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The Semiconductor Industry Association (SIA) released its annual State of the Industry Report examining the U.S. semiconductor industry’s current global position, as well as challenges to — and opportunities for — continued industry growth and innovation. This comes as Congress considers critical legislation to invest in domestic semiconductor manufacturing, design, and research, and it follows last week’s White House meeting with industry leaders to discuss the ongoing global chip shortage.
The U.S. semiconductor industry has maintained its global market share leadership (47 percent of the global market) and has kept steady its high investment in research and development ($44 billion in 2020). The report underscores, however, that the U.S. industry and its position as a global innovation leader face myriad challenges. Most notably, the industry continues to grapple with a widespread global semiconductor shortage brought on by unpredictable and increased demand resulting from the COVID-19 pandemic, as well as a decreasing share of global front-end fab capacity fueled by incentives and subsidies provided by foreign governments that far outstrip similar incentives in the U.S.
“As the report highlights, America’s economy, national security, tech leadership, and response to COVID-19 are built on semiconductors,” said John Neuffer, SIA president and CEO. “To remain competitive on the global economic stage and ensure more of the chips our country needs are researched, designed, and produced on U.S. shores, Congress and the White House must act swiftly to fund the semiconductor provisions in the CHIPS for America Act.”
Other key findings from the report include:
- Despite the uncertainty in demand caused by the COVID-19 pandemic, the global market grew substantially in 2020, and the outlook is strong for the remainder of 2021 and beyond.
- For some business model subsegments, the U.S. industry lags its Asian-based competitors.
- Industry R&D expenditures are consistently high, reflecting the inherent link between U.S. market share leadership and continued innovation.
- The U.S. semiconductor industry maintains one of the highest levels of R&D as a percentage of sales of any U.S. industry.
- U.S. semiconductor manufacturing capacity has significantly decreased as a share of global capacity.
Throughout the past year, technologies built on semiconductors have kept the gears of the global economy, healthcare, and society writ large spinning. To ensure continued U.S. leadership in the global semiconductor industry, however, the report demonstrates the need for an ambitious competitiveness and innovation agenda. The Senate has passed legislation (USICA) that provides $52 billion in funding for the necessary semiconductor provisions in the CHIPS for America Act, and now the House must follow suit and send legislation to the president to be signed into law.
To complement the federal manufacturing grants and research investments authorized by the CHIPS for America Act, SIA has also called on leaders in Congress to enact an investment tax credit for semiconductor manufacturing and research. A combination of grants, tax credits, and research investments is needed to turbocharge U.S. semiconductor production and innovation. Congress is considering legislation called the FABS Act that would establish a semiconductor investment tax credit. The FABS Act should be expanded to include expenditures for both manufacturing and design to help strengthen the entire semiconductor ecosystem.