[Congressional Record Volume 141, Number 36 (Monday, February 27, 1995)]
[Extensions of Remarks]
[Page E443]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[[Page E443]]
                THE SEMICONDUCTOR INVESTMENT ACT OF 1995

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                         HON. NANCY L. JOHNSON

                             of connecticut

                    in the house of representatives

                       Monday, February 27, 1995
  Mrs. JOHNSON of Connecticut. Mr. Speaker, today I am pleased to join 
my Ways and Means Committee colleagues, Representatives Robert Matsui, 
Phil Crane, and Barbara Kennelly, as well as Congresswoman Anna Eshoo, 
in introducing the Semiconductor Investment Act of 1995. This 
legislation will enhance the international competitiveness of the U.S. 
semiconductor industry by changing the statutory life of semiconductor 
manufacturing equipment to more accurately reflect the industry's rapid 
pace of technological change. This change in the tax depreciable life 
of semiconductor manufacturing equipment from 5 years to 3 years will 
enable U.S. semiconductor manufacturers to recover capital costs 
incurred in maintaining state-of-the-art facilities over a period that 
more closely approximates economic life.
  Semiconductors are at the core of all aspects of the information 
highway. They drive technological advances in computers, 
telecommunications and consumer electronics, and change our society in 
ways ranging from telecommuting to electronic banking to promoting 
citizen access to legislation through the Internet. Semiconductors are 
at the heart of the $500 billion U.S. electronics industry that employs 
more than 2 million Americans. The U.S. semiconductor industry alone 
provides over 200,000 high-skilled American jobs and has recently 
regained its position as the world's leading producer of chips. It is a 
highly capital intensive industry that demands continuing changes to 
manufacturing infrastructure.
  This dynamic industry is based on ever-evolving technology. The rapid 
pace of technological change makes semiconductor manufacturing 
equipment obsolete, technologically and economically, soon after being 
placed into service. Recent economic studies and normal business 
practices indicate that such equipment should qualify for a 3-year 
depreciable life under tax depreciation rules because two-thirds of the 
equipment's economic usefulness is exhausted in the first 2 years and 
the equipment's full economic life is less than 4 years. However, 
current U.S. tax rules depreciate semiconductor manufacturing equipment 
over 5 years, a period significantly longer than the equipment's true 
economic life. As a result, the U.S. semiconductor industry is at a 
competitive disadvantage with foreign firms whose cost recovery rules 
more accurately reflect economic reality.
  Japanese semiconductor producers, for example, may depreciate up to 
88 percent of their manufacturing equipment in the first year. U.S. 
producers, on the other hand, may depreciate only 20 percent in the 
first year. Thus, existing U.S. cost recovery rules are a key factor in 
determining whether firms build new plants in the United States or 
overseas. In view of the fact that the global semiconductor industry is 
expected to invest $120 billion in capital expenditures during the 
remainder of this decade, we need more accurate cost recovery rules to 
ensure that much of that investment is made here--not overseas.
  To compete in today's global market, our domestic manufacturers must 
be able to recover the cost of their capital investments in a timely 
manner. Reducing the depreciable life of semiconductor manufacturing 
equipment to 3 years will enable U.S. semiconductor manufacturers to 
invest the capital needed to keep pace with rapid technological changes 
and strengthen their international competitiveness.
  Mr. Speaker, it is my hope that, as the Committee on Ways and Means 
reviews the operation of the existing cost recovery rules in the 
context of the Contract With America, we may have the opportunity to 
update this narrow, but economically significant, aspect of our cost 
recovery rules. I urge my colleagues to join us as sponsors of this 
initiative to keep the United States the home of cutting-edge 
semiconductor technology.


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