Mr. Chairman, I am John R. Colbert, Treasurer of M/ACOM, Inc. I am pleased to have the opportunity to present M/ACOM's views in support of extending the tax credit for increasing research and development expenditures. I have been assisted in preparing this statement by Dr. Joseph Saloom, a Senior Vice President of M/A-COM and Deputy Director of our Components Technology Center, and Mr. Stephen Zezima, our Corporate Tax Manager. Dr. Saloom is one of the administrators of our corporate R&D activities.

M/A-COM was founded in 1950 as Microwave Associates, Inc. and adopted its present name in 1978 to reflect the company's diversification. We have evolved from a company that chiefly sold microwave products to the military into a designer and manufacturer of equipment and systems for use in satellite communications, data communications, television broadcasting and

cable television (CATV).

M/A-COM is the nation's largest

supplier of coaxial cable for the CATV industry and a major designer and manufacturer of numerous digital communications products as well as microwave semiconductors, components and subsystems and other products for commercial and defense applications.

Fiscal 1982 was a record year for M/A-COM, with sales reaching $587 million. However, because of the worldwide

recession, profits were down and earnings per share fell 4% from the previous year. In spite of flat profits, we substantially

increased research and development expenditures in 1982. to discuss this in more detail in a moment.

I want

M/A-COM is a leader in high technology industry in the United States. In the digital communications area, our products include sophisticated modems used to increase the capacity, reliability and security of satellite communications systems; a line of digital processors used for multiplexing data streams into packets for efficient transmission; satellite communications terminals for real time data transmission for business communications; and microwave data transceivers for local distribution of data. We have developed satellite communications systems for the Department of Defense, and we are the largest supplier of digital Time Division Multiple Access (TDMA)

satellite terminals for commercial satellite networks.

communications

In the microwave components area, M/A-COM manufactures

a broad line of products that generate, control and receive microwave energy. These products incorporate microwave

of

semiconductor technology and are sold to manufacturers and users military radar, missile guidance systems, electronic countermeasures equipment, and navigation systems. Some of the specific products include PIN diodes, used to control the passage of electrical energy through circuits; Schottky-barrier and point contact diodes, used to receive and detect microwave signals; Gunn diodes, used to generate low levels of microwave power; and

microwave transistors, used to amplify microwave signals. M/ACOM now has in place the technology base to manufacture the underlying materials--silicon, gallium arsenide and ferrites-used for microwave components, as well as the ability to manufacture circuits, assemblies and subsystems for commercial and defense products. The experience gained from the recent conflicts in the Falkland Islands and the Middle East suggests increasing emphasis on the development of microwave components needed to drive complex electronic warfare systems. On the commercial side, the lighter weight and increased reliability of systems based on microwave semiconductor technology, such as portable microwave transmission systems for electronic newsgathering, assures continued growth and competition.

of

We at M/A-COM were greatly heartened by the recognition the importance of industrial research and development displayed by members of this committee in enacting the R&D tax credit as part of the Economic Recovery Tax Act of 1981, and we have sought to do our part in continuing the American tradition of industrial growth. As a "high technology" manufacturing company, we are acutely sensitive to the continuing need to grow; research and development provides the fertile soil which companies like ours must have in order to prosper.

We view our own research and development program as the element which enables us to maintain the place of leadership we have earned in our own industry. In the fast

vital

growing, highly

competitive

telecommunications

industry the

company with an old product line quickly becomes the company you used to hear about, but don't any more. For an example, TV news coverage used to depend upon a person at the scene who made some sort of recording, which was then transported back to the TV station, then broadcast to the public. Initially, that camera was bulky and heavy, and the film had to be carried away and processed. Today, using technology created by M/A-COM research, easily transportable microwave links and lightweight minicams relay pictures instantaneously to the broadcast station and "live" into the homes of the American public. Now, when Reggie Jackson hits a home run, a new President is inaugurated, or this committee makes the R&D tax credit permanent, we can all see it live as it happens. No more need to wait for "film at 11."

M/A-COM research has application in many facets of American life. For example, microwave sensor technology which was developed for the space program has been applied by our scientists to medicine, resulting in a device which is able to detect both existing and incipient cancer tumors in the human body by sensing a heat differential unique to a tumor. This device is currently being tested in several medical institutions around the country. If it fulfills its promise, it will provide every physician and health facility with affordable access to a reliable means of cancer diagnosis, enabling early treatment of victims. Another device, also in the same testing stage and using similar microwave technology, will allow the treatment of

tumors with a heating process, eliminating in many cases the need The potential for life-saving represented by these

for surgery.

two devices is enormous.

These are but a few examples of the results of our intense R&D effort. Without going into detail, other such products of our most recent research include encryption technology for voice and data, which has both national security and commercial applications; video scrambling equipment for secure satellite distribution of video programming; coaxial cable for information transmission with increased capacity and improved installation capabilities; and satellite telecommunications

technology which enables a widely diverse group of people to share a limited transmission capacity whenever they wish, thereby bringing the cost of these services within reach of a vast number

of users.

the

Mr. Chairman, we appreciate that the question before committee is: "Does the R&D tax credit work? Does it

encourage companies to undertake research and development efforts which it would not otherwise undertake?" The answer from M/A-COM is a resounding "Yes!!"

The credit has been in effect for only two years; yet in that time it has become embedded in the thinking of our company's senior management, and has had the effect of

heightening the corporate priority for research.

of course,

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