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Chips driving economy, study says

What trains and crude oil were to past markets, the semiconductor is to today's economy.

What trains and crude oil were to past markets, the semiconductor is to today's economy, according to a study from the Semiconductor Industry Association.

Semiconductor manufacturers have collectively become the primary engine of the modern economy and the most significant players in the manufacturing sector, according to an association report presented to the National Press Club today. The report cautioned, however, that future growth will depend upon sustained investment in manufacturing plants and research.

Between 1987 and 1996, the semiconductor industry's contribution to the U.S. economy grew 15.7 percent per year and rocketed from the 17th rank to top standing among all manufacturing industries.

In 1996 alone, the industry contributed $41.6 billion of value (sales revenues minus manufacturing expenses) to the U.S. economy. By 2002, the industry's share of the economy will likely double, said Robert Darmuth, an economist with Nathan Associates and the author of the report.

More significantly, the industry remains the bedrock for the high tech industry, which contributed $149 billion to the domestic economy in 1996 and employed 4.3 million people, according to the study.

The surge in sales have spilled over to an improved employment picture as well. Since 1991, the industry has accounted for close to 8 percent of all job growth in the manufacturing sector. Average wages for the 257,000 people employed directly in the semiconductor industry came to $54,900 in 1996, 15 percent more than other manufacturing sectors. Even when executive salaries are removed from the calculations, average semiconductor wages came to $36,600, higher than the average manufacturing wage of $28,100.

Still, the chipmaking life is not a complete bowl of cherries. Continued investment, especially in fabrication plants and research, will be necessary. Over the years, the increasing complexity of chips has raised the cost of chip manufacturing plants. In 1996, $9.5 billion was invested in plant capacity and research.

"To maintain our global leadership, the U.S. must continue its aggressive pursuit of fair trade practices in international markets, increase investment in scientific research at universities, and address the educational and employment need of all high tech industries," said George Scalise, the trade group's president.