Federal Research

SEMATECH--the government-industry research and development consortium formed in 1987 to help the United States regain world leadership in semiconductor manufacturing by the end of 1992--appears to be on schedule for achieving its objective, but the Pentagon plans to phase out future direct funding for the consortium despite member companies' support for continued funding. The 1992 goal of producing state-of-the-art semiconductors using only U.S. equipment will likely be achieved, although this capability will enable U.S. industry to only reach parity with--not surpass--the Japanese. U.S. semiconductor manufacturers and equipment suppliers seem to have stemmed the decline in their worldwide market share. How much credit SEMATECH should get for this turnaround is unclear, however. The Defense Department has proposed phasing out funding earmarked for SEMATECH at the end of this year. Under the proposal, projects at SEMATECH and other groups would be funded on a case-by-case basis. The agency plans to spend $80 million annually on semiconductor research during the next five years. SEMATECH member companies, citing both national defense and economic benefits, support continued federal backing for SEMATECH. This report also details SEMATECH's expenditures during its first five years and its proposed budget after 1992.

GAO found that: (1) the consortium appears to be on schedule for achieving its objective of demonstrating the capability to manufacture state-of-the-art semiconductors using only U.S. equipment by the end of 1992; (2) this capability will enable the U.S. semiconductor industry to reach parity with its Japanese competition, but not to surpass the Japanese industry in terms of superconductor manufacturing equipment capability; (3) the Defense Advanced Research Projects Agency (DARPA) plans to phase out funding for the consortium and spend $80 million annually to support semiconductor manufacturing research and development; (4) the consortium's members cited the importance of continued federal support to improve the competitive position of the U.S. semiconductor industry; and (5) DARPA and member companies believe that consortium programs to develop computer-integrated manufacturing and flexible manufacturing will yield a high return on investment by enabling semiconductor manufacturers to respond effectively to customers' needs.