Washington after passing a big financial milestone…

John Neuffer is standing a little taller these days. The semiconductor industry that he represents in Washington D.C. just stood up its first $400 billion+ year.

The chip sector recorded $412.2 billion in 2017 revenues, its biggest year ever, as reported today by the Semiconductor Industry Association (SIA) that Neuffer heads. The 21.6% annual rise was the largest since 2010, and the year ended with a record $114 billion quarter.

As other market watchers already reported, a spike in DRAM and flash prices drove the breakout year. Growth fanned out across all segments, with non-memory sales up 10%, according to the SIA.

Neuffer’s job of driving the chip industry’s agenda amid the chaos of the capital is not easy. But “being a bigger kid on the block helps,” he quips of the latest stats.

Four of the top items on the SIA’s agenda for 2018 are immigration, taxes, federal R&D spending, and trade — particularly with China. The first one is on the front burner in Congress.

“Immigration is super-hot these days,” said Neuffer, pointing to the so-called I-Squared draft bill that the SIA supports. “We want to do what we can to ensure that talented people can stay once they are educated here.”

The bill would ease the process of getting green cards for graduates who earn advanced degrees in the U.S. It would also raise the limits on H-1B visas to 185,000 from 65,000 and remove country-specific caps.

Next? “Tax reform is done, but there’s going to be a lot of technical fixes to the sweeping legislation and a mountain of regulations put in place to implement the reforms,” he said.

Toward that end, the SIA sponsored a meeting with member companies on the topic in Silicon Valley last week. “It’s way too in the weeds,” said Neuffer, declining to give specifics about what was discussed.

Two other longstanding concerns for the semiconductor industry will hit the national agenda this year — China trade and federal research spending.

Within weeks, the U.S. Trade Representative is expected to release results of a so-called Section 301 investigation into China trade issues that it started last fall. The SIA submitted a 16-page briefing to the USTR last year detailing the chip industry’s concerns.

The SIA report suggested that new China laws are using national security as an excuse to pressure U.S. companies to disclose intellectual property. It said that China’s call for “secure and controllable” technology is being used to request source code and design information on microprocessors, operating systems, and encryption techniques. In general, companies are under pressure to transfer their technology to China and to use China-designed technologies as conditions of market access, said the report.

China has raised $21 billion for its National IC Fund and more than $80 billion in local government funds in an effort to build its own semiconductor industry, according to the report. The government-led drive to build an indigenous industry sometimes spawns bad actors willing to steal IP by hiring key U.S. executives and teams at several times their typical pay levels.

China is “our largest market, and we want to make it a level playing field,” said Neuffer.

“The Section 301 report is pretty much done, and based on its findings, the USTR will put together remedies that may include tariffs and limiting investment in and out of China. We can guess the substance of the report, but we don’t have visibility on its conclusions, and we don’t know whether the private sector will have a chance to recalibrate those remedies.”

Back in the U.S., the semiconductor industry spends, on average, 20% of its revenues on R&D. It has long felt the federal government failing to chip in enough on basic research compared to other governments around the world.

Last year, the Trump Administration’s draft budget called for significant cuts in federal research spending. Congress will have a chance to weigh in before the fiscal year starts in October.

Neuffer praised the government’s backing for an exascale supercomputer project at the Department of Energy and a new DARPA program driving basic research in semiconductors.

“We’ve had these successes, but we will double down to ensure that we get pre-competitive basic research money into NIST and NSF as well,” he said of two of the agencies targeted by Trump for cuts. “China is going whole hog on driving research with a lot of state money. Koreans and others are pouring a lot of government money into research, too.”

— Rick Merritt, Silicon Valley Bureau Chief, EE Times