US Semiconductor Industry Market Share
Semiconductors were invented in the United States, and the American industry remains the global market leader. Although the U.S. position in the semiconductor industry has been challenged several times over the decades, it has always prevailed due to its amazing resilience and greater ability to lead. However, this does not mean that the United States will not be challenged in the future. The importance of semiconductors is such that most information age nations struggle to remain competitive in (at least) some aspects of this critical industry, while some ambitious nations are trying to catch up to the United States.
The U.S. semiconductor industry accounts for nearly half of the global market and shows steady annual growth
Since the late 1990s, the US semiconductor industry has been the leader in global sales market share with an annual global market share of nearly 50%. In addition, U.S. semiconductor companies maintain leadership in R&D, design and manufacturing process technologies.
Global sales market share leadership also enables the U.S. semiconductor industry to benefit from a virtuous cycle of innovation; sales leadership enables the U.S. semiconductor industry to spend more on R&D, which in turn helps ensure U.S. sales leadership. As long as the U.S. semiconductor industry maintains its lead in global market share, it will continue to benefit from this virtuous cycle of innovation. 2020 Global Market Share virtuous circle of innovation
U.S. semiconductor companies lead the market in terms of business models and sub-products, but the U.S. semiconductor industry lags behind Asian competitors in terms of certain business model segments.
Broadly speaking, the U.S. semiconductor industry maintains market share leadership in the most R&D-intensive areas: EDA, core IP, chip design, and manufacturing equipment. More capital-intensive raw materials and manufacturing, including wafer fabrication and assembly, test, and packaging, are concentrated in Asia. Asia has 75% of the world's semiconductor production capacity, including all leading-edge capacities smaller than 10 nanometers. This imbalance requires the United States to consider strategic incentives to support more domestic manufacturing.
Similarly, in terms of sub-product leadership, the United States leads in logic and discrete, analog, and optical semiconductors. When it comes to memory, however, other countries lead the way. 2019 Semiconductor Industry Growth Values by Activity and Region ( %)
America's Technology Competitiveness
The US semiconductor industry is a global leader in semiconductor R&D and chip design. For U.S. companies, whether fabless semiconductor companies or integrated device manufacturers (IDMs), which together account for nearly 50% of global semiconductor sales, the key success factors are access to highly skilled engineering talent and thriving innovation ecosystem, especially from leading universities. The U.S. semiconductor industry leads in R&D-intensive activities, while Asia leads in manufacturing process technology, largely due to government incentives. And that's not the case in the US when it comes to cutting-edge processes below 10nm. In fact, the U.S. is also far behind at 28nm and beyond.
The United States is a leader in semiconductor design
Before a semiconductor can be manufactured, it must be designed. Semiconductors are highly complex products in terms of design. Companies involved in semiconductor design develop nanoscale integrated circuits to perform critical tasks that make electronic devices work, such as networking, computing, storage and power management. Chip designers must use highly advanced electronic design automation software (EDA) and reusable architectural building blocks, or IP, to accomplish this task.
Design is primarily a knowledge- and skills-intensive activity, accounting for 65% of R&D and 53% of growth in the industry as a whole. These represent by far the highest share of R&D and added value at any stage of semiconductor manufacturing. Companies focused on semiconductor design typically reinvest 12-20% of their annual sales back into R&D. The development of modern complex chips, such as the "system-on-chip" (SoC) processors that power today's smartphones, requires years of work by hundreds of engineers, sometimes using external IP and design support services. As chips have become more complex, development costs have risen rapidly.
While both IDMs and fabless semiconductor companies design semiconductors, fabless semiconductor companies choose to focus on design and outsource manufacturing, assembly, packaging and test. Fabless semiconductor companies typically outsource manufacturing to pure-play foundries and assembly and test (OSAT) companies. Since the 1990s, the fabless model has grown with semiconductor demand, as the pace of innovation has made it increasingly difficult for many companies to juggle the capital-intensity of manufacturing with the high level of R&D spending on design. Technical difficulty and up-front investment have proliferated with the move to smaller manufacturing nodes, and fabless companies' share of total semiconductor sales has risen from less than 10% in 2000 to nearly 30% in 2019.
Half of the chip designs in the United States are leaders in the semiconductor industry. American fabless companies account for about 60% of global fabless company sales, and some large self-designed IDMs are also American companies. Additionally, the U.S. has the largest share of the global design workforce, underscoring the strength of the U.S. chip design industry and academic ecosystem. Given the importance of semiconductor design in adding value to the manufacturing process, it is critical for the U.S. semiconductor industry to have and maintain a leadership position at this stage of production.
The U.S. semiconductor industry's R&D spending has remained high, reflecting the inherent link between U.S. market share leadership and continued innovation.
From 2000 to 2020, U.S. semiconductor industry R&D spending grew at a compound annual growth rate of approximately 7.2%. Regardless of the annual sales cycle, R&D spending by U.S. semiconductor companies tends to remain high, reflecting the importance of R&D investment to semiconductor production. In 2020, total R&D investment in the U.S. semiconductor industry was $44 billion. R&D spending ($100 million)
Semiconductors help address climate change challenges
Innovative applications of semiconductor technology have the potential to make a significant contribution to addressing global climate change. The use of semiconductor technology to apply information and communication technology (ICT) across the economy can significantly improve energy efficiency and the production of clean energy. In addition, as the number of semiconductors continues to grow as our economy is fully digitized, semiconductor technology presents an opportunity to drive dramatic reductions in emissions in nearly every sector of the economy, from transportation and manufacturing to buildings, energy, and agriculture. According to the World Economic Forum, semiconductor technologies such as digital technologies could reduce greenhouse gas emissions by 15 percent — almost a third of the 50 percent reduction needed by 2030.
Semiconductors are the backbone of the ICT industry: electronics, computing hardware, telecommunications, and connected devices such as sensors and thermostats. In 2019, the number of connected devices running on semiconductor chips (i.e. the Internet of Things) was 22.6 billion and is expected to grow to 75 billion by 2025. Semiconductors are also the basis for innovations such as 3D printing, machine learning and artificial intelligence (AI), which in turn enhance healthcare, reduce construction costs, strengthen food supplies and advance scientific progress.
The U.S. semiconductor industry has one of the highest levels of R&D as a percentage of sales of any industry in the U.S.
The US semiconductor industry is second only to the US pharmaceutical and biotechnology industries in terms of R&D spending as a percentage of sales. While global competitors are increasing their R&D investments to compete with the U.S. semiconductor industry, U.S. companies spend more on R&D as a percentage of sales than any other country's semiconductor industry. These high levels of R&D reinvestment drive innovation in the U.S. semiconductor industry, which in turn helps maintain its global sales market share leadership and creates U.S. jobs. U.S. industry R&D spending as a percentage of sales
Semiconductor R&D spending by country as a percentage of sales %
While the U.S. leads in R&D-intensive activities, it lags behind in manufacturing technology
Government policies have played a major role in the strong growth of cutting-edge manufacturing technologies in Asia. At the same time, the United States lags behind Asia in manufacturing technology, especially in logic. In fact, according to a recent SIA/BCG report, there is currently no cutting-edge sub-10-nanometer manufacturing in the U.S., and this is all being done in Asia, where 5-nanometer processing technology has already been implemented, and 3-nanometer technology is on the horizon. In terms of memory manufacturing technology, the US has regained its competitiveness in DRAM and 3D-NAND, and US companies have fully embraced EUV. U.S. companies are also leading the way in advanced packaging technologies using 3D heterogeneous integration. Finally, the U.S. semiconductor industry leads the way in many emerging manufacturing technologies, such as compound semiconductor manufacturing technology and silicon carbide (SiC).
2019 Global Logic Processing Technology Regional Breakdown (%)
Domestic U.S. workforce and manufacturing
Having a competitive domestic workforce and manufacturing capabilities is critical to America's leadership in semiconductors. In addition, a strong domestic semiconductor industry is equally critical to the U.S. economy. The semiconductor industry has a considerable economic impact in the United States. The industry has nearly 277,000 people working in semiconductor design, manufacturing, test and R&D in 49 U.S. states. More than 300 downstream sectors of the economy (with more than 26 million U.S. workers) are consumers of semiconductors, which support their industries.
The positive impact of the semiconductor industry on the U.S. workforce.
In addition to providing inputs to nearly every industry in the U.S. economy, aspects of the U.S. semiconductor industry that are critical to the U.S. economy are in stimulating employment and paying workers. In 2020, the U.S. semiconductor industry provided a total of 1.85 million jobs. The industry directly employs more than 277,000 practitioners in research and development, design and manufacturing activities. In addition, for every U.S. worker directly employed in the semiconductor industry, there could be an increase of 5.7 in the broader U.S. economy, whether in the semiconductor industry's supply chain or through the wage bill of employees hired by the company itself jobs.
In addition to job creation, the U.S. semiconductor industry has a significant impact on GDP and revenue. In 2020, the U.S. semiconductor industry contributed $246.4 billion to GDP. In terms of revenue impact, the industry generated $160.8 billion in U.S. revenue in 2020, while also having a positive impact on other industries. For example, of the 1.85 million direct and indirect jobs created in the industry, many were created in different sectors such as construction, financial activities, leisure and hospitality.
The U.S. semiconductor industry creates more than 250,000 direct jobs and nearly 1.6 million additional indirect jobs in the U.S.
Total increase in US semiconductor industry Contribution of Value (GVA) to GDP
US Semiconductor Manufacturing Distribution
Semiconductors are one of the largest U.S. exports
In 2020, U.S. semiconductor exports totaled $49 billion, ranking fourth in U.S. exports after aircraft, refined oil and crude oil. The reason for this continued high level is that more than 80% of the semiconductors sold today are sold outside the U.S. market.
Maximum U.S. Exports in 2020 < br/>
U.S. semiconductor manufacturers have more manufacturing bases in the U.S. than any other country, although this percentage has steadily declined over the past eight years
In 2020, approximately 43% of U.S. semiconductor manufacturers' front-end wafer capacity is located in the United States. That percentage has steadily declined from 57 percent in 2013. Other capacity leaders for US-based front-end semiconductor fabs include Singapore, Taiwan, Europe and Japan. Notably, mainland China has attracted far less U.S. investment in front-end manufacturing than other major regions.
The average growth rate of overseas chip manufacturing output over the past decade was five times that of the United States. This is mainly due to the strong incentive programs implemented by countries to attract semiconductor manufacturing. To remain competitive, the United States must implement similar incentives.
U.S. Semiconductor Manufacturers' Percentage of Wafer Capacity by Region< /em>
Prospects for U.S. Semiconductor Innovation Policy
The U.S. federal government is a key partner in developing policies that promote a strong and innovative U.S. semiconductor industry
Over the past year, leaders in Washington have taken steps to ensure the United States continues to lead in chip technology. The bipartisan legislation known as the Chip America Act was introduced in 2020 and enacted in early 2021 in the National Defense Authorization Act (NDAA), which authorizes investment in domestic chip manufacturing and research programs. Crucially, these provisions must be adequately funded.
The sharp decline in the U.S. share of global chip manufacturing, coupled with underinvestment by the federal government in semiconductor R&D, has weakened U.S. production of advanced chips needed to support economic recovery, support the U.S. military and critical infrastructure Facilities provide power, the long-term ability to create new high-paying jobs, reduce the cost of clean energy technologies, and drive innovation in the winning technologies of the future. For America to succeed in the future, it must lead in semiconductors.
By taking bold action to address these decisive challenges, Congress and the Administration can usher in a historic recovery in U.S. chip manufacturing, strengthen America's most critical industry, and help ensure U.S. leadership in critical chip technology : Artificial intelligence, quantum computing, 5G/6G communications, and countless others. This recovery will determine America's strength for decades to come.
To ensure the United States continues to lead the global semiconductor industry, the United States must take steps to enhance competitiveness and encourage innovation
1. Invest in U.S. semiconductor leadership:
Fund related industries under the Semiconductor Manufacturing, Research and Design provisions of the American Chip Act. Create an investment tax credit covering manufacturing and design to stimulate the construction of new onshore advanced semiconductor research, design and manufacturing facilities and to boost domestic chip innovation.
2. Strengthen America’s Skilled Workforce:
Implement a national strategy supported by appropriate investments and in consultation with education leaders and the private sector to Improve the U.S. education system and increase the number of Americans graduating in STEM fields. Reform America's high-skilled immigration system to allow the world's best and brightest to enter and retain them.
3. Promote free trade and protect intellectual property:
Approve and make free trade agreements that remove market barriers, protect intellectual property and enable fair competition modernization. Expand one of the World Trade Organization's most successful free trade agreements - the Information Technology Agreement.
4. Work closely with like-minded economies:
areas such as sexuality, standards and export controls to create a regulatory and legal environment that is more conducive to growth, innovation and supply chain resilience.
By implementing these policies, Congress and the Administration can take critical steps to protect U.S. leadership in semiconductor technology and win the global competition for future technologies.
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