Securing the Future Regional and National Programs to Support the Semiconductor Industry (2003) / Chapter Skim
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IV. Research Papers: Competing Programs: Government Support for Microelectronics
IV. Research Papers: Competing Programs: Government Support for Microelectronics
Pages 187-253
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From page 189... ...
tFor an update of the program developments in this industry, particularly the emergence of China as a semiconductor manufacturing site, see the Postscript.
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From page 190... ...
In addition, in the European Union substantial funding is being provided by national and regional governments to individual companies for investment in semiconductor manufacturing facilities, and in both the European Union and Japan, direct government funding is being used to stimulate new "venture" businesses in the microelectronics field. In the growing number of newly industrializing countries promoting an indigenous capability in microelectronics Taiwan, Korea, Singapore, China, and Malaysia government policies emphasize the acquisition and diffusion of advanced semiconductor technology from the industrialized countries rather than pursuit of leading-edge R&D.
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government has been drawn into a series of limited market interventions to counter the adverse effects of foreign government measures on the U.S. semiconductor industry, most notably the Semiconductor Trade Agreement and federal funding of the SEMATECH consortium.
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Looking back it is clear that government policies have played a major role in the evolution of the global semiconductor industry. Indeed, to date no country in the world, including the United States, has established and sustained a world-class semiconductor industry in the absence of a very substantial government promotional effort.)
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merchant semiconductor industry, measured in terms of sales revenues per employee, more than doubled between 1990 and 1998, from $93,000/employee to $245,000. Semiconductor Industry Association.
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From page 194... ...
European and Japanese industry leaders believe that they can dominate what they see as the main semiconductor growth markets of twenty-first century wireless and wired telecommunications and digital home appliances.6 The Japanese semiconductor industry, with an unprecedented level of government backing, is embarking on an intensive series of leading-edge R&D projects with the objective of recapturing world leadership in microelectronics from the United States, based on improved capability with respect to systems-on-a-chip. A Japanese semiconductor analyst recently commented on this effort as follows: The 21 St century will be the end of the PC era, and the arena of competition will change.
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From page 195... ...
The European Union's flagship R&D project, JESSI, began in 1988, ran through 1996, and was succeeded by MEDEA, a four-year project ending in 2000; the latter was succeeded by MEDEAPlus, which will run through 2009. Japan's new Asuka sub-O.10-micron project will run for 7 years beginning in 2001.
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From page 196... ...
. iiThe initial impetus for the growth of the semiconductor industry in the United States came from the Apollo and Minuteman programs, which featured government procurement of integrated circuits in large volume at high prices.
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Larry Summey, who has headed the Semiconductor Research Corporation since 1982 was previously the head of the Department of Defense's Very High Speed Integrated Circuit Program, the largest U.S. defense-related microelectronics program of the 1970s.
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From page 198... ...
was a U.S. national policy based around cooperation between industry, government, and academia." See Hajime Susaki, chairman of NEC Corporation, in FBIS, January 12, 2001, translation of "Japanese Semiconductor Industry's Competitiveness: LSI Industry in Jeopardy," Nikkei Microdevices, December 2000, pp.
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From page 199... ...
[T] he recent acceleration in productivity is at least half due to the improvements in computer technology.22 For many years it has been recognized that there are limits to the miniaturization of semiconductor components; at some point optical lithography the predom~nant mode of semiconductor manufacturing will no longer be workable.
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Herr, and Victor Zhirnov, Semiconductor Research Needs in the Physical Sciences. Semiconductor Research Corporation working paper, undated; Pieter Burggraaf, "A Closer Look at Some of the Most Difficult Processing Challenges," Solid State Technology September 2000, p.
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From page 201... ...
30Defense Advanced Research Projects Agency, Focus Center Research Program. Undated view graph presentation.
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The image of China expanding into a great power in the field of LSIs and LCDs, right after Korea and Taiwan, has come into view." See FBIS, March 7, 2001, translation of "Special Projects - Part One - Industry, Government and Universities United in Enthusiasm and Talent for LSIs and LCDs," Nikkei Microdevices, March 2001 (JPP20010307000001)
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Focus Center Research Program is a wholly owned and separately managed subsidiary of the Semiconductor Research Corporation, a not-for-profit research management organization that funds and operates university-based research centers in microelectronics.36 other semiconductor manufacturing firms conduct much R&D beyond development of next-generation products. None of the new leaders in digital communications perform any fundamental research or maintain much internal semiconductor R&D, instead focusing their efforts on the development and marketing of next-generation semiconductor products." Jeffrey T
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From page 204... ...
R&D on silicon-based integrated circuits in order to "address gaps and barriers anticipated in the development of certain technologies" outlined in the roadmap (ITRS) .37 The Focus Center Research Program is funded jointly by Semiconductor Industry Association member companies (50 percent)
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The private-sector participants have formed a limited-liability corporation to participate in this project, EUV LLC. This entity will transfer technology developed by the virtual national laboratory to semiconductor manufacturing equipment suppliers.
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Its subsequent embrace and rapid expansion by the Clinton administration, and concom~44The National Nanotechnology Initiative implementation plan envisions that nanotechnology "will foster a revolution in information technology hardware rivaling the microelectronics revolution begun about 30 years ago" (ibid., p.
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From page 207... ...
Outside the United States, governments also fund pre-competitive research, particularly in Japan and Europe, but they are also providing large-scale financial support for R&D with direct and immediate commercial application. The table at the end of this paper provides a partial summary of significant government measures supporting microelectronics R&D outside the United States.50 In addition, above and beyond assistance for basic and applied R&D, foreign governments are providing capital for the construction of wafer-fabrication facilities and in some countries, such as Taiwan and Singapore, they have taken direct equity positions in semiconductor enterpnses.
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From page 208... ...
IMEC, a highly regarded, partially government-funded European microelectronics R&D center, performs leading-edge R&D on a contract basis for non-European firms, including Motorola, Texas Instruments, and AMD.52 Most major U.S. semiconductor producers have R&D centers abroad and/or R&D alliances and 5iJapan's recently inaugurated Future Information Society Creation Laboratory, which will develop high-speed semiconductor devices, will reportedly receive $300 million in government funding (Handotai Sangyo Shimbun, September 6, 2000, p.
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From page 209... ...
Instead they are pursuing R&D strategies characterized by Rapid acquisition of foreign leading-edge technology; Efficient diffusion within the national industry; and · Efforts to foster the ability to manufacture leading-edge products.57 Governments adapting this strategy pursue policies to attract inward investment and joint ventures involving advanced foreign semiconductor firms.
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From page 210... ...
With the cost of a single fate rising above $1 billion and with markets volatile, the risks have become too great for many private companies to bear. In response, in the European Union national and regional governments have committed substantial investment resources to ensure the retention of at least some state-of-the-art manufacturing capacity within the European Union.60 In Korea the government has traditionally channeled capital to the semiconductor industry through its influence over the banking system.
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From page 211... ...
Taiwanese Policy The aggressive capital investment programs under way in Taiwan supports its acquisition-and-diffusion technology strategy and partially compensates for the relative absence of larger-scaled R&D consortia. The performance of foundry manufacturing services creates a close, interdependent relationship between the foundry and the designing firm, and has enabled Taiwanese firms in particular to surge to the forefront with respect to semiconductor manufacturing technology.
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From page 212... ...
Nagahiro, "World's First 300 mm Production Line - Establishing World Standard 300 mm Technology" Nikkei Microdevices, May 2000, pp.
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From page 213... ...
The Economic Development Board manages a number of funds through which it channels grants, investments, and loans to m~croelectronics enterpnses.68 Singapore's tax rules provide incentives to priority indus67The Worldwide Semiconductor Manufacturing Corporation and Acer, both of which have been absorbed by TSMC, received substantial financial support from the China Development Industrial Bank, a government bank with the mission of providing long-term credit and investment funds to strategically important industries. "Account Update Taiwan," The Asian Banker Journal April 19, 2000; "Management Statement," China Industrial Development Bank at |
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70In Germany the state government of Bavaria has directed the Fraunhofer Institute of Solid State Technology (IFT) , an institute of applied research, to undertake the local commercial manufacture of application specific integrated circuits (ASICs)
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manufacture systems-on-a-chip for use in so-called Bluetooth products, a potentially revolutionary system that will establish short-wave radio links between mobile phones. "PCs and home appliances," Taipei Central News Agency, Taipei, wire service report, November 1, 2000.
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From page 216... ...
Planners in Taiwan and Singapore view prospective workforce shortages as the single most important constraint on the industry's expansion plans. In Europe an estimated 500,000 IT-related jobs are unfilled, and an annual shortfall of 3,500 new graduates in electronic engineering currently exists and is expected to widen.76 All major sem~conductor-producing countries in East Asia are implementing substantial programs to train more specialists and engineers for the sem~conductor industry, but these are generally acknowledged to be inadequate for the actual need.
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See "Singapore's Transition into a Knowledge-Base Economy-Investing in the Future Today," Singapore Investment News (press release from the Economic Development Board, no pagination) , April 1, 2000.
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82Nikkei Microdevices, "Investment in 300mm Plants Heating Up; 32 New Lines to be Built." 83Some significant successes have already been achieved in this regard. The German ASIC design house SICAN was established with 100 percent public funding in 1990.
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In the Tohoku University Venture Business Laboratory, the main research themes are micro-machining, integrated Microsystems and microelectronics, micro-optics and optoelectronic mechanical systems. "Toward the Creation of New Industries," Tokyo Trigger, December 1998.
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From page 220... ...
economic growth in the l990s, has deployed a broad array of government financial support measures to fund startups in microelectronics. This includes MITI's Support Program for System LSI Development.87 There are as well benefits available under the New Business Creation Law88 and the Creative Activity Law89, and funding by the Japan Development Bank.90 In Korea the government has established dozens of venture capital companies to provide direct equity injections, equity, loans, and managerial advice to small- and medium-size enterpnses; although some of these venture companies have been nominally pnvatized and have received some private funds, they continue to obtain funds from ministry "promotion funds" for industry.9i companies, and many of its employees leave after five to six years to work at Taiwanese electronics firms.
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Every country outside the United States that has made a major effort to promote an indigenous semiconductor industry has implemented programs to replicate what it views as the best features of Silicon Valley. Such features include the clustering of mutually supportive enterprises and research organizations within a limited geographic area.93 Typically the government sets aside land for hightechnology industrial parks and offers investors incentives for locating there.
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From page 222... ...
the Industrial Technology and Research Institute (ITRI) and its microelectronics affiliates, ERSo.94 The production of integrated circuits accounts for nearly 60 percent of the total revenues generated by firms located in the park.95 Hsinchu and Ta~wan's other science-based industrial parks foster close physical proximity of OEMs, device makers, design houses, and other enterprises engaged in the production of IT equipment.
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Since 1995 Jurong Town has "pulled out all the stops to develop facilities ahead of demand to attract the big players in the high-value-added waferfabncation industry."~03 . "Chinese Hsinchus" China is "putting into practice what was successful in Taiwan," establishing high-technology development zones with the industrial infrastructure for semiconductor manufacturing and financial and tax incentives for enterprises locating in the zones.
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From page 224... ...
i05"[T] hat which felt the greatest brunt of the collapse in DRAM prices and the wave of the silicon cycle is Japan's semiconductor industry." Japanese industry analysts speak of "the ten years that were lost in the l990s" in a result of "reorganization and withdrawal from the DRAM business." See FBIS, August 1, 2001, translation of Michio Mizogami, "Prescription for Japan's Revival," Nikkei Microdevices, August 2000, pp.
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From page 225... ...
firms began emphasizing semiconductor manufacturing science, the Japanese industry took a disparaging attitude. Speaking of biannual symposia on semiconductor manufacturing science that were held in the United States, he notes: "Guest speakers from Japan were invited to the symposia.
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The government's Japan Key Technology Center founded a seven-company consortium to develop 400-mm silicon wafers, the Super Silicon Crystal Research Institute (Ssi) .~3 In addition to these government-sponsored programs the Japanese industry established two major pnvately funded research consortia, STARC, which is patterned on the SRC in the ii°FBIS, December 1,1994, Taro Okabe, "Semiconductor Industry Research Institute Resolves Policy Framework," Nikkei Microdevices, December 1994, pp.
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This organization parallels some of the functions of the U.S. SEMATECH consortium and was in fact established as a Japanese alternative to a proposal by SEMATECH for an international joint venture for evaluating next-generation semiconductor manufacturing equipment.
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From page 228... ...
in this 5-year project, which will create a "new, small-scale and very short-term ii9Akira Kubota, "Semiconductors Support the IT Revolution; Silicon Technology the Key in the Next Decade," Nikkei Microdevices, October 2000. i20Japan Information Processing Development Corporation, Information Whitepaper 2000, (Tokyo: Computer Age, June 16, 2000)
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From page 229... ...
"Asuka" Sub O.10-Micron Project In September 2000 it was reported that 11 Japanese semiconductor producers had agreed to invest 76 billion yen (about $750 millions in a 5-year project to develop manufacturing technology for circuit widths of 0.10 to 0.07 micron and less by 2005. STARC will oversee Asuka' s R&D with respect to design technology, and Selete will manage development of device and process technology.~25 A staff of 250 researchers from the 11 core companies will be assigned to Selete and 90 to STAR.
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The project, based in Kyoto University, involves a variety of private companies and government and university research institutes. The budget is 2 billion yen (about $20 millions.
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From page 232... ...
dominance of the Internet in the l990s, and NTT's regulatory policies which have restricted competition and prevented low-cost Internet access in Japan are widely criticized in Japan as the main reason Japan has lagged in incorporating Internet technology throughout its economy.~38 version of Nikkei Sangyo Shimbun monitored via Nikkei Telecom 21 website)
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From page 233... ...
By contrast, Japan utilizes a single standard and partly as a result is far ahead of the United States in wireless communications.~39 Most Japanese semiconductor makers are placing a high priority on developing devices that build this growing leadership, which they see as a high-volume technology driver enhancing their overall competitiveness.~40 IT Strategy In the latter half of 2000 the Japanese government launched a "Basic IT Strategy," a sweeping array of promotional measures and legal reforms with the stated objective of overtaking the United States as a "high-speed Internet superpower" within five years.~4i One element of this plan is an ambitious public works spending program designed to link most of Japan's households with high-speed fiber-optic broadband connections by 2005. This would give Japan far more pervasive broadband coverage than the United States.~42 Japanese electronics hardware manufacturers are developing products alongside which will take advantage of Japan's near universal broadband coverage.
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From page 234... ...
' For awhile that expression was the most apt way to describe attitudes toward the semiconductor projects," in FBIS, October 1, 2000, translation of "Development of 0.07 to 0.05 micron LSI Technology," Nikkei Microdevices, October 2000, pp.
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Solid State Technology, March 1, 2000, p.
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From page 236... ...
, a $3.6 billion effort widely credited with a dramatic improvement in the competitiveness of European semiconductor makers.~57 Among JESSI in FBIS, January 1, 2001, translation of "3 major European LSI Makers Show Stable Growth Through Large Investments," Nikkei Microdevices, January 1, 2001, pp.
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From page 237... ...
. 158See FBIS, January 26, 1996, translation of Richard Sietmann, "With Research and Development in First Place; Belgian Microelectronics Institute IMEC in Demand as Partner for Cooperation in International Research and Development," VDI Nachrichten, January 26, 1996, p.
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From page 238... ...
The government of Saxony will hold an equity position of 115 million euros in this and the German Federal Ministry of Education and Technology is expected to contribute another 75 million euros to this project.~64 A similar effort is being sponsored with government assistance at a site in Crolles, France. In 1998 ST Microelectronics established a research facility and a pilot 300-mm fate with government subsidies estimated at Fr 900 million to Fr 1 billion.~65 In April 2000 ST Microelectronics and Philips announced plans for a second 300-mm fate at Crolles that would serve as a research facility and a commercial fate whose output the two firms would share equally.
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From page 239... ...
32. i7iThe Fraunhofer Microelectronics Alliance, with roughly 1,000 employees, combines seven FHG research institutes "to turn product ideas into serial products." During the past five years the FHGs have helped German semiconductor manufacturers reduce costs through automation and flexible manufacturing techniques; produced ASICs on a contract basis for European firms; pursued alternative-to-silicon technologies such as GaAs, iridium phosphide, arsenic, and antimony; developed veryhigh-frequency transistors and monolithic microwave integrated circuits (MMICs)
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From page 240... ...
i73European Union Commissioner Erkki Liikanesi commented in April 2000 that in a competitive comparison between the European Union and the United States, "The positive side is of course mobile communications, because here Europe is the leader," in FBIS, April 17, 2000, translation of interview by Stefan Krempl with Erkki Likanne, "KU Commissioner: We Need a Sense of Urgency," Munich Telepolis, April 17, 2000, no page citation given (EUP20000417000266)
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From page 241... ...
.~77 In addition to these programs a number of stand-alone projects administered by national governments within the European Union are developing m~croelectronics technologies with wired and wireless applications.~78 The Potential Emergence of China The government of China has been promoting an indigenous semiconductor industry since the 1980s. It has been hampered in this effort by resource shortages and by national security restrictions imposed by more developed nations, including the United States and Japan, on the export of advanced semiconductor manufactunng equipment to China.
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From page 242... ...
producer Motorola is building a facility in Tianjin that, when completed, "will become one of the largest semiconductor, manufacturing facilities in the world."~85 NEC is investing heavily in sem~conductor production facilities through joint ventures in Shanghai and Beijing, and other Japanese producers have begun to map out ambitious investment in~tiatives in China.~87 Much of the Chinese government assistance is being provided pursuant to Project 909, a $1.2 billion program initiated in 1995 to establish five device manufactunng companies and at least 20 design and development centers in a Pudong i8iSee FBIS, March 7, 2001, translation of M Kimura, "Industry, Government and Universities United in Enthusiasm and Talent for LSIs," Nikkei Microdevices, March 2001, p.
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From page 243... ...
Taiwan's desktop computers are now largely produced in Taiwanese-owned facilities on the mainland, as well as 56 percent of Taiwan's motherboards, 88 percent of its scanners, 74 percent of its CD drives, and 58 percent of its monitors.~93 i88The United States, Japan, Korea, and the European Union participate in the Wassenaar Arrangement, a multilateral export control regime that obligates participants to administer export control licensing requirements for advanced semiconductor manufacturing equipment to all locations. i89"Compared with the United States, both Japan and Europe have greater freedom to approve the export of advanced semiconductor equipment [to China]
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i94See FBIS, March 7, 2001, translation of M Kimura, "Industry, Government and Universities United in Enthusiasm and Talent for LSIs," Nikkei Microdevices, March 2001, p.
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See FBIS, January 13, 2001, "China-Taiwan Princelings Joint Venture Stalled," Taipei Times (Internet Version) , January 13, 2001 (CPP20010116000160)
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export control regulations. See FBIS, January 18, 2001, PRC: Taiwan Computer Firm CEO Cited on Importance of Mainland Expansion," China Daily, (Hong Kong Edition, Internet Version)
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117-22. Collective output restraints for price stabilization purposes are common in Japanese industry and are generally a response to domestic price erosion, not pressure from the United States.
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From page 248... ...
companies and industnes sometimes succeed in securing government assistance in the form of bailouts, import protection, special tax relief, and the like, such measures are almost always controversial and for that reason frequently short lived. An imperative of the global economy, however, is that U.S.
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From page 249... ...
immigration policy should be administered in a manner that facilitates the attraction of foreign talent to the United States. The potential problems posed by foreign industrial policies are more complex.
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From page 250... ...
two of these new foundries are operational, six more are under construction or will enter the construction phase by early 2003, and at least 11 more are planned.209 This expansion reflects a new Chinese government promotional effort designed to replicate Ta~wan's success in microelectronics on a much larger scale in China, drawing heavily on Ta~wanese and other foreign capital, management and technology.2~0 China's new policy measures closely resemble those utilized by Taiwan, 209In September 2002, Shanghai-based Semiconductor Manufacturing Corp.
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From page 251... ...
Investors currently establishing semiconductor manufacturing facilities in China are operating on the assumption that the eventual effective VAT rate will be 14 percent. FBIS, February 15,2002, translation of "Interview with SMIC President Richard Chang," Nikkei Microdevices (February 2002)
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From page 252... ...
In 2002, METI launched a 5-year industry-government R&D project to develop extreme-ultraviolet (EUV) lithography for 50-nm device manufacturing in conjunction with an association of 10 Japanese device and lithography equipment purchasers.2~7 In July 2000,11 Japanese semiconductor manufacturers established a new R&D company, Ad2~4World Trade Organization, Accession of the People's Republic of China (Decision of November 2001)
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From page 253... ...
; FBIS, November 1, 2002, "Final Phase of LSI Industry Restructuring, Some Non-Winning Scenarios," Nikkei Microdevices (November 2002)
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