The United States is the largest chip developer in the world. But as semiconductors become more ubiquitous and important, other countries are gaining chip design prowess and market share.
If the US is to maintain its position as the world’s largest chip developer, the US government will need to help fund local semiconductor R&D, according to a report by the Semiconductor Industry Association and the Boston Consulting Group.
Chip development is expensive
US companies control about 46% of global semiconductor design revenue, about 2.5 times more than the nearest competitor. The United States is particularly strong with logic chips, such as CPUs, GPUs, and various other complex SoCs, as companies like AMD, Apple, Intel, Nvidia, and Qualcomm dominate the markets for processors, graphics cards, and SoCs. mobiles.
But 46% is down – the United States controlled more than 50% of the market in 2015, according to the SIA. This loss is due to the fact that countries such as China, South Korea and Taiwan have been gaining design-related market share for years, thanks to semiconductor research and development activities supported by the federal and federal governments. local, as well as the development of national talent. For example, in 2021, South Korea approved a $450 billion plan to develop the local semiconductor industry over the next 10 years. This figure included $1.3 billion for AI and power chip design.
If nothing changes and the US continues on its current downward trajectory, the US share of chip design revenue could drop to 36% by the end of the decade, according to the report.
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As logic and memory chips become more complex, they require more R&D investment and more engineering talent. The cost of designing a fairly complex chip to produce with 5nm class process technology – which includes the design of the physical ICs and associated software – is estimated to be over $540 million, according to International Business Research. American companies produce dozens of such systems-on-chips every year, spending billions on design-related R&D. In 2021 alone, American companies have invested around $40 billion in chip design.
Semiconductor Industry Association analysts estimate that the US public sector should invest between $400 billion and $500 billion over the next 10 years in R&D and workforce development. But they think that’s not enough to maintain chip design leadership for the entire country.
SIA and BCG experts warn that the U.S. semiconductor design industry already faces a shortage of skilled workers – and by 2030, that shortage could reach 23,000 as science graduates , Technology, Engineering and Mathematics (STEM) will leave the industry.
In addition, things such as export restrictions for creme de la creme processors for the growth of artificial intelligence and high-performance computing applications (e.g. AMD’s Instinct MI250X, Ponte Vecchio from Intel and Nvidia’s A100 and H100 compute GPUs that sell for more than $10,000 each) further threaten the ability of US companies to invest in R&D since such restraints limit their revenue growth.
Major OEMs depend on chips
Chip design prowess not only ensures the prosperity of US chip developers, but also the success of adjacent OEMs. In the United States, this includes 34 world-class companies, including Apple, Dell, HP and HPE. In contrast, there are 27 major companies in China, including Huawei, Lenovo, BKK and Xiaomi, which consume chips made in the People’s Republic as well as elsewhere.
The Chinese government understands how important it is to develop chips domestically — even if produced elsewhere — and has nurtured its local design industry for years. Profits of China’s top 25 fabless companies doubled from $12.2 billion in 2017 to $24.4 billion in 2020, according to SIA data.
Public sector chip development funding needed
The CHIPS & Science Act passed earlier this year involves spending $11 billion on various R&D projects focused on new methods of producing semiconductors (i.e. new fundamental manufacturing technologies) , advanced semiconductor research (transistor structures, materials), metrology research and innovative chip packaging.
But the law won’t fund chip designers: while Micron and Western Digital will get funding to conduct pre-competitive R&D on materials, transistors, manufacturing methods, analysis and metrology, they won’t get nothing to design real products that will compete with those developed elsewhere.
Developing real products before the competition is extremely important because it allows pioneers to set new market standards for others to follow. Companies that set their own standards also tend to benefit directly. For example, Nvidia’s proprietary parallel computing platform and CUDA development environment is so far ahead of its rivals that the company has seen years of dominance in certain AI and HPC sectors.
Currently, about 13% of R&D in semiconductor design in the United States is funded by public investment. Around 20-30% of this R&D is funded by governments, local authorities or tax incentives in Europe, Taiwan, South Korea and Japan. In China, no less than 45% of R&D related to chip design is funded by direct public funds (government, local authorities, public universities, etc.), tax incentives and other initiatives.
To ensure US leadership in chip design in the future, public sector investment is needed, say experts from the Semiconductor Industry Association and the Boston Consulting Group.
The good news is that every public dollar invested in design and R&D would leverage additional private sector investment and thus significantly increase actual chip sales, analysts say.
They estimate that if the US public sector invests $20-30 billion by 2030 in design and R&D (including a $15-20 billion tax incentive for design), it would eventually generate sales. related to the design of approximately $450 billion over 10 years. It would also train and employ 23,000 semiconductor design engineers and create 130,000 indirect jobs.
The United States still leads in advanced logic processors and other logic, but lags behind in memory, sensors, and optoelectronics. That’s not going to change anytime soon, but the share of chip design revenue controlled by US companies could also drop in the coming years if current trends continue.
Industry experts believe that public sector funding of chip design and R&D in Europe and Asia will allow non-US companies to increase their share of chip design revenue if the US does not do not act.
Public investment in chip design R&D in the United States need not be extremely high, because the chip development ecosystem already exists – and there are dozens of competitive chip designers in the country. .
The SIA and BCG report indicates that if the U.S. public sector invests between $20 billion and $30 billion by 2030 in design and R&D (including tax incentives), it will fuel private sector investment and generate incremental design-related sales of approximately $450 billion over 10 years. That would be more than enough for the US to maintain its position as the world’s top chip developer.
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