Study Highlights Need for More Government Support of R&D

by Semiconductor Industry Association

In February, Congress raised the limits on defense and nondefense spending, giving significant increases in research spending across most agencies and research fields. However, a new white paper by Duke Law’s Center for Innovation Policy argues that while this is a good first step, more action is needed. This white paper, Righting the Research Imbalance, by Stephen Merrill, does a deep dive on the history of government funding of physical sciences and engineering (PS&E) research and its importance to U.S. productivity and economic growth.

PS&E research is critically important to our country’s economic and national security and an essential contributor to innovation in the semiconductor industry. Other countries are investing heavily in research in PS&E fields and if U.S. firms are to remain competitive, government support of research will be crucial. The U.S. semiconductor industry is a leader in research investments, investing nearly one-fifth of revenue into R&D, second only to the U.S. pharmaceuticals and biotechnology industry. PS&E research, including in the semiconductor industry, helps grow the U.S. economy. According to the Department of Commerce’s Bureau of Economic Analysis, PS&E-reliant sectors account for at least 50 percent of private R&D’s contribution to economic growth. For decades, the semiconductor industry has contributed to economic growth by partnering with civilian and defense research agencies to develop technologies that have led to the development of commercial products and systems that have driven our nation’s growth and productivity and solved critical national security needs. Past and continuing government support is crucial in helping fuel future innovations and maintain American competitiveness.

Merrill finds that there is a significant imbalance in the government’s research support portfolio, as government support for physical sciences and engineering is declining while support for the life sciences is increasing. Comparing 1980 to 2016, he finds that spending on engineering doubled, spending on physical sciences barely increased, and spending on the life sciences tripled. In 1980, PS&E research represented 41 percent of the federal sciences budget, dropping to 28 percent in 2016, with the life sciences sector picking up the entire difference.

As Merrill’s report shows, continued government support of PS&E research is a crucial priority for our country. In order to maintain U.S. leadership in semiconductor innovation, and to keep and support semiconductor advanced manufacturing in the United States, the Administration should robustly fund pre-competitive PS&E research. The semiconductor industry contributes one of the largest amounts of R&D funding as a percentage of sales. Industry R&D works most effectively when it is matched by government funded research to bring scientific discoveries and inventions to the stage where industry is willing to take a chance to fund further development toward commercially viable products. Without higher levels of government funding for pre-competitive PS&E research, our country risks losing U.S. semiconductor leadership, a significant risk to our national security.