Innovation in Global Industries U.S. Firms Competing in a New World (Collected Studies) (2008) / Chapter Skim
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3 Semiconductors
3 Semiconductors
Pages 101-140
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semiconductor firms' innovation-related activities. In addition, the data themselves represent imperfect proxies for the actual phenomena that we wish to examine.
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firms remains homebound, the United States is the predominant location for offshore inventive activity of all but Canadian semiconductor firms.
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semiconductor firms (the fabless firms) may be the emergence of new segments of market demand that are concentrated in Southeast Asia.
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Smaller production runs also mean that new semiconductor production capacity, the costs of which continue to rise, must become more flexible and capable of producing a wider variety of component designs. The relative decline of the PC market for semiconductors has important implications for the geographic location of demand for semiconductor components.
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From page 105... ...
Producers of these electronics systems often require that functionality be based on features in the semiconductor components incorporated in the products -- so-called system-on-chip designs that are more complex and require more intensive interaction between system and chip designers (Ernst, 2005)
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Hundreds of socalled fabless semiconductor firms that design and market semiconductor components have entered the global semiconductor industry since 1980. These firms rely on contract manufacturers (so-called foundries)
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At the same time, however, a number of large semiconductor firms (IDMs) still combine semiconductor device design and manufacture.
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European semiconductor firms have shifted much of their production capacity to Southeast Asia since the mid1990s and have entered joint ventures with Southeast Asian producers. Southeast Asian firms, on the other hand, have invested primarily within their home regions during this period.
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KOREA JAPAN 15 USA 10 5 0 1997 1998 1999 2000 2001 2002 2003 Year FIGURE 5 Location of ownership of semiconductor manufacturing capacity, 1997-2003. semiconductors-5.eps SOURCE: Strategic Marketing Associates.
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As U.S. semiconductor firms, and especially fabless firms, seek to collaborate more closely with the systems firms that are located in Southeast Asia, a regional or local design presence is important.
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In summary, the structure of production activities in the global semiconductor industry has shifted from one dominated by vertical integration to a more complex structure that blends vertical specialization and vertical integration. Specialized design and manufacturing firms have entered the industry in large numbers, and the growth of foundry firms has been associated with a substantial shift in production capacity investment to Southeast Asia.
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From page 112... ...
Even if the reported R&D data accurately summarize the trends in semiconductor-related offshore R&D investment, there is reason to suspect that the R&D investment data reported by semiconductor firms do not capture many of the activities that contribute to innovation in this industry. For example, R&D We examined several sources of R&D data related to the globalization of innovation-related activity in the semiconductor industry.
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Offshore Process-Development Facilities A second indicator of the offshore movement of semiconductor firms' innovation-related activities is the location of their process-technology develop
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The overwhelming majority of development fabs are located in semiconductor firms' home countries. The "homebound" nature of process-technology development appears to reflect the demanding technical requirements of this activity, the need for close coordination between product design and process-technology development, the need for an iterative approach to the introduction of new manufacturing processes, and the
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This trend is another reflection of the structural change in the semiconductor industry that we discussed earlier. A growing share of global production capacity in the semiconductor industry now is accounted for by foundries, which typically do not use development fabs.
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Korea 20 Taiwan Number U.S. 15 10 5 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 Year FIGURE 8 Geographic location of domestic development fabs, 1995-2003.
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. Semiconductor firms headquartered in Germany, the Netherlands, and the United States have a greater tendency to invest in foreign development fabs than do semiconductor firms based in other countries.
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AMER 50 Percentage 40 30 20 10 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Year FIGURE 10 Home region of semiconductor alliance participants, newly formed alliances, 1990-1999. SOURCE: Integrated Circuit Engineering (ICE)
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Figure 10 depicts trends in the regional composition of alliance partner firms for newly formed alliances during the period 1990-1999, based on partnerfirm home countries. The share of North American firms in newly formed alliances decreased from roughly 70 percent in 1990 to slightly more than 50 percent in 1999, while the share of European and Southeast Asian firms increased.
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U.S. semiconductor firms experienced a period of significant growth during the early 1990s in their international alliance activities, followed by a decline in international alliance formation.
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patent policy and some large financial awards in patent-infringement cases. We therefore believe that the period covered by our patent analysis is one during which semiconductor firms patented extensively, and patents therefore should serve as a reasonable proxy for inventive activity.
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and non-U.S. semiconductor firms' patenting that follows (but only that discussion)
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A similar lack of growth in offshore inventive activity also is apparent in Figure 13, which shows the same "site of invention" trends for the IDM and systems firms in our sample. Although the number of patents for fabless firms in our sample is considerably smaller, Figure 14 reveals
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a modest shift toward greater offshore inventive activity among fabless firms. Even for this group of firms, however, patenting remains dominated by home country inventive activity. Table 3 includes patents assigned to U.S.
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For all but Canadian semiconductor firms, the single most important offshore site for inventive activity is the United States, which on the basis of this evidence remains the dominant site for the offshore inventive activities of most non-U.S. semiconductor firms.
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FIGURE 15 Offshore invention sites, U.S.-assigned semiconductor patents, 1996-2003 SOURCE: Thomson Delphion Consulting. is stratified by year and patentsemiconductors-15.eps overall semiconductor-patent class within our "family," was adopted to provide a patent sample that was not affected by the different propensities of U.S., Asian, and European firms to obtain foreign as well as domestic patents.
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The evidence on post-issue citations suggests that the most "important" semiconductor patents are slightly more likely to result from domestic inventive activity, but this conclusion should be qualified by a recognition of the small size
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Indeed, the growth of offshore foundry production capacity in Southeast Asia has helped sustain the growth of employment of engineers and designers in U.S.based fabless semiconductor firms. Innovation-related activities in this industry include a number of different activities, such as semiconductor chip design, process-technology development, and product-technology development.
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semiconductor firms, but structural change in the global semiconductor industry has resulted in considerable change in the structure of the innovation process. Fabless firms in particular seek to develop closer collaborative relationships
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IDMs remain dominant. In other words, the strategic management of innovation becomes even more important for the competitive performance of semiconductor firms that seek to exploit the emerging global division of labor in product design and manufacturing while maintaining strength in product and process innovation.
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semiconductor firms remain concentrated in the United States. Moreover, the inventive activities of non-U.S.
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The growth of new products that use semiconductor components and the entry of firms from Southeast Asia also have contributed to growth in offshore manufacturing capacity within the industry, much of which remains under the control of U.S. semiconductor firms.
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semiconductor firms of these "home-base" advantages may not require significant offshore R&D investment to complement offshore production investment. Indeed, one hypothesized motivation for offshore R&D that receives the most support from our analysis is the "market-demand exploitation" hypothesis of Gerybadze and Reger (1999)
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semiconductor firms' patenting is similar to that of semiconductor firms headquartered in other nations, as is the homebound character of the process-technology development facilities that U.S.
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Nonetheless, it seems clear that much of the innovative performance of U.S. semiconductor firms relies on the health of a complex domestic R&D infrastructure that has benefited from large investments of public funds during the past six decades.
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. Managing the development and transfer of process technologies in the semiconductor manufacturing industry.
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. Vertical specialization and industry structure in high tech nology industries.
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138 INNOVATION IN GLOBAL INDUSTRIES APPENDIX: SEMICONDUCTOR PATENT CLASSES • 029. Subclasses: 116.1; 592; 602.1; 613; 729; 740; 827; 830; 832; 835; 840; 841; 854; 855; 025.01; 025.02; 025.03 • 065.
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SEMICONDUCTORS 139 • 327. Subclasses: 109; 112; 127; 170; 186; 188; 189; 192; 193; 194; 195; 196; 203; 204; 206; 207; 208; 209; 210; 211; 212; 213; 214; 223; 224; 258; 262; 281; 288; 306; 324; 327; 328; 334; 366; 367; 368; 369; 370; 371; 372; 373; 389; 390; 391; 404; 405; 409; 410; 411; 412; 413; 416; 417; 419; 420; 421; 422; 423; 424; 425; 426; 427; 428; 429; 430; 431; 432; 433; 434; 435; 436; 437; 438; 439; 440; 441; 442; 443; 444; 445; 446; 447; 448; 449; 450; 451; 452; 453; 454; 455; 456; 457; 458; 459; 460; 461; 462; 463; 464; 465; 466; 467; 468; 469; 470; 471; 472; 473; 474; 475; 476; 477; 478; 479; 480; 481; 482; 483; 484; 485; 486; 487; 488; 489; 490; 491; 492; 493; 494; 495; 496; 497; 498; 499; 500; 501; 502; 503; 504; 505; 510; 511; 513; 527; 528; 529; 530; 536; 537; 538; 539; 541; 542; 543; 546; 562; 563; 564; 565; 566; 568; 569; 570; 571; 574; 575; 576; 577; 578; 579; 580; 581; 582; 583; 584; 585; 586; 587; 051; 065; 081; 408; 409; 410; 411; 412; 413 • 329.
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From page 140... ...
140 INNOVATION IN GLOBAL INDUSTRIES • 365. Subclasses: 103; 104; 105; 106; 114; 145; 156; 174; 175; 176; 177; 178; 179; 180; 181; 182; 183; 184; 185; 186; 187; 188; 189; 200; 201; 203; 205; 207; 208; 210, 212; 218; 221; 222; 225; 226; 227; 230; 233; 015; 049; 053; 096 • 368.
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