Industrial R&D—Information & Communication Technologies
Information and communications technology (ICT) continues to evolve into various form factors, platforms, and system configurations. Its expanding applications base includes increasingly high-performance and cloud-based computing systems, a massive infrastructure of mobile communications, global networks of sensing systems, military and defense networks, Internet-based control systems, and many more.
Forty years ago, military funding dominated the initial development of these devices and systems. Today, government R&D funding for ICT is just a quarter of the total, while industrial sources account for about 70% of the nearly $300 billion spent on ICT R&D. Massive infrastructure and personal and corporate reliance on ICT systems also makes them vulnerable to geophysical, terrorist, and accidental threats, driving significant industrial and military R&D efforts to protect these systems.
Large-scale information, semiconductor, and communication systems rely on complex layers of integrated technology. At the same time, the pace of technology development and deployment is accelerating. As a result, even the largest companies increasingly rely on a combination of collaboration, development alliances, intellectual property licensing, and acquisitions to incorporate enabling technologies, ensure performance and security, and mitigate risks.
Leading U.S. R&D Firms
The U.S. continues to drive R&D within the global ICT industry. With major pharmaceutical firms scaling back R&D activities, Microsoft became the largest U.S. R&D spender in 2011. Microsoft, Intel, and IBM are all on pace to exceed their 2011 levels. If Intel’s spending increases slightly more than expected through the end of 2012, it could challenge Microsoft as the largest R&D investor. Google's 2012 R&D spending rate has it on track to pass both Cisco and IBM and move into the third position in next year's assessment of U.S. ICT R&D spending. Google has nearly equaled their 2011 investment through the first three quarters of 2012, and is on pace to more than double their 2009 investment level. Apple, whose reputation for innovation demonstrates the sometimes non-linear connection between innovation and R&D spending is also ramping up its R&D, having already exceeded 2011 levels through the first three quarters of 2012. At this pace, Apple will have more than doubled its R&D in four years.
U.S. Industry Perspectives
U.S. ICT professionals, like their life science counterparts, have a mixed perception regarding their R&D budgets. More than one quarter (26%) are not satisfied with their R&D budgets, while more than 40% were pleased with how their 2012 budgets fared. Uncertainty marked the outlook for 2013 R&D budgets, with approximately an equal number of respondents having a negative, neutral, or positive change in their outlook in the last six months. Regardless of how their outlook has changed, ICT respondents are generally positive about 2013 investments, with 46% indicating that they expect an increase in their R&D budgets over last year.
Collaborative development is becoming more prevalent as firms look to extend the capacity of their resources; 44% of the firms expect an increased involvement in collaborations in 2013.
U.S. ICT firms are fairly confident in their overall competitiveness heading into 2013. While 35% expect increasing globalization to affect their R&D efforts and 58% feel there is some risk in the U.S. losing technological leadership in ICT, only 5% feel this risk is significant.
U.S. and Global Industry Forecast
Even with increasing Asian ICT R&D levels, the U.S. still accounts for more than half of global ICT R&D and nearly all of the global 2011 to 2012 growth. ICT industry performance is strongly correlated with economic conditions in the U.S. and abroad.
Uncertainty regarding 2013 will likely have a dampening effect on U.S. and global ICT industry R&D growth. Most of the forecast 2012 to 2013 U.S. growth rate of 2.3% will come from the largest firms, as smaller firms remain uneasy in the current economic environment. Globally, the industry will have a slightly higher growth rate of 2.7%, representing improving R&D investment conditions for Asian and European ICT firms. Returning to historical high R&D growth rates within ICT will depend on the ability of emerging ICT firms to replicate both the size and growth rates of some of the newer ICT firms, such as Google. Firms such as Huawei Technologies and Facebook may indeed reach these levels.
Developing Next-Generation Hardware
ICT depends on integrated circuits (ICs) and embedded software control systems. The primary IC in an ICT hardware system or device is the central processing unit (CPU), which today consists of multiple cores on one integrated device. The scale of the features on these multicore CPUs continues to shrink according to Moore’s Law down to the low nanometer scale. Efficiently fabricating multicore devices with nanoscale features requires extremely sophisticated processes.
These devices are fabricated on silicon wafers that are 150, 200, and 300 mm in diameter in tightly controlled manufacturing facilities, or fabs, that generally cost $1 to $3 billion to build and run continuously. Currently there are about 160 fabs in the world for manufacturing devices on 150-mm wafers, 150 fabs for 200-mm wafers, and 80 fabs for 300-mm wafers. For increasing the economies of scale (building more devices on one silicon wafer) engineers and scientists are currently developing the next generation of processing hardware for the 450-mm wafer.
The Global 450 Consortium is a $4.8 billion collaboration in the Albany (N.Y.) NanoTech complex that’s backed by Intel, IBM, Globalfoundries, Samsung Electronics, and Taiwan Semiconductor Manufacturing (TSMC). Widespread adoption of 450-mm wafers is not expected until 2018 at the earliest and more likely 2020. The first alpha development tools will not be available until early 2013 with the first production tools expected in 2017. The transition from 200- to 300-mm wafers occurred in the early 2000s, but the complexity and uncertainty of the 300- to 450-mm transition is taxing even the most technologically savvy corporations in the world.
Most estimates of the development costs for creating the production tools and processes for 450-mm wafers is about $17 billion cumulatively, with about $2 billion being spent in 2012. Other estimates for the development costs go as high as $40 billion.
The developers state that the transition to 450-mm is inevitable and predict that the top 10 wafer fab equipment suppliers will contribute about 80% of the R&D required to support the transition.
Basic Research Gaps
The evolution from 300-mm to 450-mm wafers is strictly a development program, which is funded primarily by companies anticipating future profits. However, analysts are now talking about a gap in basic information and communication technology research in the U.S. due to reduced federal government funding capacity. A white paper by the Telecommunications Industry Association (TIA) states that if this gap is not remedied, "U.S. leadership and innovation in the ICT sector is threatened, with consequences for the U.S. economy and national security." Over the past 35 years, the U.S. federal government has been the primary sponsor of basic research, especially in ICT, as all but a few corporate R&D laboratories no longer were able to afford the high costs and risks of basic research. Their corporate mandates required shorter-term R&D with faster paybacks.
The National Academy of Sciences (NAS) agrees that federal long-term basic research aimed at fundamental breakthroughs has declined in favor of shorter-term, incremental, and evolutionary products whose main purpose is to enable improvements in existing products and services. The TIA expresses concern that the U.S. is beginning to cede leadership in ICT. The U.S. has fallen to eighth place among OECD (Organization for Economic Cooperation and Development) countries in R&D intensity, there are fewer U.S.-based firms in the top 250 ICT firms than in previous years. While revenue growth for U.S. ICT companies increased by 70% from 2000 to 2009, it increased in other countries more dramatically—China (315%), Finland (101%), Germany (90%), India (473%), Singapore (135%), South Korea (136%), and Taiwan (428%). These other countries are directly benefiting from government policies aimed specifically at growing their ICT sectors and attracting research investments.