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4/30/2008 3:30:58 PM
Innovation Is at Risk as Semiconductor Equipment and Materials - Industry Loses up to $4 Billion Annually Due to IP Infringement

Semiconductor equipment and materials suppliers face serious and mounting challenges in intellectual property (IP) protection, with adverse economic consequences for the entire microelectronics industry, according to a new white paper published by SEMI.

The report, "Innovation at Risk -- Intellectual Property Challenges and Opportunities," provides a detailed study of various IP challenges facing the equipment and materials industry and offers recommendations for improving the situation. The white paper is based on a survey of 49 SEMI member companies representing 56 percent of the total annual sales of the entire equipment and materials industry. The study was conducted by the Noblemen Group.

"Protection of IP rights is a serious area of concern for the semiconductor equipment and materials industry, which supplies critical enabling technologies to microchip manufacturers," said Stanley Myers, president and CEO of SEMI.

The study found that increasing IP violations are driven by factors such as weak IP protection laws and weak enforcement and penalties in many regions of the world, outsourcing and off shoring in Asia, and the ongoing quest by the semiconductor industry for cost reduction in a consumer driven market.

Close to 90 percent of the companies that participated in the study reported experiencing some form of IP violation, including infringement, counterfeiting, and theft of core technologies, core products, spare parts and components, trade secrets, and trademarks. 54 percent of companies characterized these infringements as serious to extremely serious.

"In the highly competitive global business environment, IP protection is essential to the industry, allowing it to make the significant R&D investments needed to sustain technological advancement of the semiconductor device industry," said Bob Akins, chief executive officer of Cymer, Inc. and vice chairman of SEMI. "IP violations of various forms undermine the development of the next generation of equipment and materials required to meet the challenges of Moore's Law."

"Semiconductor equipment and materials companies offer complex and advanced systems to a highly specialized market. Continued violations of IP could undermine the development of new equipment and materials for the next generation semiconductor devices," said Tetsuro "Terry" Higashi, chairman and CEO of Tokyo Electron.

These companies identified Taiwan, China, Korea, and North America as regions of the greatest concern. However, the form and nature of IP violations in each region vary and occur for different reasons, especially in the case of North America. In addition, about 53 percent of the companies report IP violations by their customers (i.e., chipmakers). Nearly 60 percent of the companies surveyed have taken legal action against IP violations. However, only 48 percent of them were satisfied with the outcome, citing legal processes that were slow, expensive, and unpredictable. Companies were also concerned about costs and variability in the outcome of litigation.

Over 60 percent of the companies surveyed have experienced adverse economic impact caused by IP violations -- due to loss of sales and market shares -- with estimated lost revenues ranging from one percent to 2.5 percent of the total annual sales of the industry. In aggregate, the total magnitude of economic impact due to IP violations on the industry including lost sales, market share losses, loss of sales due to pricing pressure and loss of market valuation is in the range of US$2-4 billion per year.

To address IP concerns, the white paper provides a set of recommendations to SEMI that focus on expanding public policy efforts, working with governments for global IP protection, driving customer dialogue, working with SEMI member companies to promote a global culture of respect for the industry IP assets, as well as providing IP management education to its members.

The IP report can be downloaded in PDF format from the following URL:

SEMI is the global industry association serving the manufacturing supply chains for the microelectronic, display and photovoltaic industries. SEMI member companies are the engine of the future, enabling smarter, faster and more economical products that improve our lives. Since 1970, SEMI has been committed to helping members grow more profitably, create new markets and meet common industry challenges. SEMI maintains offices in Austin, Beijing, Brussels, Hsinchu, Moscow, San Jose, Seoul, Shanghai, Singapore, Tokyo, and Washington, D.C.

Other Headlines from SEMI ...
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