and thereby maintain the incentive for firms to devote large resources to design and development.

SEMICONDUCTOR R. & D. COSTS SKYROCKET

One of the trends of the most advanced segment of the semiconductor industry is the exceedingly rapid growth of the cost of designing new products. This trend is shown in the first attachment, which is taken from the Keynote Speech at the 1979 International Solid State Circuits Conference, by Gordon E. Moore. It can be seen that while ten years ago a typical semiconductor integrated circuit took about ten person-months to design, the typical product today requires the expenditure of about 200 person-months-a 20-fold increase! Since the expense required for a person-month of design effort has also been steadily increasing, it is clear that the cost of semiconductor integrated circuit design has been-and will continue-growing at a dizzying rate. As a rough estimate, a 200 person-month effort costs in the neighborhood of $1,000,000.

No prudent management can authorize the expenditure of this kind of development sums unless the resulting product is protected from pirating by competitors desirous of taking a free ride. I shall provide some recent examples of this practice.

CHIP PIRATING ON THE RISE

The next attachment shows one of Intel's most important, advanced technology products-the 2147 4K static Random Access Memory (RAM). This product, the result of very extensive R&D work, enabled Intel's innovative Metal-Oxide-Silicon (MOS) technology to invade the marketplace formerly held by older bipolar products. IBM made their first purchase of memory systems from an outside supplier ever because of the unique characteristics of this memory component.

Intel introduced the 2147 in mid-1977 and has not, until recently, seen any competition. The first competition which recently appeared is a photographic duplicate manufactured in Japan by Toshiba. The attachment shows the Intel and Toshiba chips next to each other; clearly, the Toshiba device is a straight copy of the Intel device.

The next attachment shows a Russian copy of an Intel 4K dynamic RAM integrated circuit. To be sure, passage of the Edwards, Mineta and McCloskey bill into law in the United States will not prevent the Russians from copying in Russia. At least, however, it will prevent the Russians from exporting their illicit copies to the United States, and as Russian technology enters the 20th century it will become necessary for them, more and more, to conform their laws to ours to obtain exports. As I illustrated earlier, due to the extremely rapid increase in the cost of development of advanced semiconductor integrated circuits, the temptation for chip pirating, and the damage to the developer coming from such chip pirating, will inevitably increase unless protection is provided by the Congress. So far, companies such as Intel, Mostek, and other American semiconductor companies who spend huge sums on otherwise unsupported research and development have been able to reap the benefits of their ingenuity, and their shareholders, as well as our entire society, have been well served. But the inevitable rise of "chip pirating" does not augur well for the future. Chip pirates curtail the innovators' product leadtime (during which development costs can and must be recovered) by quickly reaping where the innovators have sown. If we lose the early profits from our designs to the chip pirates, funds available for development will be curtailed, and our industry will lose its technology lead. The semiconductor industry is a substantial exporter. We would suffer in balance of payments, stability of the dollar, and even in superiority of our military equipment as a result of loss of our semiconductor technology leadership position.

JAPANESE CHIP PIRATING PARTICULARLY DANGEROUS

If the pirating is done by the Japanese, the effect is doubly serious. The Japanese already have major competitive advantages: cheap money and a home market protected by tariff and non-tariff barriers to American exports. If we also allow them to help themselves to American technology by copying rather than having to do their own topographic designs, they will be handed the opportunity to take America's most successful high technology business away.

Patents are not enough to protect us. The Japanese make their share of patented "inventions." Since the American companies need licenses under the Japanese inventions in the same manner as the Japanese need licenses under the American inventions, patent exchanges have been the norm. On the other hand, to my knowledge, no American semiconductor company has ever made an unlicensed copy of a Japanese chip. If copyright protection is available, companies can exchange designs and receive a benefit back from a licensed copier.

In summary, if the semiconductor industry is to continue on its enormously successful path of providing jobs and exports, helping us conserve energy, and improving the quality of our lives in many other ways, it must have the assurance that its gigantic investment in research and development will have a chance to pay off: it needs protection from chip pirating!

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