New Report Identifies Challenges to Continued U.S. Leadership in Semiconductor Design, Innovation

Following enactment of landmark semiconductor manufacturing and research investments in the CHIPS and Science Act, new SIA-BCG study highlights need to advance federal policies to reinforce U.S. chip design, tech leadership

WASHINGTON, Nov. 30, 2022—Following the historic 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) today released a report finding continued U.S. leadership in semiconductor design—the critical and high-value-add mapping of a chip’s intricate circuitry—is essential to America’s sustained leadership in semiconductors and the many technologies they enable. The report, titled “The Growing Challenge of Semiconductor Design Leadership,” identifies three key challenges facing the U.S. 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 $20 billion to $30 billion through 2030—including $15 billion to $20 billion for an investment tax credit for semiconductor design—will help maintain long-term U.S. chip design leadership. Such an investment would fortify the U.S. design ecosystem, support training and employment for more than 150,000 jobs across the economy, and help the U.S. win the global competition for key semiconductor-dependent innovations of the future, according to the report. The CHIPS and Science Act—now codified in 15 U.S.C. Ch. 72A § 4651-4659—includes a critical investment tax credit for semiconductor manufacturing, but not for 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, which has enabled the U.S. to foster key innovations across the digital economy in areas such as artificial intelligence, 5G communications, robotics, digital healthcare, and autonomous vehicles. The U.S. has built-in advantages in chip design, including being home to the world’s best universities and a highly skilled workforce. Global competition in chip design is increasing, however, as other countries actively support the development of their own design sectors. For example, China’s fabless chip sector doubled in revenue—from $12 billion to $24 billion—between 2017 to 2020.

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“America’s longstanding leadership in semiconductor design has spurred exciting technological advancements, promoted economic growth, and fortified national security,” said Matt Johnson, president and CEO of Silicon Labs and 2023 SIA chair. “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.”

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

The report identifies three critical challenges the U.S. must address to defend its leadership position in design and reap the associated downstream benefits of design leadership:

• 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 U.S. private sector invests more in design R&D than any other region, but public support for R&D in the U.S. lags that of other regions.
  • Bringing U.S. public investment in design and R&D in line with international peers—through direct incentives like an investment tax credit for semiconductor design and greater public funding for basic R&D—is critical to keep design in the U.S.
• A shortage of domestic design talent
  • The U.S. semiconductor design industry is on track to face a shortage of 23,000 design workers by 2030.
  • The 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 from leaving the field or the 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 U.S. semiconductor players, implicitly putting R&D reinvestment at risk.
  • Ensuring global markets remain as open as possible will benefit the U.S., which gains significantly from free trade and has the most to lose in the face of restrictions.

To maintain U.S. semiconductor leadership in the coming decade and continue to develop the semiconductors critical for the innovation so many industries rely on, the report finds the U.S. private sector will need to invest $400 billion to $500 billion 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.

“Innovations in semiconductor design have made all sectors of the U.S. economy, from farming to manufacturing, more effective and efficient,” said John Neuffer, SIA president and CEO. “We should not take for granted America’s current leadership position in chip design. To ensure economic growth and prosperity for decades to come, Congress should pass an investment tax credit for semiconductor design, attract and retain the world’s top innovative minds, and promote open markets around the world.”

About SIA

The Semiconductor Industry Association (SIA) is the voice of the semiconductor industry, one of America’s top export industries and a key driver of America’s economic strength, national security, and global competitiveness. SIA represents 99% of the U.S. semiconductor industry by revenue and nearly two-thirds of non-U.S. chip firms. Through this coalition, SIA seeks to strengthen leadership of semiconductor manufacturing, design, and research by working with Congress, the Administration, and key industry stakeholders around the world to encourage policies that fuel innovation, propel business, and drive international competition. Learn more at www.semiconductors.org.