The US semiconductor industry will grow 40% over the next five years, despite significant recent erosion of the domestic market to Japanese imports, according to a report from by Data Resources Inc, Lexington, Massachusetts. The outlook for semiconductors is seen to be strong despite the inroads made by the Japanese in recent years, because US chip makers will continue to benefit from three emerging trends – defence spending, technological advances, and the falling dollar. The US Defense Department, which accounts for about 12% of all semiconductors purchased in the US, wants to buy the chips only from the US manufacturers. While US industry has lost ground to the Japanese in the commodity chip market, custom chips, in which US manufacturers dominate, are seen to be the wave of the future. At the same time, the recent quantum appreciation of the yen against the dollar – which may well still have further to go – will make US chips more competitive, the researchers reckon. Data Resources Inc is a unit of McGraw-Hill Inc.