Panel Urges Tax Credits for Makers of Chip Equipment
A high-level panel of business and government leaders will recommend today a package of aggressive tax credits to revitalize the nation’s semiconductor equipment industry, seeking to alter the Bush Administration’s continuing opposition to an industrial policy favoring the electronics industry.
The presidentially appointed National Advisory Committee on Semiconductors will release a study today that says Japanese manufacturers of the sophisticated equipment used to make semiconductors--just like Japanese producers of the chips themselves--have taken the lead once held by U.S. companies, and will dominate the $15.2-billion industry by 1993.
The panel says that to regain global pre-eminence, the United States should adopt investment tax credits of 50% on new equipment purchased within a year of its introduction, liberalize depreciation rules for high technology investments, and establish tax credits for research and development of strategic semiconductor materials and equipment.
The report further recommends that Congress revise antitrust laws to encourage the creation of manufacturing consortia and cooperatives in both the chip-making and semiconductor equipment manufacturing industries.
An advance copy of the report was obtained by The Times.
The panel notes that while the U.S. semiconductor equipment industry is far from dead, its condition poses “a cause for concern” because foreign competitors are larger, serve larger customers and dominate key new chip-making technologies.
“Technological and/or competitive advantages, once lost, are very difficult and costly to regain,” the report says.
Although the study calls for tax incentives, it makes no mention of the panel’s recommendation last year to immediately boost funding by $100 million for Sematech, the chip industry’s research and manufacturing consortium in Austin, Tex. The report also omits a previous observation that Sematech will need an additional $800 million over the next three years.
Industry observers said the omissions were not inadvertent. “The panel has been pressured by the Bush Administration to water down its position,” said Dan Hutchinson, president of VLSI Research, a San Jose semiconductor research firm whose work is cited in the panel’s report.
“The problem is that while the Silicon Valley is burning, the Bush Administration is playing its fiddle.”
The panel’s report notes that U.S. producers of semiconductor-making equipment held a 69% share of the global market in 1983, compared to 25% for the Japanese. But by 1993, the Japanese are expected to command a 55% hold on the market, compared to 32% for U.S. manufacturers.
In one telling statistic, the panel notes that in 1980, all of the top 10 semiconductor equipment manufacturers were U.S. companies. By 1989, just four were, and three were in the bottom half.
Members of the panel, created in 1988, include Ian M. Ross, president of AT&T; Bell Laboratories and the panel’s chairman; John A. Armstrong, vice president for science and technology at International Business Machines; Norman R. Augustine, chairman and chief executive of Martin Marietta; Robert W. Galvin, chairman of the executive committee of Motorola; Erich Bloch, director of the National Science Foundation, and D. Allan Bromley, a technology adviser to President Bush.
SLIDING SHARE The market share held by U.S. manufacturers of semiconductor-making equipment is declining and Japanese manufacturers are expected to dominate the industry in the next few years.
1983 U.S.: 69% JAPAN: 25% Rest of World: 6% 1988 U.S.: 51% JAPAN: 40% Rest of World: 8% 1993 U.S.: 32% JAPAN: 55% Rest of World: 6% Source: VLSI Research
