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Can U.S. chip industry keep its competitive edge?

Posted: 16 Mar 2009     Print Version  Bookmark and Share

Keywords:chip R&D  offshore R&D spending  U.S. semiconductor industry  U.S. technological leadership 

An industry study shows that "intensifying centrifugal forces" are eroding U.S. semiconductor industry competitiveness as a larger percentage of the industry's design, manufacturing and R&D facilities move offshore.

A recent study released by the Semiconductor Industry Association (SIA) said the exodus threatens U.S. technological leadership as China and other Asian rivals build indigineous chip industries.

For example, the study compiled for SIA by the law firm Dewey & LeBoeuf found that the U.S. percentage of global wafer fabrication capacity has plummeted 26 per cent since 1980 to 16 per cent in 2007.

"While some analysts believe that it makes no difference whether this industry (or any other industry) is located in the United States, that view is not shared abroad, where an intensive competition is being waged by national and regional governments to attract semiconductor manufacturing and [R&D] investment," the SIA report asserted.

Change in Share of Global Spending in the United States by U.S. Semiconductor Companies

SIA praised the Obama administration's economic stimulus package for supporting U.S. technology development, but noted that it is primarily geared towards direct job creation.

"While the short term [U.S.] stimulus is needed to create and sustain jobs and drive economic growth, the United States should consider ways to reinvigorate advanced research and manufacturing in this country to maintain its technology edge," the study concludes.

The study also found that:

- Three quarters of U.S. spending on chip R&D is still spent here, but the level declined by 8.4 between 1997 and 2007. The study also noted that U.S. R&D spending in China is "very small but growing."

- The shift in offshore R&D spending over the last decade has been to Europe, India, Israel and south Asia rather than South Korea, China or Taiwan.

"Most of their worldwide installed manufacturing and R&D capability is located in the United States," the survey found. "However, U.S. semiconductor industry investment in manufacturing and R&D inside vs. outside the United States has declined during the past decade."

SIA called for new U.S. tax and economic incentive policies to boost chip manufacturing and R&D. The industry group repeated calls for a permanent extension of the U.S. R&D tax credit and continued tax breaks on overseas income. "These policies are the cornerstone of a competitive U.S. tax policy," the study asserted.

SIA also called on Congress to fully fund provisions of the 2008 America Competes Act, which calls for boosting basic research funding for the National Science Foundation, the Commerce Department's National Institute for Standards and Technology and the Energy Department's Office of Science.

-George Leopold
EE Times

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