SEMATECH after Five Years: High-Technology Consortia and U.S. Competitiveness

Other reasons often cited for this include the high cost of capital in the U.S., a poorly educated work force, product dumping closed foreign markets, unilateral tariffs, and a poor environment for cooperation between industry and government. Prestowitz C. , Trading Places: How We Allowed Japan to Take the Lead (New York, NY: Basic Books. 1988); Choate P. , Agents of Influence (New York, NY: Knopf, 1990).

This echoes themes expressed in: Hayes R. Abernathy W. , “Managing Our Way to Economic Decline,” Harvard Business Review (July/August 1980), pp. 67–77; Reich R. , “The Quiet Path to Technological Preeminence,” Scientific American (October 1989), pp. 19–25; Kuttner R. , The End of Laissez-Faire: National Purpose and the Global Economy After the Cold War (New York, NY: Knopf, 1991). For example, a study by Japanese industrial leaders concluded that “the concept that a post-industrial society can be exclusively an information society while being utterly dependent on material production from elsewhere is overly simplistic.” Hall R. Tonkin L. , eds., Manufacturing 21 Report: The Future of Japanese Manufacturing (Wheeling, IL: Association for Manufacturing Excellence, 1990).

“SEMATECH … can serve as a model for federal consortia funded to advance other critical technologies. Programs will be encouraged in the development of a new automobile, new construction technologies, intelligent control and sensor technologies, rapid prototyping, and environmentally-conscious manufacturing.” Technology for America's Economic Growth: A New Direction to Build Economic Strength (Washington, D.C.: White House Press Office, February 22, 1993).

More than a dozen dual-use technology consortia—ranging from the development of huge memory chips to parallel computers—are included as part of a new $550 million Defense Technology Conversion funds proposal (Electronic News, March 15, 1993). Supporters in the industry of increased joint-funded collaborative programs, and a reduction of fully government-funded research programs, include Gordon Moore and Andrew Grove, chairman and CEO respectively of Intel (San Francisco Chronicle. March 24, 1993). A contrary view is Cohen and Noll, who believe that SEMATECH will not be an effective model for consortia due to the tendency of such programs to be overtaken by the demands of distributive politics. Cohen L. Noll R. , “The Federal Role in Research Joint Ventures,” mimeo, Stanford University, 1992.

Ferguson C. , “From the People Who Brought You Voodoo Economics: Beyond Entrepreneurialism to U.S. Competitiveness,” Harvard Business Review (May/June 1988), pp. 55–62; Chandler A. , Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge, MA: Belknap, 1990).

Peters T. , Thriving on Chaos (London: Macmillan, 1987); Gilder G. , “The Revitalization of Everything: The Law of the Microcosm,” Harvard Business Review (March/April 1988), pp. 50–60.

Florida R. Kenney M. , “Why Silicon Valley and Route 128 Can't Save Us,” California Management Review (Fall 1990), pp. 66–88; Saxenian A. , “Regional Networks and the Resurgence of Silicon Valley,” California Management Review (Fall 1990), pp. 89–112.

Wall Street Journal, April 12, 1993. Similar statements were made by Rodgers and 10 other high-tech executives to a House of Representatives subcommittee reviewing the technology initiative, though many Silicon Valley executives have praised it (San Francisco Chronicle, March 26, 1993).

Burrows P. , “Bill Spencer Struggles to Reform SEMATECH,” Electronic Business, May 18, 1992, pp. 57–62.

Washington Post, “When Industrial Policy Works,” August 29, 1992.

Los Angeles Times, October 4, 1992.

Bylinsky G. , “A U.S. Comeback in Electronics,” Fortune, April 20, 1992, p. 77; Financial Times, February 9, 1993.

In the early 1960s, each chip contained only a single transistor. By 1985, there were more than a million on a chip, yet they cost the same as the single transistor had previously—a one million times gain in productivity in 25 years. By the next century, there will be over a billion transistors on a chip, a further one thousand times productivity gain in a decade. The limit to these improvements may be in sight, however. Holden D. , “Statute of Limitations on Moore's Law?” Electronic News. April 5. 1993, p. 3.

Electronic Business, February 3, 1993.

DSB (Defense Science Board), Report of the Defense Science Board on Defense Semiconductor Dependency, Washington, D.C., 1987, pp. 6; McLoughlin G. , SEMATECH: Issues in Evaluation and Assessment, Congressional Research Service. Washington, D.C., 1992.

The working group included senior representatives from 14 firms: AT&T. Advanced Micro Devices, Digital Equipment Corporation, Harris Corporation, Hewlett-Packard Company, Intel Corporation, IBM, LSI Logic, Micron Technology, Motorola, National Semiconductor, NCR, Rockwell International and Texas Instruments. Three of the smaller members later left the consortium: LSI Logic (1992), Micron Technology (1992) and Harris Semiconductor (1993).

U.S. GAO (General Accounting Office), SEMATECH's Efforts to Strengthen the U.S. Semiconductor Industry, Washington, D.C., September 1990.

Annual membership dues are set at 1% of the company's total semiconductor sales, with a minimum of $1 million and a maximum of 15% of total dues (effectively $15 million).

Detailed discussion of SEMATECH structure and comparisons with other U.S. and foreign research consortia are given in Grindley P. Mowery D. Silverman B. , “SEMATECH and Collaborative Research: Lessons in the Design of High-Technology Consortia,” mimeo, Center for Research in Management, University of California, Berkeley, 1993.

SEMI/SEMATECH is distinct from the trade association SEMI (Semiconductor Equipment and Materials International). Although membership overlaps, the two organizations are separate.

Rice V. , “What's Right with America's IC Equipment Makers?” Electronic Business, May 15, 1989, p. 28–34.

Advisory Council on Federal Participation in SEMATECH, SEMATECH 1990: A Report to Congress, Washington D.C., May 1990; SEMATECH. Annual Report 1992; U.S. GAO (General Accounting Office), SEMATECH's Technological Progress and Proposed R&D Program, GAO/RCED-92-223BR, July 1992.

See Katz M. Ordover J. , “R&D Cooperation and Competition,” Brookings Papers on Economic Activity, Special Issue (1990), pp. 137–203; U.S. CBO (Congressional Budget Office), The Benefits and Risks of Federal Funding for SEMATECH, Washington, D.C., 1987. The importance of linkages between the equipment and manufacturing industries is discussed in Stowsky J. , “The Weakest Link: Semiconductor Production Equipment, Linkages and the Limits to International Trade,” BRIE Working Paper No. 27, University of California, Berkeley, 1987, pp. 77; NACS (National Advisory Committee on Semiconductors), Preserving the Vital Base: America's SME Industry, Washington, D.C., July 1990.

For the role of complementary assets in commercializing innovations, see Teece D. , “Profiting from Technological Innovation,” Research Policy, 15 (1986): 285–305.

A frequent misconception is that SEMATECH was originally set up to design and manufacture Dynamic Random Access Memories (DRAMs). Although these feature in most discussions of process technology, as they have been the technology leaders for new generations of technology and represent 30% of the market, the production of any microchip, and especially DRAMs, is not an objective.

For program descriptions see Grindley P. , The UK Software Industry: A Survey of the Industry and Evaluation of Government Policy, Report Series, Centre for Business Strategy, London Business School (1988); Keliher L. , “Core Executive Decision Making on High Technology Issues: The Case of the Alvey Report,” Public Administration, 68 (1990): 61–82; Nelson R. , “Government Policies Towards the Microelectronics Industry,” pp. 128–163, in Langlois , ed., Microelectronics: An Industry in Transition (Boston: Unwin Hyman, 1988); Watkins T.A. , “A Technological Communications Costs Model of R&D Consortia as Public Policy,” Research Policy, 20 (1991): 87–107.

Grindley Mowery Silverman , op. cit.

An interesting U.S. comparison is with the Microelectronics and Computer Technology Corporation (MCC), established in 1983, which initially performed most of its research at a central laboratory but has gradually moved towards an “umbrella” model, with research performed on contract by members. It is financed fully from private subscriptions and property rights are protected. See Peck M. , “Joint R&D: The Case of MCC,” Research Policy, 15 (1986): 219–231; Werner J. Bremer J. , “Hard Lessons in Cooperative Research,” Issues in Science and Technology (1991), pp. 44–49. Another “umbrella” U.S. consortium is the National Center for Manufacturing Sciences (NCMS), set up in 1986. It relies on member firms or third parties to conduct research ( Grindley Mowery Silverman , op. cit.).

The VLSI program (1976–80) aimed at research into semiconductor manufacturing technology; OMCS (1979–85) developed product and process technology for optoelectronics; Supercomputer (1981–89) performed basic research in advanced semiconductors. They have stressed knowledge diffusion and have chosen to leave sensitive proprietary technology to be developed privately by the firms. See Gaines B. , “Perspectives on Fifth Generation Computing,” Oxford Surveys in Information Technology (1984), pp. 1–30; Sigurdson J. , (1986), “Industry and State Partnership in Japan: The VLSI Project,” mimeo. Lund Research Policy Institute, 1986; Fransman M. , The Market and Beyond: Cooperation and Competition in Information Technology in the Japanese System (New York, NY: Cambridge University Press, 1990).

McLoughlin , op. cit.

VLSI Research (April 1993). In 1992 U.W. equipment firms increased their share of the U.S. market by nearly 4% and of the Japanese market by 2% (Business Week, June 7, 1993, p. 27). U.S. SME gains were not across the board but were due mainly to two

firms: Applied Materials, with a 21% rise, and Lam Research, with 33% (San Francisco Chronicle, February 3, 1993; Electronics News, April 19, 1993).

Historically, Japanese semiconductor manufacturers have placed four out of five equipment purchases with local suppliers: Thompson T. , “The Americans are Back in the Semi Equipment Business,” Electronic Business, July, 1993, p. 123.

The fact that Japanese SME manufacturers' sales have declined by less than their home market (13% versus 25%) suggests that there may have been some rebound in Japanese sales to Europe and Asia in 1992, partially reversing the U.S. gains there in 1991. This may reflect diversion of sales or early deliveries made possible by the precipitous fall in the Japanese market. Since this analysis compares data from different sources it should be seen as an illustration of the arguments rather than a definitive analysis.

SIA figures (Electronic News, April 5, 1993).

Some of the recent improvement may be associated with changes in the personal computer market in Japan, which is switching to DOS compatible machines using Intel microprocessors, a factor helping keep imports from the U.S. steady.

SEMATECH, Annual Report 1991; U.S. GAO (1992), op. cit.

Burrows , op. cit.

Electronic News. January 25, 1993.

VLSI Research Inc., 1990 Customer Satisfaction Report on Semiconductor Capital Equipment, Vol. 1., 1990.

Burrows , op. cit.

SEMATECH (1991), op. cit.

Moore Gordon , Intel chairman (Electronic News, July 27, 1992).

Rice , op. cit. SEMATECH has tried to make selection as palatable as possible, for example, by choosing two suppliers rather man one for each major process step. An executive at Eaton Corporation, an equipment supplier, says, “It's almost impossible for SEMATECH not to be controversial, but … they bend over backwards to be fair.” ( Burrows , op. cit.) The risks involved in backing particular suppliers are illustrated by the recent shutdown of GCA Corp., a major SME producer, which had received significant support from SEMATECH. At the same time SVGL, the remaining U.S. manufacturer of lithography equipment, has merged its interests with Canon. (Electronic News, May 17, 1993).

U.S. GAO (1990), op. cit.

One reason may be that U.S. manufacturers have been divesting their SME divisions. Another is that there may have been more acquisitions of U.S. SME suppliers by foreign firms.