The Tunnel at the End of the Light: The Future of the U.S. Semiconductor Industry

By Atta, Richard Van | Issues in Science and Technology, Spring 2012 | Go to article overview

The Tunnel at the End of the Light: The Future of the U.S. Semiconductor Industry


Atta, Richard Van, Issues in Science and Technology


Federal intervention rescued the US. industry in the 1980s. In some ways, the situation is worse now, but so far there has been little talk, never mind action, about it.

Today, as it was 25 years ago, U.S. leadership in the semiconductor industry appears to be in peril, with increasingly robust competition from companies in Europe and Asia that are often subsidized by national governments. Twenty-five years ago, the United States responded vigorously to a Japanese challenge to its leadership. U.S. industry convinced the government, largely for national security reasons, to make investments that helped preserve and sustain U.S. leadership. The main mechanism for this turnaround was an unprecedented industry/government consortium called SEM ATECH, which today has attained a near-mythical status.

The world has changed in the past 25 years, however. Today, industry is not clamoring for government help. In a more globalized economy, companies appear to be more concerned with their overall international position, rather than the relative strength of the U.S.-based segment. More-over, the United States continues to lead the world in semiconductor R&D. Companies can use breakthroughs derived from that research to develop and manufacture new products anywhere in the world.

Indeed, it appears increasingly likely that most semiconductor manufacturing will no longer be done in the United States. But if this is the case, what are the implications for the U.S. economy? Are the national security concerns that fueled SEMATECH's creation no longer relevant? Unfortunately, today's policymakers are not even focusing on these questions. They should be.

We believe that there could be significant ramifications to the end of cutting-edge semiconductor manufacturing in the United States and that government involvement that goes beyond R&D funding may be necessary. But the U.S. government has traditionally been averse to policies supporting commercialization, and the current ideological makeup of Congress dictates against anything smacking of industrial policy.

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But assuming that more government help is needed, and that Congress is even willing to provide it, what form should it take? In considering this question, we decided to reexamine the SEMATECH experience. We concluded that SE-MATECH met the objectives of the U.S. semiconductor companies that established it but was only a partial answer to sustaining U.S. leadership in this critical technology. Moreover, as a consortium that received half of its funds over a decade from the U.S. Department of Defense (DOD) under the rationale of supporting national security, the SEMATECH experience raises some unaddressed policy questions as well as questions about how government should approach vexing issues about future technology leadership.

The origins of SEMATECH

In the late 1970s, U.S. semiconductor firms concluded that collectively they had a competitiveness problem. Japanese companies were aggressively targeting the dynamic random access memory (DRAM) business. U.S. companies believed that the Japanese firms were competing unfairly, aided by various government programs and subsidies. They contended that these arrangements allowed Japanese firms to develop and manufacture DRAMs and then dump them on the market at prices below cost. Initially, U.S. industry responded by forming the Semiconductor Industry Association as a forum for addressing key competitive issues.

In 1987, a Detense.Science Board (DSB) Task Force issued a report articulating growing concerns about the competitiveness of the U.S. integrated circuit (IC) industry. The DSB study depicted semiconductor manufacturing as a national security problem and argued that the government should address it. A key recommendation was the creation of the entity that became SEMATECH.

The Reagan administration initially opposed an industry/government consortium, considering it inappropriate industrial policy. …

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