US is the Ultimate Leader in Semiconductor Business

Last year in November when I looked at the world’s top20 semiconductor companies with Samsungand TSMCbeing at the second and third rank respectively, first being Intel, I computed the sales numbers of the companies based on their countries and found that Taiwan and South Korea accounted for 34.5% of the total sales of the top20 companies. That provided a well founded perception that these countries in Asia were leading the semiconductor business. I blogged about it “Look Who is Leading The World Semiconductor Business” and received comments from the community that it’s no surprise, companies in South Korea and Taiwan have been leading it since long. Well, South Korea and Taiwan, in fact APAC region does lead in foundries. A blog on 300mm Fab Capacity provides actual data about that. However, look at the following bar chart from an IC Insights report.

The companies headquartered in US have the lion’s share of 63% sales in fabless IC, and that is going to further increase after completion of Qualcomm’sacquisition of CSR, the second largest fabless company in Europe and Intel’s acquisition of Lantiq, the third largest fabless company in Europe. Also US leads in IDMs with more than 50% market share. The total shown in the graph does not include foundry sales, so I’m not talking about that, because then TSMC can definitely change the equations. Bye the way, in this chart, Samsung’s sales from its Austin facility has been counted as sales from South Korean companies.

There are a couple of point to note here, South Korea has just half of US market share in IDMs, and Japan, Europe and Taiwan are nowhere near US market share in IDMs. China has negligible presence in IDM. Although Europe will have improved figures in IDMs after completion of NXP’sacquisition of Freescaleand Infineon’sacquisition of International Rectifier, it will still be much lower compared to US market share in IDMs. In case of fabless business, South Korea and Japan have negligible presence and others including Taiwan are much lower compared to US market share in fabless. Europe’s just 3% share in fabless market will further erode after CSR and Lantiq will start being counted as US headquartered companies.

Now let’s take a closer look at 300mm Fab Capacity blog. I am reproducing that bar chart here –

It’s apparent that based on headquarter location of companies, US is just next to South Korea in 300mm wafer capacity. There is a large difference between headquarter figure (28%) and fab location figure (15%) of US fabs. The reason is simple; keeping the fabs out of US locations provides significant cost advantage to US companies. Also South Korea and Taiwan definitely have significant cost advantage in this capital intensive foundry business.

One more indicator about US lead in R&D of semiconductors was mentioned in my earlier blog, “Who Leads Semiconductor Innovation”. In this it was clear that US semiconductor companies, led by Intel, spent the most on R&D activities for semiconductors. They also have largest R&D Expense / Sales ratios. That reminds me about one of our forum discussions in Semiwiki on patents and innovations. There, it was evident that sales are important and equally important are investments into R&D to further grow the sales; both need to complement each other. The US is doing well in that aspect. There are companies outside US as well which are doing well in these aspects. However in my view a cluster of such companies is in the US and that creates an innovative and developing environment there.