TR: Why did you decide to work intensively with the companies that produce chipmaking equipment, even though they are not formally members of the consortium?SPENCER: The thinking was that if the United States is going to have a strong semiconductor industry, it had to have access to the very best equipment. It’s the ever more complex machinery that keeps the semiconductor productivity engine turning. You certainly don’t want to depend entirely on foreign sources for such critical equipment.
And the same thing that had happened to the U.S. semiconductor industry was happening in the equipment industry: the U.S. share had declined from nearly 100 percent in the 1970s to 40 percent in the late ’80s. That convinced us to try to foster cooperation among the equipment firms, the materials industry, and the semiconductor companies to ensure that we get new manufacturing technology as cost-effectively as possible. We devoted some $900 million in R&D support-more than half of Sema-tech’s funds-to that effort.
TR: And are U.S. manufacturers now buying more domestic equipment?
SPENCER: They are. Our goal was that semiconductor manufacturers would use at least 50 percent domestic equipment, and today it’s well over 60 percent.
Overall, the turnaround in the equipment industry has been even more dramatic than among semiconductor manufacturers: U.S. equipment makers now account for about 55 percent of the worldwide market, the Japanese hold 35 or 40 percent, and the Europeans control a little less than 10 percent.
TR: Are sales largely domestic as well?
SPENCER: No. If you look at any U.S. high-tech company today, more than 50 percent of its sales occur outside the United States. My guess is that by 2050, those companies will be selling 90 percent of their product outside the United States. Much of the present foreign market is in Europe, but future growth will occur largely in the Pacific Rim, Africa, and South America.
TR: Do those companies establish new factories here or abroad in order to supply those expanding markets?
SPENCER: Both. Every manufacturer worldwide recognizes that if you’re going to sell a chip-etching or lithography tool in another country, you’re probably going to have to have a factory there, and this industry is no exception.
TR: If Sematech aids manufacturers who expand in other countries, how does that benefit the United States?
SPENCER: A large percentage of profits from those ventures return to the United States, and a lot of high-paying service jobs are created as a result, such as in R&D. That’s why maintaining a strong manufacturing base is so important, and why every major economic region has a program designed to attain or retain one. If U.S. boards of directors are in the driver’s seat, they decide where to build factories and do that R&D.
TR: So is the United States seeing a net gain in jobs in this industry?
SPENCER: Yes, but the situation is complicated. One of our young engineers came to see me the other day because he was very excited to report that he was taking a job in Malaysia-he and his wife think it’s going to be a great lark to live there for the next four or five years. If that company were a Malaysian company rather than a U.S. company, my guess is that he wouldn’t have gotten the job.
A company gets capital from wherever it’s cheapest-maybe in Tokyo, maybe in London, maybe in New York. Similarly, a firm will get qualified people wherever it can to run a multibillion-dollar manufacturing facility. And since U.S. universities put out the most qualified graduates, more and more of those people are taking jobs worldwide. When I go to Taiwan or Korea today, it’s almost like having a reunion with people I’ve worked with at Xerox and AT&T. In the future, instead of moving from Detroit to Dallas, more and more people will move from San Francisco to Kuala Lumpur.
TR: And has the government’s total investment of $800 million in Sematech paid off?
SPENCER: The U.S. companies that have become stronger as a result have more than reimbursed the government in the form of taxes. In fact, one member company reported that it paid four or five times the government’s share of Sematech’s funding in taxes last year.
And of course the U.S. government, particularly the Department of Defense, is now assured of a U.S. source for key electronic components, and U.S. computer manufacturers can more easily decide when to introduce the next generation of microprocessors and memory chips.
TR: Do chip makers think they are getting a good return on their investment in Sematech?
SPENCER: Last year our members reported more than a 400 percent return-a record. The chipmaker that gained the most from Sematech reported a sixfold return on its dues. Because these returns are so strong, member companies recently voted to increase their dues by 30 percent.
TR: How does a company measure its gain?
SPENCER: Sometimes it’s easy. Suppose the consortium works to improve a piece of equipment, and that equipment reduces the cost of a chip manufacturer’s $2 billion product flow by 1 percent. That represents a $20 million benefit right there. And the company avoids having to set up its own improvement procedures, which can also cost millions.
Sometimes the benefits to our members are less tangible but still invaluable. For example, the employees they send to Sematech for a two-year stint work on the most advanced equipment and carry that information back home. Those employees also make contacts that might otherwise take 10 or 20 years to establish. Finally, our members gain access to the results of Sematech’s frequent meetings with European and Japanese consortia and share information from technical conferences.
TR: What does it cost a company to join?
SPENCER: We put a floor on joining: you couldn’t get in for less than a million dollars. That caused a lot of complaint among smaller firms. But if you are a $200 million company and pay $1 million to Sematech, you get access to the same experiments and information that a larger company does by contributing $20 million.