U.S. must foster innovation and push back China says semiconductor industry report

America must continue to foster cutting edge innovation in the semiconductor industry to bolster the economy and stave off the threat from China.

So concludes a report endorsed by the President’s Council of Advisors on Science and Technology (PCAST) – a panel that advises the White House.

semiconductor industry circuit boardThe report sets out a strategy for ensuring the United States continues to lead the world in semiconductors.
Image: pixabay-862112

The report is the product of a working group of 11 semiconductor industry leaders, academic experts, and former policymakers.

It assesses the challenges and opportunities facing innovation, security, and competitiveness in the industry and sets out a three-point strategy for ensuring the United States continues to lead the world in semiconductors. The three points are:

– push back against Chinese industrial policy that is hindering innovation
– improve the business environment for makers of semiconductors in the U.S.
– help to engender transformative innovation in the semiconductor industry over the next 10 years

“Delivering on this strategy will require cooperation among government, industry, and academia to be maximally effective,” urge PCAST co-chairs John Holdren and Eric Lander in a covering letter to President Barack Obama.

Modern life relies on semiconductors at every level, says the report, which emphasizes the need to keep innovating and staying ahead as semiconductors are critical to defense systems and America’s military strength. Also, as their pervasiveness increases, there is a growing need to maintain their integrity to reduce the risk of cyber attacks.

‘Concerted push by China’

The report highlights how a “concerted push by China to reshape the market in its favor” threatens to undermine U.S. competitiveness and the benefits its semiconductor industry brings not only to America but globally.

“We found that Chinese policies are distorting markets in ways that undermine innovation, subtract from U.S. market share, and put U.S. national security at risk,” it notes.

In a move to reduce dependence on foreign technology, China is increasing support for domestic production of semiconductor chips. Currently, China buys more than half of the semiconductors sold each year.

In 2015, media coverage reported the Chinese government saying they plan to spend as much as 1 trillion yuan ($161 billion) over 10 years to grow the country’s semiconductor industry.

Semiconductor industry welcomes report

A blog post from John Neuffer, President & CEO of the Semiconductor Industry Alliance (SIA), says the SIA completely agrees with the report’s two assertions that:

– outpacing the competition is the only way to retain leadership, and
– the U.S. semiconductor industry needs an economic and policy environment that fosters innovation to keep it strong and globally competitive.

The semiconductor industry in the U.S. employs over a quarter of a million people directly and supports over a million other jobs indirectly throughout the U.S. economy.

Of America’s top manufactured exports, semiconductors rank third after airplanes and automobiles. For the last 20 years, U.S.-headquartered firms have accounted for half of global sales in semiconductors. Other leading firms are based in South Korea, Japan, Taiwan, and Europe.

At present, there are no China-headquartered companies in the top 20.

The full report “Ensuring Long-Term U.S. Leadership in Semiconductors” is available as a PDF download from the White House website.