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By late , the Japanese market was open to competitive foreign products, and foreign chips did indeed account for The series of U. Creation of a competitive multiple vendor base, in turn, spurred the production of ever more powerful personal and mainframe computers at diminishing cost and fueled the information technology revolution. Also, the agreements allowed Intel and other companies to pursue more attractive opportunities in devices such as microprocessors.

Notably, by , five of the top 10 semiconductor producers in the world were based in the United States, compared to two from Japan. The United States has a number of other public-private research collaborations addressing technological challenges under the umbrella of the Semiconductor Research Corp. Industry experts say that at some point, the extreme miniaturization of transistors—the basic building block within an integrated circuit--results in undesirable quantum effects that inhibit performance of the device.

The Nanotechnology Research Initiative: The NRI, which receives funding through the National Science Foundation and NIST, supports four institutes—each based at universities—that pursue high-risk, pre-commercial research on technologies that are likely to result in commercial products within the next decade.

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Each institute, which brings together its own partnerships of universities, focuses on different approaches to developing devices cable of replacing CMOS in logic chips by INDEX conducts research on a wide range of topics, such as new nanomaterials and atomic-scale fabrication technologies.

Graphene is a strong, flexible atom-thick carbon material that are capable of carrying 1, times the density of electric current as copper wires, which researchers believe could lead to a new generation of super-fast, super-efficient electronics. The Focus Center program, supported by the Defense Advanced Research Projects Agency, involves 41 universities, 33 faculty, and 1, doctoral students.

The new National Institute for Nanoengineering, based at Sandia National Laboratories, explores nano-enabled solutions to technologies that address various critical national challenges. The competitive landscape has changed dramatically since the s. The market is increasingly global, as are the locations of supply among the U.

Important new pools of engineering talent are emerging.

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Decisions on where to build capacity are heavily influenced by government incentives. In addition to commodity memory chips, the new market-share battles are also fought on the basis of design and innovation. Government policy will loom large in determining the winners and losers. The following are some of the new challenges facing policymakers. The share of global production capacity located in the United States continues to decline. In , 42 percent of worldwide fabrication capacity was located in the United States.

That dropped to 30 percent in and reached 16 percent in Estimated integrated circuit wafer fabrication installed capacity by region — July The rapid expansion of Asian semiconductor companies and offshore investment by U. Samsung, one of the largest integrated device manufacturers, also entered the foundry business in Significantly, the vast majority of new leading-edge mm wafer fabrication capacity is being installed in Asia, an estimated 80 percent in and a forecasted 70 percent in This facility will be able to produce 60, wafers per month with line widths of 28nm and below.

The company is seeking further financial aid from the state of New York to expand the plant. Capital spending by U. China is rising fast as a semiconductor consumer and producer, although the vast majority of production in China is still carried out by foreign semiconductor firms. Most of these products, once assembled, are then exported by foreign-invested factories as finished goods.

Domestic demand is growing rapidly as well, including advanced devices required for weapons systems and telecommunications. China trade in integrated circuits, to Only 27 percent of the new or committed capacity in China is for mm wafers, compared to a global average of 45 percent. Most will produce 6-inch or 8-inch wafers. In the first quarter of , capacity utilization in China sank to 43 percent, the lowest level since and dramatically below the 92 percent utilization rate of mid Because most use mature technology, they cannot fabricate the most advanced chips and instead make thin-margin, commodity devices.

As a result, many Chinese chip manufacturers have not earned the high profits required to invest in next-generation wafer fabs. The government also has introduced programs to deploy Chinese-owned intellectual property. The Ministry of Information Industry has announced a goal that China become 70 percent self-sufficient in integrated circuits used for information and national security and 30 percent for those used in communications and digital household appliances.

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The Chinese government still regards developing a globally competitive semiconductor industry as a high strategic priority. In , Intel agreed to build a mm wafer fab in the coastal city of Dalian for chip sets.

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Asia will likely remain the largest market for leading-edge semiconductor manufacturing equipment. For this reason, U. The soaring cost of fabricating chips has made financial incentives an important determinant of where new capacity is built. The SIA maintains—.

Germany and other governments offer direct grants, project equipment, and central and state government loans and loan guarantees to semiconductor manufacturers.

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Intel said the grants were pivotal in deciding to build the plant in Israel. Such U. The United States remains the world leader in semiconductor design. The chip-design industries in Taiwan, India, and China have grown tremendously, either as outsourcing destinations or as development bases for domestic industries.

The share of research by U. By , the portion invested in the United States is projected to drop by another 9. The growing importance of foundries, wafer fabrication plants dedicated to contract manufacturing, has brought about a significant structural shift in the semiconductor industry that has accelerated the global dispersion of design work. By outsourcing manufacturing to large foundries, even small chip companies can gain access to state-of-the-art wafers and production processes without having to raise the billions of dollars required to build their own modern production capacity.

Instead, they can focus their resources on design around standardized parameters. Hodges and R. UMC —the U. By the same token, however, the shift to the foundry model means that design can be based any place with the best available talent. A number of governments are targeting semiconductor design and development for rapid development.

As a world technology leader in computers, displays, and smart phones, Taiwan also has become a major factor in semiconductor design.

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Sci-Soft also established six university research consortia in fields such as mixed-signal design, digital IP, electronic design automation, and system on a chip. China also is becoming a major location for chip design. Multinationals such as Intel and Freescale have opened Chinese design centers and a number of fabless design companies have opened in Shanghai and Beijing.

In an SIA survey of U. Perhaps the biggest threat to long-term U. Only one U. The leading university, Tsinghua University in Beijing, had students who went on to earn Ph.