Government, private partnership will ensure our competitive edge

While the payroll tax cut deal was by no means ideal, extending the payroll tax holiday and unemployment insurance for the rest of 2012 was essential for America’s continuing economic recovery. My hope is that Republicans’ compromise on the measure signals their willingness to put aside partisan stunts and manufactured crises in favor of working with the president and Democrats to protect and expand the American Dream for all.

The economy has seen 23 months of private-sector job growth. These developments are encouraging, but we still have a great deal of work to do. We must begin to address the structural problems that plague our economy — that imperil American exceptionalism in the 21st century. One of the major threats to our economy is the shift of jobs and industries to our international competitors.

Currently, U.S. companies lead and dominate production of semiconductor manufacturing equipment with approximately 50 percent market share. They manufacture roughly $18 billion worth of tools each year, 86 percent of which are exported, and employ more than 70,000 Americans directly, while supporting more than 350,000 semiconductor-related jobs in the United States. This industry is vital to our economy.

This U.S. leadership and dominance is currently being challenged and threatened by foreign countries — the industry is facing a major transition the likes of which only occurs every 12-15 years. The transition to larger-sized 450mm wafers will allow the manufacture of more advanced semiconductor devices at a lower cost by producing more devices per wafer. To get there, however, requires the development of the next generation of manufacturing tools, which equipment companies must develop in order to remain competitive and meet their customers’ demands.

Developing the next generation of tools will require high-cost and very intensive research and development. It is estimated that the cost will be at least $8 billion for U.S. companies and as high as $30 billion globally. Foreign governments realize that this transition serves as a prime opportunity to lure U.S. companies and their technology overseas and are proposing generous government incentives. Failure to compete with these foreign incentives will mean the irreversible demise of the industry in the United States and threaten U.S. economic and national security. It is critical to maintain domestic high-tech manufacturing capabilities for military applications, as foreign suppliers could provide faulty microelectronic components that might fail to operate as specified and affect military capabilities. The United States must remain a leader in semiconductor manufacturing equipment technology and continue to possess the capability and intellectual knowledge to develop and manufacture the equipment to build microelectronic components for future use in military applications.

To achieve this, I am leading efforts to establish a two-year public-private partnership between the industry and the federal government. This partnership would jump-start the industry’s transition to 450mm, taking it through the next decade, when the full transition will take place. The U.S. semiconductor manufacturing equipment industry has not asked for government assistance in the past, but the global competitive climate has changed, and it is now important that the U.S. government play a role. 

The semiconductor manufacturing equipment industry will make this transition to 450mm. The question is, will it be done in the United States with our country leading the way, as we have done for decades, or will we fail to compete and let the industry move offshore as has happened with other high-tech manufacturing industries? The United States must compete, and a $225 million per year commitment from the federal government, matched by greater funding from industry partners, will help in this vital effort to keep manufacturing jobs and expertise in the United States.

Fifty years ago, the Apollo program invested heavily in a new, risky technology called integrated circuits. Metal-oxide-semiconductor technology allowed the American space industry to compete with and ultimately surpass the Soviets. The U.S. semiconductor industry was built on the Apollo investment. The federal government now must act to keep a vibrant U.S. semiconductor manufacturing equipment industry.

To forge the technological leaps necessary to power the economy — to keep America exceptional in the 21st century — good old Uncle Sam must partner with the private sector now to win the global competitiveness race.

Honda is Silicon Valley’s representative in Congress. He is Budget Task Force chairman for the Congressional Progressive Caucus, the author of “The People’s Budget,” and a member of the House Appropriations and Budget committees.