Working Together to Close the Innovation Deficit

by Semiconductor Industry Association

With the fiscal year coming to a close at the end of this month, there is frequent talk in Washington, D.C. about the importance of shrinking the federal budget deficit – the gap between federal expenditures and revenues. What is too often overlooked, however, is the need to close America’s innovation deficit – the gap between needed and actual federal investments in research and higher education. These investments are critical to sustaining America’s global economic and technological leadership.

Today, SIA and a dozen other associations representing the high tech business community sent a letter to President Obama and Congress asking for their leadership in closing the innovation deficit:

“America’s competitiveness and future innovation capabilities cannot be held in limbo or sacrificed amidst the constantly changing, hypercompetitive global economy in which our member companies operate. Federal dollars invested in long-term basic research yield extraordinary returns for society–providing the foundation for game changing ideas, new industries, and the 21st century workforce driving them.”

The letter echoed the sentiments that 165 university presidents expressed in a recent letter to our elected leaders. Both letters highlight the fact that the U.S. is falling behind other countries when it comes to investments in R&D and higher education. Consider the following facts related to the innovation deficit:

•  The percentage of U.S. gross domestic expenditures on R&D funded by the government declined from  47.1% in 1981 to 33.4% in 2011. The U.S. trails nine Organisation for Economic Co-operation and Development (OECD) nations in this percentage. (Source: OECD)

•  Over the last ten years, R&D expenditures as a share of economic output have remained nearly constant in the U.S., but have increased by nearly 50% in South Korea and nearly 90% in China. (Source: NSF S&E Indicators 2012, Figure O-3)

•  From 1996 to 2007, R&D expenditures in the U.S. grew by an average of 5.8% annually.  During the same time period, China’s average annual growth was 21.9%.  During the first year of the economic slowdown (2008-09), U.S. expenditures decreased slightly while China’s increased by 27%.  (Source: NSF Indicators Figure O-4 and Overview)

•  Regarding the semiconductor industry specifically, the European Union has planned a public investment of about $6.4 billion in nanoelectronics (to be matched by investments from private entities) with the aim of doubling semiconductor production on the continent to around 20 percent of global production.

When it comes to investments in R&D, the U.S. semiconductor industry has a reliable record of putting its money where its mouth is.  Last year, our industry invested $32 billion in R&D – one of the highest percentages of revenue of any industry.  Together with other leaders in the high-tech community and academia, we simply ask that the federal government hold up its end of the partnership by recommitting to robust and sustained investments in basic research, including achieving the vision outlined in the last two authorizations of the America COMPETES Act.

Working together, government, industry, and universities can close the innovation deficit and strengthen America’s global competitiveness and technology leadership.