George Scalise President Semiconductor Industry Association President

2 Charter Members * SIA Board Company Advanced Micro Devices* Agere Systems* Altera* AMI Semiconductor Analog Devices* Atheros Communications Conexant Systems* Eastman Kodak Fairchild Semiconductor Freescale* IBM* Integrated Device Technology Intel* International Rectifier Intersil Corporation* Jazz Semiconductor Lansdale Semiconductor LSI Logic* Micron Technology* National Semiconductor* NVIDIA* ON Semiconductor Pixelworks PMC-Sierra QP Semiconductor QUALCOMM* QuickLogic Rambus Rochester Electronics Texas Instruments* Xilinx*

3 Profile of the U.S. Semiconductor Industry 2005 Sales = $110 Billion 2005 World Market Share = 48.3% of $227.5 Billion Market U.S. Jobs = 225,000* Percent of Sales Outside U.S. Market = 77% R&D Investment = $18 Billion, 17%* Capital Equipment = $11 Billion, 10%* Historically about Percent of Revenues Invested in the Future Source: SIA, U.S. DoL * Preliminary Numbers for 2005

4 Although 73% of U.S. chip industry sales are outside the U.S. market, U.S. chip companies currently have most of their facilities and employment in the U.S. 27% of Sales in U.S. Market 55% of U.S. Industry’s Worldwide Employment in North America 77% of U.S.- Owned Capacity in the U.S. 75 % of U.S. Industry’s Labor Compensation in North America

5 Cost of 1MB DRAM: Source: DQ/Micron/WSTS $/MB DRAM

6 IT Producing Industries Spur Growth Non-IT-Intensive Industries Intensive IT-Using Industries IT-Producing Industries IT Producing Industries are: Semiconductors, Computers, Communications, and Software. (50%) (25%) (72%) (25%) (3%)

Brian L. Halla Chairman of the Board, Chief Executive Officer National Semiconductor Corp. Chairman of the Board, Chief Executive Officer National Semiconductor Corp.

U.S. Competitiveness – Maintaining the Lead

9 October 4, 1957

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11 Space Race Breeds Tech

12 Space Race Breeds Tech

13 Space Race Breeds Tech

…That’s How We Got Here!

15 We’ve Only Just Begun…   The Gold Rush is taking place…   in China   The next Gold Rush is coming...   in India   in Russia   The American Dream?   The Gold Rush is taking place…   in China   The next Gold Rush is coming...   in India   in Russia   The American Dream?

…Maintaining Momentum (Not Screwing This Up)

17 The “Perfect Storm”...   AT&T break-up, Bell Labs’ demise   Shortened DARPA funding horizon   Declining foreign PhD candidate enrollment in U.S. universities   H1-B visa concerns limiting foreign PhD career paths in the U.S.   We have no new Sputnik threat   Emerging nations pushing R&D, tax incentives & stock options   U.S. falling behind in deploying new technology   K-12 schools not filling the pipeline   Distracting priorities   AT&T break-up, Bell Labs’ demise   Shortened DARPA funding horizon   Declining foreign PhD candidate enrollment in U.S. universities   H1-B visa concerns limiting foreign PhD career paths in the U.S.   We have no new Sputnik threat   Emerging nations pushing R&D, tax incentives & stock options   U.S. falling behind in deploying new technology   K-12 schools not filling the pipeline   Distracting priorities

18 Competitiveness Programs   Innovate America   Rising Above the Gathering Storm   TechNet Innovation Initiative   Losing Competitive Advantage   Tech Industry at an Innovation Crossroads   Tapping America’s Potential   Computational Science: Ensuring America’s Competitiveness   Sustaining the Nation’s Innovation Ecosystems   Choose to Compete   Innovate America   Rising Above the Gathering Storm   TechNet Innovation Initiative   Losing Competitive Advantage   Tech Industry at an Innovation Crossroads   Tapping America’s Potential   Computational Science: Ensuring America’s Competitiveness   Sustaining the Nation’s Innovation Ecosystems   Choose to Compete

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20 Where We Are Going   Fabulous future for our industry   What’s needed:   Funding for basic research & universities   Access to the best & the brightest   Awareness of the role of technology   Leadership!   Fabulous future for our industry   What’s needed:   Funding for basic research & universities   Access to the best & the brightest   Awareness of the role of technology   Leadership!