Challenges to continued US semiconductor leadership

In this article, SIA summarises its recent report highlighting the need to advance federal policies to reinforce US chip design and tech leadership

Following enactment of the CHIPS and Science Act to reinvigorate domestic semiconductor manufacturing and research, the Semiconductor Industry Association (SIA) and the Boston Consulting Group (BCG) released a report finding continued US leadership in semiconductor design is essential to America’s sustained leadership in semiconductors and the many technologies they enable.

The Growing Challenge of Semiconductor Design Leadership report identifies three key challenges facing the US chip design sector and highlights opportunities to strengthen America’s position as a global semiconductor innovation and workforce leader.

The report finds that a federal investment in semiconductor design and R&D of approximately $20b to $30b through 2030—including $15b to $20b for an investment tax credit for semiconductor design—will help maintain long-term US chip design leadership. Such an investment would fortify the US design ecosystem, support training and employment for more than 150,000 jobs across the economy and help the US win the global competition for key semiconductor-dependent innovations of the future.

The CHIPS and Science Act includes an investment tax credit for semiconductor manufacturing but not design. The SIA-BCG report also highlights the importance of promoting STEM workforce development and ensuring open access to global markets, among other priorities.

The United States has long been the leader in semiconductor design, enabling the US to foster innovations across AI, 5G, robotics, healthcare, autonomous vehicles and more. The US has built-in advantages in chip design, including the world’s best universities and a skilled workforce. However, global competition in chip design is increasing as other countries actively support their own design sectors.

President and CEO of Silicon Labs and 2023 SIA chair, Matt Johnson, said: “America’s longstanding leadership in semiconductor design has spurred exciting technological advancements, promoted economic growth and fortified national security. Building on the momentum from the recent enactment of the CHIPS and Science Act to strengthen domestic semiconductor manufacturing and research, leaders in Washington should increase focus on maintaining and even extending our semiconductor design leadership that is so fundamental to our country’s future.”

US leadership in semiconductor design has improved America’s ability to shape technical standards, enhanced national security and created spill-over benefits for adjacent industries. However, America’s share of overall semiconductor industry revenues has declined from 50 per cent in 2015 to 46 per cent in 2020. Without action, US market share could decline further, according to the study, as global competitors make significant investments.

The report identifies three critical challenges the US must address:

  • Design and R&D investment needs are on the rise
    • To meet rapidly shifting market demands, chips have grown more complex. In turn, development costs have risen
  • Today, the US private sector invests more in design R&D than any other region, but public support for R&D in the US lags other regions
  • Bringing US public investment in design and R&D in line with international peers is critical to keep design in the US
  • A shortage of domestic design talent
    • The US semiconductor design industry is on track to face a shortage of 23,000 design workers by 2030
  • Public and private sectors must work together to encourage more domestic workers to enter the field of design, as well as to prevent experienced designers leaving the field or country
  • The private sector must continue to enhance the productivity of its workforce by adopting new tools and prioritizing the highest value-add R&D and design
  • Open access to global markets is under pressure
    • Investment in R&D is funded by sales and today, tariffs, export restrictions, and other factors threaten market access for US semiconductor players, implicitly putting R&D reinvestment at risk
  • Ensuring global markets remain as open as possible will benefit the US, which gains significantly from free trade and has the most to lose in the face of restrictions

To maintain US semiconductor leadership the report finds the US private sector will need to invest $400b to $500b in design over the next 10-years. This can be incentivized through an increased R&D tax incentive. America’s current incentive is weaker than incentives offered by our global competitors and should be strengthened.