Recent public concern over international trade issues has focused on the integrated circuit (IC) industry, in which the United States has begun to lose its international dominance to Japanese producers. For 25 years, the U.S. IC industry has been one of the most technologically dynamic of all U.S. manufacturing industries. Few industries can match its record of growth in employment and productivity and its price and performance improvements. Technological improvements in ICs have been sources of technological revolutions in computers, telecommunications, and other electronics manufacturing activities. Price reductions and performance improvements in IC products have provided opportunities for new entry and innovation in the production of electronics goods. In short, the U.S. IC industry has been a major source of long-term economic growth and employment in the U.S. economy.

The last decade of economic growth in the IC industry has been accompanied by major changes and stresses. In this respect, the IC industry shares features with other maturing industries. With maturity, the seemingly boundless opportunities confronting a new industry are constrained by problems of meeting competition for existing major markets, coordinating new product innovation with existing products, and making the investments necessary for sustained expansion. Maturation of the IC industry has occurred during a period of increasing convergence of industrial output and technological capabilities within industrialized nations. This convergence in industrialized economies has led to both larger international markets and more direct competition among firms for participation in these markets.