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The Semiconductor Industry Association held its annual dinner for a thousand industry executives on Thursday night in San Jose, Calif. At the event, the group’s new president, Brian Toohey (left) laid out the industry’s political agenda in the wake of the Republican victories in this week’s national election.
Toohey warned that the economy is weak and faltering and could create a negative environment for investing in the semiconductor industry, the backbone of Silicon Valley. His voice will be one among many lobbyists in Washington, D.C., but the SIA has had a three-decade long history of being influential, loud and relevant in political circles.
John Daane (right), chief executive of Altera and outgoing chairman of the SIA, spoke just before Toohey. Daane warned that, in a time of economic malaise, it might be easy for politicians to view spending on research and development as an expense. But he said that the industry will try hard to convince Washington that R&D is an investment. He warned that the U.S. stands to lose its leadership in technology if it doesn’t continue to invest in basic science.
Daane also warned that the U.S. has the second-highest corporate tax rate in the world. The Republicans are likely to beat back attempts to expand corporate taxes, but Daane said the chip industry believes that it can create jobs in the U.S., given the right tax incentives and tax relief. If the U.S. doesn’t make its tax policies more corporate-friendly, it risks losing investments in multibillion-dollar chip factories to other countries. (Intel is spending $6 – $8 billion on U.S. factories in the coming years, but it also just opened a $2.5 billion chip factory in China).
Chip makers are also worried that the Environmental Protection Agency’s new rules on monitoring greenhouse gas emissions could cost the industry millions of dollars in new equipment purchases at each factory in the U.S. Even worse, the permits for new chip factories could take 12 – 18 months to complete, an incredibly long time when the construction time is a year or two and industry economic cycles fluctuate on a yearly basis.
Toohey echoed a lot of Daane’s concerns and said he held out hope that the U.S. would find the resources to invest in R&D, attract capital spending on chip factories, improve its university and K-12 education, and tread lightly on taxation. The chip industry has 185,000 employees in the country and enables a $1.1 trillion electronics industry that employs 6 million people. But to keep creating jobs in the U.S., the federal government will have to out-compete foreign governments that are trying to foster their own Silicon Valleys around the world.
It will be interesting to see the reaction in Washington, D.C., to the chip industry’s wish list, given the economy’s woes and record deficits.
Toohey, former head of the pharmaceutical industry’s lobbying group, replaced retiring SIA president George Scalise (right; his video speech is also below). Scalise was honored with the industry’s highest honor, the Robert N. Noyce award before the crowd at the Fairmont Hotel in San Jose, Calif. In hopes of gaining more political clout, the SIA has moved its headquarters to the nation’s capital.
Chip makers are coming off a great year, with revenues of $300 billion, up 32.8 percent from a year ago. But sales are expected to slow down to 6 percent growth in 2011 and 3.4 percent in 2012.
Check out our video of Toohey’s talk below as well as Scalise’s farewell speech.