The SIA supports public policies that spur free competition, and economic growth. SIA also promotes policies that recognize the importance of semiconductors and advanced technology in an increasingly broad array of product lines - from PCs, advanced communication networks and sophisticated automotive systems, to medical devices and state-of-the art weapons systems.
In its report, "Rising Above the Gathering Storm," the National Academies stated that "We fear the abruptness with which a lead in science and technology can be lost—and the difficulty of recovering a lead once lost, if indeed it can be regained at all." Maintaining U.S. leadership in semiconductors will take a concerted effort to fund basic research in our universities, build a workforce for the 21st century through a commitment to excellence in education and welcoming the world's brightest. In addition we must have a business climate that encourages investment and supports risk-taking.
U.S. Semiconductor Industry and Innovation Leadership
Basic research conducted at America's universities and the chip industry's significant investments in commercialization have made it possible for American semiconductor companies to maintain world leadership with a market share of nearly 50 percent. But other countries are seeking to replicate the U.S. economic model and attain our level of prosperity by investing heavily in basic research, training highly skilled scientists and engineers, and offering tax incentives and subsidies to attract investment.
Research is the foundation for innovation. For the past forty years the chip industry has been making faster, more powerful and ultimately less expensive semiconductors. U.S. chipmakers invest more than 15 percent of sales back into R&D, among the highest of any industry. The resulting growth in computing capacity has made the information revolution possible. But, to continue to deliver these technological advances, significant research hurdles must be overcome as the current 30-year old semiconductor process reaches its physical limits around 2020. Seminal research papers usually appear 12 to 15 years before commercialization, so breakthrough discoveries are needed within the next few years if a replacement technology is to be available by 2020.
While individual companies have and will continue to fund near term commercial research, a different approach is need for longer-term efforts. Basic scientific discovery is beyond the capacity of any single firm or even a united industry. Government investment in basic research funding is imperative for the continuation of America's innovation leadership, competitiveness and national security. In particular, basic research findings in physical sciences, engineering, and mathematics hold the potential to drive productivity gains and growth across all sectors of our economy. Yet, federal investment in these key areas has been relatively flat or declining over the past 30 years.
SIA supports the President's American Competitiveness Initiative proposal to double Federal basic research in the physical sciences and engineering at the National Science Foundation (NSF), National Institute of Standards and Technology (NIST), and Department of Energy's Office of Science. Nanotechnology research at these agencies, such as the Nanoelectronics Research Initiative (NRI) within the NSF and the Center for Nanoscale Science and Technology at NIST, will lead to discoveries that will allow industry to continue to shrink the size of electronic circuits. SIA also urges a Congressional appropriation of $20 million for the Defense Department to fund the Focus Center Research Program. Industry will provide a dollar for dollar match to allow the Focus Center Research Program to fund semiconductor research at 33 universities across the country.
Building a 21st Century Workforce
Ensuring that America remains competitive requires actions that will bear fruit in twenty years as well as tomorrow. The business community stands ready to do its part, and many SIA members work hard in their communities to strengthen math and science education for American students. However, too few American students are pursuing studies in science, technology, engineering and math fields. This waning interest needs to be addressed at all stages of the pipeline, from K-12 through university and graduate-level. Public policy leadership is required if the United States is to be successful.
The long term solution to the workforce challenge is for America to upgrade K-12 mathematics and science teaching and improve the proficiency of all students in math and science. The Administration's American Competitiveness Initiative proposals for MathNow programs for elementary and middle school and the AP/IB incentive programs for high school will be critical to ensuring students have the fundamental skills in these areas. Additional ways to accomplish this goal include enhancing loan forgiveness programs for professionals with science, technical, engineering and mathematics degrees (STEM) who pursue K-12 teaching careers. Other options would be creating differentiated pay scales for mathematics and science teachers and modifying teaching certification procedures to allow professionals in the STEM fields to easily transition to the K-12 teaching environment.
Actions that will have an impact over the mid-term focus attracting and retaining undergraduate and graduate students to study and pursue careers in science, technology, engineering, and mathematics (STEM) fields. As a first step, the U.S. should increase scholarship programs and provide other incentives for students in STEM disciplines. A rich university research environment drives student interest. As a result, boosting and sustaining government funding for basic research, especially in the physical sciences and engineering, will not only improve America's innovation base, but also increase student interest in these fields.
Improvements in U.S. education will have benefits over the mid- to long-term, but industry needs a competitive workforce now. The U.S. must pursue policies that welcome the world's brightest minds. Electrical engineers are the lifeblood of the semiconductor industry. Over half the masters degrees and two-thirds of the PhDs awarded by U.S. universities in electrical engineering are to foreign nationals. Chip companies must have access to this talent. These individuals have the potential to play key roles in creating opportunities for domestic employment. Semiconductor companies hire very few individuals under the H-1B program and almost all become permanent residents. Yet, they are critical to our competitiveness. U.S. government policies must be changed to enable the United States to attract and retain the most gifted science, STEM students from around the world to study for advanced degrees and stay to work in the United States. Students graduating from U.S. universities with STEM degrees should have streamlined access to green cards. In addition, we must embrace policies that recognize this nation's history as a magnet for innovators from around the globe. Talent is worldwide. We must never close our doors to it.
Welcoming Investment
America is the world's most dynamic and productive economy because innovation drives high productivity. Productivity, in turn, allows Americans to earn high wages and maintain a high standard of living. Investment in innovation spurs growth throughout the economy.
High technology research and manufacturing foster creativity and entrepreneurship in the universities, businesses and communities where these activities occur. The strategic application of many new technologies makes maintaining a critical mass of innovation research and manufacturing in the U.S. also an urgent national security concern.
Creating an environment that welcomes innovation investment is critical to America's competitiveness. Other nations have recognized the strategic importance of the high technology sector, and in particular, the semiconductor industry. Often, America's competitors offer rich incentive packages to attract innovation research and manufacturing to their shores. Tax holidays, subsidies, accelerated depreciation, low interest loans and training grants are among the many incentives nations ranging from Germany to China make available to chip makers. The U.S. must level the playing field.
At a minimum, predictability of the Federal R&D Tax Credit must be addressed. Created in 1981, this program has faced expiration and been extended 12 times. The Credit expired again at the end of 2007, and a "tax extenders" package awaits Congressional action. Making the R&D Tax Credit permanent would contribute to its effectiveness as an incentive for innovation research. Similarly, increasing the rates for the Alternative Incremental Credit and enacting the Alternative Simplified Credit would allow companies currently not eligible for the credit to participate in this innovation incentive program.
Federal R&D Tax Credit reform would be an effective first step to increasing domestic incentives for innovation investment.
