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Lou Tomasetta, the CEO of Vitesse Semiconductor Corporation in Camarillo,

California, is an expert in transistor physics, data communications, and GaAs integrated

circuit manufacturing. Neither Tomasetta nor I can figure out why our government is

making GaAs wafers in space. He calls the program a "solution looking for a problem."

We both sit on the Board of Vitesse, one of America's Big Three GaAs companies. Given

the possibility that we were missing something, I called Steve Sharp, who runs TriQuint

Semiconductor, another of the Big Three, in Oregon. Sharp said that he was buying GaAs

wafers for $175 each and that the very highest performance GaAs wafers sold for $1,000.

He said that it would be very difficult to figure out how to make money on a $10,000

space wafer.

In response to criticisms I published in an industry publication, Electronic News,

challenging the commercial value of the space wafers, the head of the SVEC project said

the wafers "could be useful for technologies not yet developed" and then listed numerous

commercial products with technology derived from ordinary terrestrial wafers, including

CD players and optic fibers, that already are on the market.

Maybe we are all missing something, but I think our government has taken several

hundred million dollars from American taxpayers to subsidize an exotic technology manu-

factured in an exotic place for a super-high-tech industry that neither needs nor cares

about the investment.

Spending That Cripples: European Semiconductor Subsidies

One form of modern corporate welfare that almost always produces unintended

consequences is protectionism. Particularly in the high-tech area, trade barriers help some

firms only at the expense of raising the costs and lowering the U.S. competitiveness of

others. A recent case in point is the tariff that the European Union placed on

semiconductor chips imported into Europe.

Currently, semiconductors make up about 20 percent of worldwide electronic

shipments. In other words, the average personal computer contains about 20 percent of

its value in semiconductors. Or, put another way, for every $1 in semiconductor sales,

there is $5 in computer or home electronics sales.

When the European Union decided to protect its fledgling semiconductor industry

by imposing a stiff 14 percent tariff on imported chips, it also raised the price that the

European computer industry had to pay for its most important raw material, chips. The

EU policy to protect its small semiconductor industry had a devastating impact on its

much larger computer industry. Europe's largest computer company, Great Britain's ICL,

had to sell a 50 percent stake to Fujitsu to stay afloat. Nixdorf, a prominent German

computer company, was acquired by Siemens after a financial crisis. Italy's Olivetti,

Europe's biggest PC producer, still sells PCs, but it stopped manufacturing, triggering big