President Obama Delivers 2013 State of the Union Address; Highlights Many SEMI Priorities

President Obama Delivers 2013 State of the Union Address; Highlights Many SEMI Priorities

By Jamie Girard, senior director, Americas Public Policy, SEMI

On February 12, 2013, President Barack Obama appeared before a joint session of Congress to deliver the annual State of the Union address.  Although all such speeches are important and influential, this particular speech marks the first such opportunity for the President to lay out the vision for his second term to Congress and the nation.  With the 2012 election only recently behind us, the “clock is running” as pundits are already talking about 2016. President Obama has a narrow window in which to try and make a meaningful mark in his second term before the proverbial “lame duck” label becomes attached to him, weakening his clout and ability to push forward his legislative agenda.

With this in mind, the President laid out a positive agenda that hit many of the issues about which SEMI members are concerned.  Increasing US manufacturing was a central theme of the speech, with other important issues like federal funding of research and development, corporate tax reform, solar energy, high-skilled immigration reform, and trade given air time as crucial priorities for the second term.

Manufacturing

“Our first priority is making America a magnet for new jobs and manufacturing… I ask this Congress to help create a network of 15 of these [manufacturing] hubs and guarantee that the next revolution in manufacturing is made right here in America…Now is not the time to gut these job-creating investments in science and innovation.  Now is the time to reach a level of research and development not seen since the height of the Space Race.  We need to make those investments.”

The President’s commitment to expanding American manufacturing and supporting high tech and innovative industries is of special note to SEMI.  With 40 percent of the world’s semiconductor equipment being manufactured in the U.S., it’s important that the federal government compete with the incentives that are offered by other countries around the world.  Innovation has always been strength in America, and Obama National Network for Manufacturing Innovation (NNMI) looks to partner public funds with private industry and academia to support innovation for the future.

SEMI supports the President’s efforts, and is actively supporting efforts in the US Congress to pass legislation that will allow the opening of up to 15 centers to bring new industrial innovations out of the R&D phase and into full commercialization.  Manufacturing is critical to GDP growth in the U.S., and is one of the most labor intensive pursuits available in ability to create and sustain jobs.  SEMI member companies have long been a positive example of great American manufacturing and believe that the federal government should do more to support these endeavors.

Tax Reform

“Now is our best chance for bipartisan, comprehensive tax reform that encourages job creation and helps bring down the deficit.”

SEMI supports comprehensive corporate tax reform as a way to make doing business in the U.S. more attractive for SEMI members.  As such, SEMI’s North American Advisory Board has approved a set of tax reform principles that they believe should be the guidelines for any corporate tax reform effort.  These three principles are:

1)    Lower the top corporate tax rate from 35 percent: The U.S. corporate tax code should be lowered to be more competitive with other developed nations.  The U.S. now has the highest corporate tax rate of any developed nation, putting America at a distinct disadvantage when it comes to business investment in our country.  SEMI would like to see the top corporate tax rate reduced to be closer to the average rate of 25.1 percent, which is essential to changing to the way tax rates factor into company decisions to invest in this country. 

2)    Retain tax incentives which promote innovation: While SEMI would support the elimination of certain tax exemptions in return for lower rates, we also believe that the U.S. must continue to support American innovation as a fundamental driver of our economy.  SEMI members thrive in an intense research and development environment. Typically, our members invest 10-15 percent of their revenues back in R&D each year to keep up with the latest improvements that are demanded of them by the fast pace of innovation in the microelectronics industry.  We believe that it is in the country’s best interest to ensure the availability of incentives which prioritize research and development as an important economic driver.  Currently, the R&D tax credit acts as such an incentive, and so we support it being made permanent, or in its place a policy of equal strength to promote American innovation.

3)    Shift to a territorial tax system: Finally, the current American system is an outdated relic of a past in which the U.S. was the only dominate global business center.  Time has changed the way that companies do business, and that should be reflected in our tax code.  Moving to a territorial tax system that is more in line with the way the rest of the world taxes business will make the U.S. a better place for corporations to be headquartered, and therefore create increased economic activity

Solar PV

“Solar energy gets cheaper by the year — let’s drive down costs even further. As long as countries like China keep going ‘all in’ on clean energy, so must we.”

While the Solar PV industry has seen its share of challenges, the market has continued to expand.  The U.S., thanks to SEMI member companies, has a strong supply chain in both equipment and material for PV.  There remains much promise in PV, and it’s important the federal government compete with the dominant players in Europe and Asia for a share of this market.  That’s why SEMI continues to advocate for supportive solar policies like the Advanced Energy Investment Tax Credit (ITC), and for newer legislation like the Master and Limited Partnership Parity Act, which levels the playing field for investment in solar with oil and natural gas.

High-Skilled Immigration Reform

“Our economy is stronger when we harness the talents and ingenuity of striving, hopeful immigrants.  And right now, leaders from the business, labor, law enforcement, faith communities — they all agree that the time has come to pass comprehensive immigration reform…And real reform means fixing the legal immigration system to cut waiting periods and attract the highly-skilled entrepreneurs and engineers that will help create jobs and grow our economy.” 

SEMI has been working for many years to force implementation of reform in high-skilled immigration. Long thought to be an issue that was too divisive and too partisan to achieve meaningful reform, the narrative that has emerged from last year’s election is that politicians can no longer avoid the need for comprehensive immigration reform if they hope to ever get re-elected.  The shifting demography of the U.S. that was so apparent in the voting turnout in November 2012 has led policymakers to believe that now is the time to act.  Central to any reform effort will be the need to change the way to U.S. attracts and retains high-skilled workers who are so essential to the semiconductor industry.

Trade

“To boost American exports, support American jobs, and level the playing field in the growing markets of Asia, we intend to complete negotiations on a Trans-Pacific Partnership.  And tonight I’m also announcing we will launch talks on a comprehensive Trans-Atlantic Trade and Investment Partnership with the European Union, because trade that is fair and free across the Atlantic supports millions of good-paying, American jobs.”

President Obama’s call for the launch of a comprehensive transatlantic trade and investment partnership with the EU is tremendously significant.  Already the world’s largest bilateral trading relationship with an annual value of approximately $650 billion, an all-encompassing agreement to further reduce barriers to trade and investment would be significant based on trade volume alone.  However, any agreement would also hold strategic significance, as an EU-U.S. deal would give rise to a dominant economic alliance that would strongly influence other nations toward free trade.  The Administration hopes to begin negotiations by June and has set the ambitious goal to conclude talks by end of 2014. This accord would be the most significant since the founding of the World Trade Organization (WTO) in 1995, with estimates that implementation would raise the GDP of both economies by one-half a percent per year. 

Conclusion

While SEMI is encouraged by many of the topics that were supported by President Obama is his address, these efforts still need require much hard work  to become the law of the land.  That’s why SEMI will continue to work with the Administration and members of both parties in Congress to implement the changes necessary to support a strong equipment and materials industry in the United States.  Through the work of the SEMI Washington, D.C. office, we will continue to advocate for the best interests of the industry in the nation’s capital.

If you have any questions regarding SEMI Public Policy or how you or your company can be more involved, please contact Jamie Girard, senior director, Americas Public Policy, at jgirard@semi.org or 202-289-0440.

March 5, 2013