Who Leads Semiconductor Innovation?

Semiconductor business is highly dependent on technology and that changes very rapidly in the semiconductor space. It’s important to recognize the importance of research and innovation activities in this space. In my last article on 7nm technology node, one respondent commented, very rightly, “It’s important to have competition which gives rise to innovation in the semiconductor industry”. Well, if I look at from competition perspective that is very intense in semiconductor space. In a couple of my earlier articles, “Look Who is Leading The World Semiconductor Business” and “Is Fab Business The Forte of APAC?”, Asia-Pac appeared to be the leader in semiconductor business. However, after seeing the R&D investment done by top semiconductor companies around the world, I have to change my thought process. Okay, production and sales, and of course substantial amount of R&D, have spread across the world due to several factors. The semiconductor business is concentrated in Asia-Pac today. However, in terms of R&D spend that drives innovation, USA is the undisputed leader. That reminds me about a general newspaper quote that referred the USA to be the single engine driving the world economy.

Yesterday, I was studying the IC Insight’s report on top semiconductor R&D spenders. It was clear that R&D activities in the semiconductor space are concentrated in the USA region.

Among the top10 semiconductor R&D spenders, there are five companies in USA, three in Asia-Pac and one each in Japan and Europe. If we sum up these five American companies R&D spends, that comes out to be $22203M (~70% of total top10 R&D spend) in 2014 and $19302M (~67% of total top10 R&D spend) in 2013. On a worldwide basis, in 2014, the five American companies among top10 semiconductors R&D spenders accounted ~40% of total worldwide semiconductor R&D spends of $56B. Even if we go beyond these top10 R&D spenders, we see companies like Texas Instruments, SK Hynix, Marvell, AMD and Avago, in that order; you know about the USA companies among them. If we look at the Asia-Pac figures, that comes to $6269M (19.7% of total top10) in 2014 and $5553M (19.3% of total top10) in 2013.

There are more interesting data in the table to chew upon. If we see the increase in R&D spend in 2014 compared to 2013, in USA it increased by ~15% while in Asia-Pac it increased by ~12.8%. In Japan and Europe, R&D spends declined.

Company wise, Intel, the topmost semiconductor company, spent the highest ~36% of top10 spending and 21% of total worldwide semiconductor R&D spending of ~$56B. Qualcomm, the arch-rival of Intel, continued to maintain its second position and also increased the R&D spends by a massive 62%. At the third place, Samsung maintained its R&D spends with just ~5% increase. However, we know Samsung foundry is collaborating in technology process R&D with two American companies, IBM and GlobalFoundries and is doing well in 14nm FinFET technology. Notable among the list is MediaTek’s dramatic entry into the ranks of top10 R&D spenders. MediaTek (along with its acquisition of MStar) gives severe competition to Qualcomm in Chinese region.

Another important point to note is about R&D/Sales ratio. It’s the least in case of TSMC, 7.5% in 2014. And it’s highest for Nvidia, 31.3%. I know Nvidia promotes R&D programs even for global student and research community with handsome annual grant of the order of $150000. Look at my last year’s blog about Nvidia’s research and education activities, “Wanna start something new? Try this…”. The Global Impact Award finalists have been announced this month, look for details here. The other high R&D/Sales ratio companies are again in USA, Qualcomm and Broadcom have R&D/Sales ratios of more than 28%.

As a concluding remark I must say that in most of my observations and analysis, I have found USA to be a region where there is an inherent cultural of spending in R&D activities, at various levels. The above facts about the semiconductor R&D spends by USA companies strengthen my belief about USA being the R&D and innovation leader.