Superconductivity
Critical Technology Assessment of the U.S. Superconductivity Industry
EXECUTIVE SUMMARY
Background
- The National Defense Authorization Acts 1991 and 1993 require the Departments
of Commerce and Defense to prepare assessments for the Senate and House
Armed Services Committees on the financial and production status of industries
supporting technologies critical to current and next generation defense
systems.
- Superconductivity was one of the six such technologies chosen for initial
analysis by a consensus of the Department of Commerce (Bureau of Export
Administration), Department of Defense and the White House Office of Science
and Technology Policy. The other assessments cover Advanced Composites,
Advanced Ceramics, Artificial Intelligence, Flexible Computer Integrated
Manufacturing, and Optoelectronics. While the Department of Defense has
deemed these technologies essential to the development of the next generation
of weapon systems, they are also crucial to the nation's ability to compete
in the global economy.
- The primary objective of these assessments is to provide industry executives
and government policymakers with comprehensive information and analysis
on the production and technology status, economic performance, and international
competitiveness of private sector firms involved in critical technologies,
in light of declining defense budgets.
- The Department of Commerce's Office of Industrial Administration (OIRA),
Strategic Analysis Division, is the office within the Bureau of Export Administration
responsible for conducting these critical technology assessments. For each
technology, OIRA created an advisory team made up of experts from government
agencies and the private sector. The team included representatives from
Commerce's Technology Administration (including the National Institute of
Standards and Technology) and International Trade Administration, and the
Department of Defense's Office of the Deputy Assistant Secretary for Production
Resources/Manufacturing Technologies. Assistance was also provided by Defense's
Advanced Research Project Agency, the U.S. Air Force, and the White House
Office of Science and Technology Policy.
- The FY 1991 and FY 1993 National Defense Authorization Acts require that
the assessment address a number of factors. These factors include the financial
ability of U.S. industries supporting these technologies to conduct R&D,
apply the technologies to the production of goods and services, and maintain
a viable production base in the wake of reductions or terminations in defense
procurement; trends in profitability, investment, and R&D for these
critical industries; international competitiveness and market trends; consequences
of mergers, acquisitions, and takeovers; effects of dependence on foreign
or foreign-owned suppliers; results of DOD spending on these technologies;
efforts of DOD to expand its use of commercial technology and equipment;
and the need and effort of industry in the area of defense conversion.
- OIRA sent comprehensive questionnaires to U.S. industry under authority
of the Defense Production Act of 1950 (DPA), as amended, and related Executive
Order 12656. Information regarding the foreign superconductivity industry
was gathered by BXA's Office of Foreign Availability (OFA). In preparing
this separate assessment, OFA contacted industry specialists in domestic
and foreign firms as well as experts in government and academia.
Technology Overview
- Superconductivity is a state in which a material experiences no resistance
to electricity. This lack of resistance means that almost no electricity
is lost to heat when a direct current is passed through a superconductor.
Superconductors can thus generate very strong magnetic fields without the
heat generation and electric current losses to resistance that occur with
conventional conductors.
- Two classes of materials are known to be superconducting under the right
circumstances: Low Temperature Superconductors (LTS),
which are metals or alloys and fullerenes; and High
Temperature Superconductors (HTS), which
are oxides or ceramics.
- For purposes of the survey, the superconductivity industry was roughly
divided into three areas: Enabling Technologies,
Components and Devices, and Systems
and Applications. Systems and Applications
were further divided into Medical Applications,
Energy Applications, Transportation or Industrial
Applications, and Electronics
Applications.
Company Identification
- There is much basic research still to be done on superconductivity; it
is, however, appropriate to speak of a superconductivity industry in the
usual commercial sense. LTS in particular is an established technology,
but HTS has also developed enough to make products commercially available.
This assessment focuses primarily on these commercial aspects of the industry.
- Most of the 40 respondents were individual companies, and they split for
the most part into two groups: small or mid-size companies whose main business
is superconductivity or related enabling technologies, and large companies
who have the resources to maintain a relatively small superconductivity
unit that is not one of their core businesses.
- Most firms combined manufacturing and R&D functions in the same establishment.
California had 12 establishments, the highest concentration, followed closely
by New York with ten. Eighteen companies stated that they had plans to expand
their superconductivity operations by building new facilities within the
next five years.
Employment
- Total employment shows a slow but steady gain of 6.6 percent from 1989-1992.
Taking estimated 1993 numbers into account, totals would show an 11.8 percent
increase over the five-year period. The high ratio of scientists to marketers
reflects the developing nature of the technology.
- Labor concerns most frequently mentioned by respondents were related to
the technical skills and educational qualifications of current or prospective
employees. However, the slow economy of recent years seems to have eased
this problem: as other firms have downsized, there are qualified technical
people available.
Production
- Respondents' government sales grew by 286 percent from 1989-1992, but
they were still dwarfed by commercial sales. Exports accounted for a healthy
percentage of total sales, growing from 29 percent of sales in 1989 to 36
percent in 1992.
Research & Development
- Total reported R&D funding from all sources rose 19.4 percent over
the period from 1989-1992. In-house funding exceeded government funding
each year from 1989 to 1992
- Respondents' receipt of Federal funding rose 14.6 percent from 1989-1992.
The Departments of Energy and Defense are responsible for the major share
of government R&D funding captured by the survey.
- Total R&D outlays by responding companies showed a 20.3 percent increase
over 1989-1992. While spending supporting R&D on enabling technologies
rose every year from 1989-1992, respondents projected a significant drop
in their estimate for 1993. Components and devices, as a category of R&D
expenditures, almost doubled from 1989-1992 and was projected to continue
rising in 1993. Systems and applications outlays fluctuated from year to
year, without showing a clear trend.
Financial
- All forty study participants provided financial information for some or
all of the period covering 1989 to 1991. Of these firms, 28 firms provided
information for each of these years.
- While aggregate sales of all respondents show an increase each year, increasing
87.9 percent between 1989 and 1991, about half the companies reporting had
a net loss in each year, with the most respondents (19 of 34 or 56 percent)
reporting losses in 1991.
- In 1991, over half of the firms reporting data for all three years (15
of 28, or 54 percent) were operating at a loss, while in 1989 and 1990 slightly
less than half experienced losses (46 percent and 43 percent, respectively).
- In spite of financial difficulties, one company's response seems to sum
up the industry's tenacious attitude: "We are going to hang in there, come
hell or high water, and eventually we hope that persistence and fortitude
will win the day."
Impact of Defense Cuts
- Two-thirds of respondents indicated that they would be adversely affected
by cuts in the defense budget over the next five years. Companies could
be affected by the cuts in two ways: directly, since over 50 percent of
reported Federal R&D funding came from DOD; and indirectly, by restricting
defense-oriented customers of superconductivity-related products, restricting
these products' sales and thus producers' money for R&D.
- The importance of DOD as a customer (direct or indirect) was stressed
in respondents' comments: "Government funding keeps R&D in superconductivity
afloat. No R&D, production suffers." Military systems are traditionally
the initial endusers of highly advanced technology that is financially risky
to develop. If DOD as the customer is not as strong, the technical development
will proceed more slowly.
Government Programs
- Twenty-eight respondents indicated that they have participated in one
or more government programs. The most frequently mentioned was the Small
Business Innovative Research (SBIR) program. Other programs mentioned included
the National Labs' Pilot Centers, the Advanced Technology Program (ATP),
and the Strategic Partnership Initiative.
- The respondents ranked both the SBIR and the ATP highly, in terms of suitability
to their funding needs. Both programs are scheduled for large budget increases
in the coming years.
Obstacles to Competitiveness
- According to survey respondents, technological obstacles to competitiveness
include the need for further development of HTS wire and related devices,
and, for those companies in LTS, contending with maturing technologies and
competition from HTS.
- The recession was a financial obstacle to competitiveness, according to
respondents; also, there is a need for capital, particularly to help firms
through the commercialization process.
- Legal/regulatory obstacles listed included environmental, export, workers'
compensation, and other regulations which have proven burdensome for firms
in the industry.
International
- The United States and Japan have the largest share of the market for super
conducting materials and systems. These countries have the largest application
markets, and they also have the most sophisticated academic and industrial
research bases to support insertion of super conducting materials and devices
into commercial systems.
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