Historically, export markets of Korea, Taiwan, and Japan, in China has lagged behind the rest of Asia as a source of particular, have all declined (the most dramatic being a U.S. Code 5 and 5 AC imports. However, it is worth ~39 percent decline by Japan). In contrast, China has emphasizing that, since 2009, Code 5 AC imports to the experienced remarkable growth as a market for U.S. United States from China have grown much faster (~72 exports of Code 4 and, especially, 4 AC products (~86 percent growth over 4 years). As a result, China held the 15 From the Code 4 and Code 5 data, the committee analyzed import and export products associated with advanced computing. 16 In particular, the committee focused on categories that included In 2010, U.S. imports of Code 4 AC products from Korea and Taiwan (1) products associated with the implementation of integrated cir- grew by ~1,328 percent and ~98 percent, respectfully. However, high cuits and (2) memory and logic-integrated circuits themselves. The growth rates should not necessarily be associated with high export-import committee did not include discrete electronic components (e.g., values. For example, while Korea exhibits a high growth rate of Code 4 AC diodes and amplifiers), display technologies, low-frequency inte- products to the United States between 2006 and 2010, the total value of grated circuits, printer technologies, magnetic storage, and radio these exports remains very low (increasing from U.S. $30 million to $470 and telecommunication technologies. million), compared with China (U.S. $16.9 billion to $38.8 billion).

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26 THE GLOBAL ECOSYSTEM IN ADVANCED COMPUTING FIGURE 2-2 Total value of U.S. Code 4, 4 AC, 5, and 5 AC FIGURE 2-3 Total value of U.S. Code 4, 4 AC, 5, and 5 AC exports. Data compiled from U.S. Census Bureau Advanced imports. Data compiled from U.S. Census Bureau Advanced Technology Product trade data. Technology Product trade data FIGURE 2-4 Total value of U.S. Code 4 and 4 AC exports to Asia. Data compiled from U.S. Census Bureau Advanced FIGURE 2-5 Total value of U.S. Code 5 and 5 AC exports to Technology Product trade data. Asia. Data compiled from U.S. Census Bureau Advanced Technology Product trade data.

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THE GLOBAL RESEARCH LANDSCAPE 27 FIGURE 2-7 Total value of U.S. Code 5 and 5 AC imports from Asia. Data compiled from U.S. Census Bureau Advanced Technology Product trade data. FIGURE 2-6 Total value of U.S. Code 4 and 4 AC imports from Asia. Data compiled from U.S. Census Bureau Advanced Technology Product trade data. percent) than any of the other three Asian countries. As a Another important finding is that shifts in result, China now has a 20 percent share of all U.S. Code competitiveness are very pronounced among the four 5 AC imports from Asia, suggesting that China is leading Asian countries. While these shifts differ across making continuous progress as an exporter despite its product markets, China consistently leads the group, persistent weakness as a semiconductor producer. except in being a supplier of Code 5 and 5 AC products (though it is growing in that market, as well). 2.4.4 Summary of Trade Data Analysis Finally, with regard to China's position in the global semiconductor value chain, the trade data analysis The overall picture that emerges from the analysis of suggests that while the China market increases in trade data is that the United States has kept its leading importance, its domestic semiconductor industry position as a supplier of leading-edge semiconductors, as continues to play a secondary role. Although China has reflected by Code 5 and 5 AC export data. China is also growing strengths in the O-S-D (optoelectronics-sensor- increasingly becoming a major market for both Code 5 discrete) industry and in the SPA&T (semiconductor and 5 AC products. Most U.S. exports of semiconductors packaging, assembly, and test) industry, these are to China end up in Chinese ICT products. The trade data somewhat secondary markets that do not define future also suggest that China is exhibiting increased technology trajectories. competitiveness as both a consumer and supplier of In summary, the United States cannot afford to be Code 4 and 4 AC products. complacent. There is no doubt that over time China's

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28 THE GLOBAL ECOSYSTEM IN ADVANCED COMPUTING position in the global semiconductor value chain will the worldwide semiconductor market (3.9 percent keep improving. The United States needs to be prepared CAGR). In 2010 alone, China's semiconductor market for a long-term shift in competitiveness. grew by ~30 percent to U.S. $132 billion, accounting for more than 40 percent of the worldwide market. Much of 2.5 China's Position in the Global Semiconductor this growth is driven by two factors: (1) a significant Value Chain portion of consumed semiconductors are incorporated into final products that are assembled in China and then So far, three broad metrics have been discussed-- exported for sale elsewhere (such as in the United States, preliminary pilot study data on national representation at the European Union, Japan, and India) and (2) electronic technical conferences (i.e., authorship of conference products produced in China have higher semiconductor papers); revenues generated by leading semiconductor, content (~27 percent) than the worldwide average (~19 hardware, and software companies; and analyses of percent). advanced electronics and ICT imports from and exports To fairly assess the implications of China's large to Asia--to assess national technological leadership and share of the worldwide semiconductor market, it is competitiveness--each of which has indicated that the important to recognize that, unlike in the United States, United States continues to maintain a leadership China's semiconductor market is dominated by position. multinational and global semiconductor companies. For However, these metrics also shed insight into the example, the 10 largest suppliers of semiconductors to potential for competitor nations, such as China, to now China are not Chinese-owned companies and account for meet or surpass U.S. technological capabilities. For a combined 47 percent share of China's semiconductor example, while Table F-4 suggests that China's research market. However, although no Chinese-owned contributions (via conference papers) are low relative to semiconductor companies are among the top 10 suppliers the United States and other leaders like Japan, Section to either the worldwide or Chinese market, China's 2.4 shows that China is exhibiting increased domestic semiconductor market has experienced competitiveness as a strong consumer and supplier of significant growth, increasing from U.S. $10 billion in advanced electronics and ICT products. China's rapidly 2003 to U.S. $46 billion in 2010, representing more than growing semiconductor market continues to transform 27 percent of worldwide semiconductor market growth. the semiconductor industry worldwide (both Today, China's domestic consumption of geographically and economically). Accordingly, many semiconductors accounts for more than 15 percent of the questions arise as to whether and how these emerging worldwide market. This suggests that Chinese original changes may affect the global semiconductor value equipment manufacturers (OEMs) may play a more chain. prominent role in the future in shaping the parameters of The following sections examine China's growing semiconductor designs. role as a major consumer and supplier of semiconductors, as well as its contribution to the global 2.5.2 China's Semiconductor Manufacturing Industry semiconductor value chain. The following description relies heavily on the PricewaterhouseCoopers (PwC) In 2010, China's semiconductor industry19 report, Continued growth China's impact on the experienced record growth (~30 percent) with revenues semiconductor industry 2011 update.17 that account for ~811 percent of the worldwide semiconductor industry (compared with ~2 percent in 2.5.1 China has become a Major Consumer of 2000). Similar to its largest semiconductor suppliers, Semiconductors China's largest semiconductor manufacturing enterprises are multinational integrated device manufacturers Over the last decade, China's semiconductor (IDMs). Various aspects of the industry have been market18 has grown at an incredible 24.8 percent demonstrating significant growth.20 compounded annual growth rate (CAGR), far outpacing China's IC design industry has become one of the fastest growing sectors in China's semiconductor 17 PwC, 2011, Continued growth: China's impact on the semi- conductor industry 2011 update. Available at http://www.pwc. 19 com/gx/en/technology/assets/china-semiconductor-report-2011.pdf. China's semiconductor industry refers to the sum of all re- Last accessed January 27, 2012. ported revenues of all semiconductor manufacturers in China, 18 China's semiconductor market refers to the value of all semi- including IC design, IC manufacturing and wafer foundries, IC conductor devices consumed in China by EMSs (electronics man- packaging and test, and O-S-D companies. 20 ufacturing service providers), OEMs (original equipment manu- See China Semiconductor Industry Association facturers), and ODMs (original design manufacturers). ( 2010). Last accessed on February 23, 2012.

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THE GLOBAL RESEARCH LANDSCAPE 29 industry, generating revenues of U.S. $5.4 billion (46 Table 2-3 China's 2010 Contribution to Worldwide percent CAGR) in 2010, up from U.S. $178 million in Semiconductor Value Chain Revenue (in Billions of U.S. 2001.21 Dollars) In 2010, China's semiconductor packaging, Worldwide China assembly, and test (SPA&T) sector also experienced positive growth (~27 percent) with revenues of U.S. $9.3 Revenue Sales Consumption billion, representing 20 percent of worldwide SPA&T Electronic Design facilities.22 China's O-S-D sector, in particular its light- Automation 4.2 N/A 0.31 emitting diode industries, experienced similar growth with revenues more than twice that of its SPA&T sector Semiconductor (U.S. $23.4 billion). In addition, revenues generated in Intellectual 1.5 N/A 0.12 2010 by China's wafer foundries grew by more than 45 Property percent, accounting for ~11 percent of worldwide foundry revenues. Equipment 39.5 0.10 3.63 Materials 43.6 0.43 4.15 2.5.3 Contribution to the Global Semiconductor Value Chain IDMs 224.7 18.9 99.6 To assess China's position in the global Fabless 73.6 5.4 32.4 semiconductor value chain, it is important to assess China's strengths and weaknesses along each step of the Foundries 30.2 3.2 13.4 value chain. Table 2-3 reports disaggregated semiconductor value chain revenue generated both by SATS 23.6 9.1 10.4 China and worldwide. The data illustrates that China Total 440.9 36.6 164.01 currently acts primarily as a semiconductor consumer, accounting for ~37 percent of the worldwide Adapted from the PwC report: Continued growth: China's semiconductor value chain. While the majority of these impact on the semiconductor industry 2011 update, including semiconductors consumed in China were ultimately source material from CSIA, EDAC, Gartner Dataquest, GSA, exported for sale outside of China, more than one-third and SEMI (available at www.pwc.com). were used in electronic products consumed within China. In contrast, China's contribution as a semiconductor producer, that is, sales, only accounts for ~8 percent the potential to reduce China's overall position in the (total sales in China divided by total worldwide revenue) value chain, as well as to alleviate concerns that the of the worldwide value chain. Although its aggregated semiconductor value chain is threatened in the near term. contributions as a semiconductor provider remains low, While China has certainly emerged as what might be China is also a strong contributor to worldwide discrete termed the dominant global factory for IT equipment, all device revenues and continues to develop its IC design products manufactured in China could also be capabilities. manufactured elsewhere if there was an interruption in trade with China. In addition, the overwhelming majority 2.5.4: Summary of China's Position in the Global of suppliers to China's semiconductor market are foreign Semiconductor Value Chain companies. While China's IC design industry continues to In the last several years, China has steadily increased experience strong growth, it lags behind the United its position in the global semiconductor value chain-- States, Japan, Taiwan, and Korea in terms of process particularly as a consumer of semiconductor devices. technology and design line width. This is partly a result China's IC design industry has also made significant of (1) lacking or technologically inferior Chinese gains. However, numerous challenges remain that have suppliers of electronic design automation tools and software and domestic licensors of IC design-related intellectual property and (2) significant supply-side constraints (e.g., intense competition and price wars) that 21 See China High-Tech Industry Development Almanac have bankrupted many of China's domestic IC houses. In ( 2010). Last accessed on February 23, addition, a narrow focus on low- and middle-end 2012 consumer products threatens to constrain the growth of 22 See semi.org.cn (). Last accessed on February 23, 2012. China's IC design industry. By fueling its dependence on

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30 THE GLOBAL ECOSYSTEM IN ADVANCED COMPUTING mature and relatively standardized products, China limits and regional participation in specific technology areas. its R&D and semiconductor capability developments. While these early data suggest a strong U.S. position, a Similarly, it is questionable whether China can sustain its more thorough investigation is necessary.23 increasing share of total worldwide wafer production as The advanced technology product trade data its leading foundries (e.g., SMIC, Shougang NEC analyses indicate that China is increasingly becoming a Electronics, and HeJian Technology) have experienced major market for advanced electronics products. China dramatic revenue declines in 2010. While it continues to also is exhibiting increased competitiveness as both a lead in the number of new wafer fabrications, these user and supplier of ICT products; its domestic plants use older technology. semiconductor industry also continues to grow. In addition, Taiwanese manufacturing and assembly are 2.6 Concluding Remarks increasingly being transferred to China. While the United States has maintained--and is likely to continue This chapter provides two measures for assessing in the near term--its leading position as a supplier of advanced research efforts related to the key advanced leading-edge semiconductor designs, it has a more minor computing technologies described in Chapter 1, as well position in semiconductor manufacturing. as for assessing global competitiveness in these Though conference data from the pilot study suggest technologies. These two measures include (1) that China currently lags behind the United States in descriptions of the global landscape of the leading research capabilities (though it is growing, commercialization of semiconductor, computing especially in the applications research areas), it is hardware, and software technologies; and (2) bilateral important to consider other indicators of China's trade data analysis of electronics and ICT ATP products research capabilities--for example, the technology with a focus on technologies specifically relevant to the transfer through U.S. education of Chinese foreign computing challenges outlined in Chapter 1. nationals. By sending its best students to top U.S. Preliminary observations from a pilot study of a research universities, China can capitalize on the "value third possible measure, conference publication data, added" by American education and bootstrap its indicate that the United States has maintained its position manufacturing and design prowess without these as a strong contributor of research papers at the technical capabilities showing up in publication data. conferences sampled by the committee over the last 15 China is already a major consumer of ICT products, years, with particular strengths in the area of architecture which is increasingly shaping product expectations and research. Early results from the pilot study also standards; over time, China's position in the global demonstrate the value of a more focused examination of semiconductor value chain will continue to improve. a nation's technology-specific paper contributions (say, Thus, the United States cannot be complacent and needs compared to a bulk analysis across all advanced to be prepared for this long-term shift in computing sectors). The longitudinal data analyses also competitiveness. provide a starting point for identifying trends in national 23 For example, as discussed in Appendix F, future iterations of this analysis would ideally take into consideration all papers rele- vant to the computing performance challenges outlined in Chapter 1, whether published at conferences or in traditional journals, weighted by citations and impact factors, as well as expert judg- ment.