Our country desperately needs some big decisions on the expiration of the R&D tax credit, the semiconductor and solar industries, and the true source of innovation in products and management.
Forbes increased the volume with their most popular article this year, “Why Amazon Can’t Make a Kindle in the USA [even if it wanted to].”
Columnist Steve Denning, former head of the World Bank, is ringing the oft-sounded alarm on the high stakes of exporting the US manufacturing overseas. The article has spawned a widely-read series of articles. Like other industries before it, he has this to say about the solar industry — which is closely tied to the semiconductor industry —
Unless private sector and government work closely together in the USA, the manufacture of solar panels will be the next sector to leave the country, probably forever.
What’s not mentioned here is that China has a 150% tax credit for research & development expenses, and the United States’ paltry 14% to 20% tax credit is set to expire at the end of this year. A bill to extend the credit (S.1577) needs support in Congress.
“The uncertainty of an on-again, off-again credit influences companies’ future R&D budgets, particularly when manufacturers are courted by other countries with more generous and permanent R&D tax incentives and lower corporate tax rates.”
One would think the semiconductor industry would be a key sector worth nurturing with an R&D tax credit, as they urge Congress to renew the provision:
“The semiconductor equipment and materials industry is one of the most R&D-intensive industries in the world,” said Victoria Hadfield, president of SEMI North America. “Over the past three years, SEMI member companies have spent an average of 24 percent of revenues on R&D.”
Walter Isaacson’s biography of Steve Jobs opens with vivid accounts of the steady intellectual diet that grew from the fields of the semiconductor industry, without which there would be no iPhone 4s, no iPad, no nano or iTunes. (Pages 9 & 10, “Childhood”).
During the SemiCon West conference in San Francisco a few weeks back, one industry executive said, “Everyone in DC is in favor of an R&D tax credit but it’s used as political leverage.” Another person said that Republicans are in favor of the R&D tax credit, but they don’t want to “make Obama look good” and pass such a smart, jobs-building initiative until they win the White House.
Can radical management techniques (Scrum and Agile) beat the competitive advantage of a giant R&D tax credit? I’m not sure. My dream panel for this discussion would include Steve Denning, Marc Andreesen (“software will save us”), Dr. Terry Brewer (father of lithography), Senator Orrin Hatch, President Obama, and Rick Wallace (KLA-T). If you hear of anything, let me know.
Here, Steve Denning presents his thesis (ya sorry it’s Flash):
The Atlantic includes higher R&D tax credits in its medicine for A Sick Economy, published November. 8th, 2011
SEMI industry calls for stronger protection of Intellectual Property (slideshare, February 2011)