Federal Research:

SEMATECH's Efforts to Strengthen the U.S. Semiconductor Industry

RCED-90-236: Published: Sep 13, 1990. Publicly Released: Sep 27, 1990.

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Pursuant to a congressional request, GAO assessed the Semiconductor Manufacturing Technology Consortium's (SEMATECH) efforts to strengthen U.S. suppliers of equipment and materials for the semiconductor manufacturing industry.

GAO found that: (1) by 1989, Japanese firms had captured 4 of the top 5 semiconductor equipment-supplier positions, while only 4 U.S. companies were among the 10 largest suppliers; (2) many U.S. semiconductor equipment suppliers are faced with a declining market share and the need to reinvest at a high rate to remain technologically competitive; (3) U.S. materials suppliers' market share declined from 25 percent in 1984 to 17 percent in 1988; (4) surveys indicated that the problems that led to the competitive decline of the U.S. suppliers of semiconductor equipment and materials were in areas where their Japanese competitors had distinct advantages; (5) the high cost of capital in the United States was the most significant factor diminishing the competitiveness of U.S. suppliers; (6) ineffective relationships between semiconductor manufacturers and their suppliers also contributed to the declining competitiveness of U.S. suppliers; (7) to be competitive internationally, U.S. suppliers need to overcome Japanese trade and cultural barriers, establish a sales network, and offer technologically superior products; (8) SEMATECH increased its efforts to assist U.S. semiconductor equipment and materials suppliers in response to their declining competitiveness; (9) despite those efforts, a broader range of initiatives, in addition to the SEMATECH program, is needed to significantly strengthen U.S. suppliers; and (10) senior executives from 28 of the 31 U.S. suppliers supported SEMATECH efforts to address their needs, but 16 of the companies were uncertain whether SEMATECH would significantly strengthen the U.S. supplier industry.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The report to the Senate Appropriations Subcommittee on Defense found that member companies believe that SEMATECH has shifted the semiconductor industry's culture toward one that establishes long-term relationships between semiconductor manufacturers and their suppliers.

    Matter: Because SEMATECH members will play a critical role in determining whether the U.S. semiconductor supplier base can be revitalized, Congress may wish to closely monitor the commitment of the SEMATECH members to developing close long-term working relationships with their suppliers and make further federal funding for SEMATECH contingent upon the members' following through with this commitment.


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