Semiconductors, tiny electronic devices based on silicon or germanium, provide data processing capabilities in millions of products, from coffee pots to space vehicles. The U.S. government played a significant role in the development of semiconductor technology, and domestic research and production have long been matters of intense congressional interest. U.S.-headquartered semiconductor firms accounted for about half of worldwide semiconductor sales in 2015. However, U.S.-headquartered producers face stiff competition from firms headquartered in South Korea, Japan, and Taiwan; moreover, the Chinese government has identified global leadership in semiconductors as a national priority. Further, the United States accounts for a diminishing share of global semiconductor production capacity, as manufacturers establish plants in locations where generous subsidies are available or customers in user industries, such as electronic products manufacturing, are nearby. In July 2015, Members of Congress concerned about the industry's competitiveness formed a Semiconductor Caucus to support increased federal funding for semiconductor research activities, among other objectives. A semiconductor chip (also known simply as a "semiconductor" or "chip") is a tiny electronic device (generally smaller than a postage stamp) comprised of billions of components that store, move, and process data. These functions are made possible by the unique properties of semiconducting materials, such as silicon and germanium, which allow for the precise control of the flow of electrical current. Semiconductors are the enabling technology of the information age. Semiconductors allow computers to run software applications, such as email, Internet browsers, and word processing and spreadsheet programs and to store documents, photographs, videos, music, and other data. They also provide the "brains," memory, and data communication capabilities of countless other products, from cell phones and gaming systems to aircraft and industrial machinery to military equipment and weapons. Even many products with roots in mechanical systems are now heavily dependent on chip-based electronics: one car manufacturer asserts that some of its models incorporate as many as 6,000 semiconductors. And one expert on software in cars estimates that premium-class automobiles can contain close to 100 million lines of software code (instructions) that the chips use to control the vehicle. Military applications were the primary driver for the invention of semiconductors. Early computers relied on thousands of vacuum tubes, crystal diodes, relays, resistors, and capacitors to perform simple calculations. The federal government, academia, and U.S. industry undertook efforts to reduce and simplify the number of these devices. The invention of the transistor, a simple semiconductor device capable of regulating the flow of electricity, was followed by the development of the integrated circuit (IC), in 1958. ICs allowed thousands of resistors, capacitors, inductors, and transistors to be "printed" and connected on a single piece of semiconductor material, so that they functioned as a single integrated device. In addition to funding academic and industrial research that contributed to the early development of semiconductor technology, the federal government played a central role in the commercialization of the technology through purchases of semiconductors for a variety of military, space, and civilian applications. The semiconductor industry has a rapid internal product development cycle, first described by the former CEO and co-founder of Intel Corporation, Gordon Moore. Moore's Law, which is actually an observation about the pace of development and cost reduction in chip speeds, has held true for decades. It states that the number of transistors in a dense integrated circuit will double about every 18 months to two years, making semiconductors smaller, faster, and cheaper. The effects of Moore's law are evident in short product life-cycles, requiring semiconductor manufacturers to maintain high levels of research and investment spending. A main challenge for the industry is that semiconductor inventory and technology can become obsolete quickly, leaving producers with serious financial problems if they have unsalable inventories as improved designs displace existing products. A major question facing semiconductor manufacturers is whether fundamental physical limits may soon make it difficult to pack more transistors onto a silicon device in an economical way . If this proves to be the case—the continuing validity of Moore's law is hotly debated—then manufacturers would need to find other methods of improving semiconductors. Research is underway into new approaches to computing (such as quantum computing, optical computing, and neuromorphic (brain-like) computing) that could, theoretically, vastly surpass the storage, processing, and transmission capabilities of semiconductor technology. These approaches, however, face substantial technological obstacles to their realization. The semiconductor industry is generally characterized by large fluctuations in product supply and demand, depending heavily on the strength of the global economy. U.S.-headquartered firms have the largest share of the global market, measured by sales, at close to 50%. Half of the 20 largest semiconductor firms by revenue in 2015 are headquartered in the United States: Intel, Qualcomm, Micron, Texas Instruments, Broadcom, Apple, SanDisk, NVIDIA, Advanced Micro Devices, and On Semiconductor. Other leading firms are based in South Korea, Japan, Taiwan, and Europe. There are no China-based semiconductor firms on the top 20 list. Only a handful of companies have the sales volume to operate as integrated device manufacturers (IDMs) operating their own fabrication facilities (known as fabs). Other chip firms are "fabless," meaning that they design and market semiconductors but contract production to "foundries" that manufacture semiconductors to order. Taiwan Semiconductor Manufacturing Company (TSMC), a Taiwanese-headquartered company, operates the world's largest foundry. Fabless semiconductor firms generally enjoy higher and less volatile profit margins than semiconductor manufacturers with integrated operations. Potential risks associated with the use of a contract foundry include availability of capacity, timeliness of production, and quality control. Worldwide semiconductor sales reached $335 billion in 2015, up 15.0% over 2012, according to figures from World Semiconductor Trade Statistics (WSTS). During the same period, sales of U.S.-based semiconductor manufacturers rose 14.6%. According to Semiconductor Industry Association (SIA) data, global semiconductor sales have increased at a compounded annual rate of 9.5% over the past 20 years. In recent years, semiconductor sales of U.S.-based companies have accounted for about half of worldwide semiconductor sales (see Figure 1 ). In 2015, total sales of U.S.-headquartered semiconductor firms experienced a contraction, and its global market share dropped two percentage points to 49.6%. In 2015, U.S.-headquartered firms posted sales of $166 billion. WSTS forecasts a modest increase in worldwide semiconductor industry sales to $347 billion (+4%) in 2017. According to semiconductor industry experts, it seems likely that the U.S. market share will remain around 50% in 2017. Semiconductors are classified into major product groups, mainly based on their function. Some of these products have broad functionality; others are designed for specific uses. According to SIA, integrated circuits, which are directly embedded onto the surface of the semiconductor chip, account for the overwhelming majority of industry sales (82% in 2015). The remaining 18% of the market is made up of sales in the optoelectronics, sensors, and discretes (O-S-D) market. Optoelectronics and sensors are mainly used for generating or sensing light, for example, in traffic lights or cameras, and discretes are used in electronic devices to control electric current. Within the integrated circuit market, the four largest segments in 2015 were: 1. Logic Devices. Logic devices are used for the interchange and manipulation of data in computers, communication devices, and consumer electronics. Logic devices are the largest category by sales, accounting for 27% of the total semiconductor market. 2. Memory Devices. Memory devices store information. This segment includes dynamic random access memory (DRAM), a common and inexpensive type of memory used for the temporary storage of information in computers, and flash memory, which retains data in the absence of a power supply. Memory devices account for 23% of semiconductor market sales. 3. Microprocessors. Microprocessors execute software instructions to perform a wide variety of tasks such as running a word processing program or video game. They make up about 18% of semiconductor sales. 4. Analog Devices . Analog devices include analog signal processing technologies, data converters, amplifiers, and radio frequency integrated circuits. These devices, for example, convert analog signals like a musical recording on a phonograph into digital signals like a musical recording on a compact disc. Analog device products account for about 13% of semiconductor industry sales. Many manufacturers specialize in certain types of semiconductors. For example, South Korean manufacturers Samsung and SK Hynix and U.S.-based Micron together account for 90% of global DRAM sales. Heavy dependence on the DRAM market has been a challenge for these companies, as weak demand or excess capacity have at times led to dramatic reductions in prices. U.S.-based Intel Corporation, the largest semiconductor manufacturer by sales, is highly dependent on supplying microprocessors to the personal computer industry. Microprocessors are harder to manufacture, more technologically advanced, and more expensive than other semiconductor products, providing Intel some shelter from competition, but the company is nonetheless affected by weakening global demand for personal computers. Multicomponent semiconductors (MCOs) represent a fast-growing segment of the semiconductor industry. These devices combine two semiconductors into a single unit, which takes up less room within the finished product and use less power. MCOs are commonly used in smartphones, tablets, and automotive braking, steering, and air bag systems. Although SIA does not track sales figures for this market, the U.S. International Trade Commission (USITC) estimates that MCOs account for between 1.5% and 3.0% of global semiconductor industry sales.