The global semiconductor industry is undergoing several forms of structural change simultaneously. The structure of market demand is shifting from one dominated by personal computers to a more diverse array of heterogeneous niches, largely resulting from global diffusion of the Internet and wireless communications applications. The structure of manufacturing activities is shifting from one dominated by "integrated device manufacturers" (IDMs) that both design and manufacture semiconductor components to one characterized by vertical specialization, where many firms specialize in either design and marketing ("fabless" firms) or manufacturing ("foundries"). Finally, market demand and technical expertise are growing in geographic regions (e.g., Malaysia, Singapore, and the People's Republic of China) that formerly were much less prominent aaors in the global industry. In the face of such far-reaching structural change in the industry, it is surprising that most indicators of "globalization" of innovation-related activities in the U.S. semiconductor industry—ranging from publicly available data on the share of industry-funded R&D that is performed offshore to the location of inventive activity associated with patenting by U.S. firms—indicate only modest offshore movement in key innovation-related activities. To a surprising extent, this evidence suggests that much of the innovation process in this global industry remains "non-globalized."
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