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Is US High-Tech Falling Behind?

Industry CEOs, scientists voice concern; many say US needs commercial technology strategy VOICES OF DISCONTENT

THE Gulf war has highlighted a certain irony about US technological might. The nation that can build the world's best jet fighter seems incapable of making a competitive VCR. A number of observers suggest the United States should reexamine that imbalance.

"The US has shown that it can invest in military technology," says William Spencer, president and chief executive officer of Sematech, a consortium of US high-tech companies. "Now the question is: Does it want to invest in commercial technology?"

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According to a new survey of more than 550 high-tech firms, 63 percent of chief executives believe the US should establish a commercial technology strategy. That attitude prevailed in small, developing firms as well as top-tier companies.

"It's a worldwide market, and worldwide markets, by definition, involve governments," Prime Computer's James McDonald told researchers at Ernst & Young, who conducted the survey.

"The industrial infrastructure of the United States is going to the dogs," said Andrew Grove, chief executive officer of Intel Corporation, in a recent interview. He worries the nation's electronics industries are getting battered by foreign competition the way steel and autos did in the 1970s and '80s.

There's little optimism, though, that Washington will act. Conservatives and liberals disagree on the government's role in technology. Budget pressures constrain everyone. "Generally speaking, the industry's CEOs do not expect the US government to help," says G. Steven Burrill, coauthor of the industry survey.

The voices of discontent aren't only coming from high-technology companies. Some scientists worry about the nation's lead in basic research.

"From one institution to the next, across demographic categories, across disciplines of research, the nation's scientists are sending a warning," wrote Nobel Laureate Leon Lederman in a report earlier this year to the American Association for the Advancement of Science (AAAS). "Academic research in the United States is in serious trouble."

Between 1968 and 1989, federal funding for university research rose 20 percent (when adjusted for inflation). But the number of researchers more than doubled during the same period. Thus, many more scientists are competing for limited funds that have not kept pace.

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This severe competition for money is discouraging many of the nation's brightest students from pursuing science careers, Dr. Lederman contends. One University of Texas physicist wrote him: "As funds for research disappear, I lose the ability to support students and to operate a laboratory. My current plans are to quit."

Broad consensus about the problem has not brought much agreement on solutions.

Mr. Grove of Intel wants a high-tech industrial policy that includes substantial government intervention. He argues the US should help build up a coterie of US companies in certain key areas of high-tech - such as semiconductors, which are a basic building block of computers.

Sematech is one prototype for this approach. In the late 1980s, 14 US companies pooled their resources to transform US semiconductor makers into world-class manufacturers. The Defense Department is funding part of the research on the theory that the military needs to ensure access to silicon chips.

Other high-tech executives argue that such strategies won't work because the technology is moving too fast for large entities to keep up. Instead, they want the US government to improve the business environment so that US companies can compete.

The Ernst & Young survey found that 65 percent of its interviewees favored making permanent the tax credits for research and development. (Currently, Congress is extending them year by year.) Just under half favored reducing to zero capital gains on long-term investments. Only 35 percent wanted a tougher trade stance to improve access to foreign markets.

There's wide disagreement in Congress too, congressional aides say. The dramatic success of US technology in the Gulf probably isn't enough to bridge that gap. "We have seen dramatic new evidence presented to us," says Pennsylvania Rep. Robert Walker, a Republican on the House Science, Space, and Technology Committee. "Whether Congress will get out of its pork-barrel mode and look toward the future is highly questionable."

Representative Walker supports President Bush's big boost for defense research and development - most of it for the Strategic Defense Initiative. But he is noncommittal on government support for strictly civilian R&D, which is what many Democrats are clamoring for.

Some policymakers say the distinction doesn't matter, since both sectors rely on much the same technology.

"Either argument gets you pretty much to the same conclusion," says Sen. Jeff Bingaman, (D) of New Mexico and a key member of the Senate Armed Services Committee. "The federal government needs to do the best it can to assist in maintaining a strong technology base."

Conservatives and liberals do agree on one area for government support: so-called pre-competitive research. That's the early, generic stage in research before a company develops a product or process that could be patented.

The National Institute of Standards and Technology has mounted such an effort with congressional and White House support. The $36 million-a-year program is minuscule by Washington standards but it's drawing strong interest from companies.

When the program's administrators announced the program last year, they expected no more than a few dozen proposals. They were shocked to receive 249. "There's no question that high-tech has been very much in people's minds in the civilian area," says NIST director John Lyons.

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