How has the Semiconductor Industry evolved in the US, and what does the future hold?
04/01/2022 by MRL
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Semiconductors were invented in the US and have been around since the 1700s. However, it's not until recent years, when technology has finally caught up, that the world has really started to appreciate its potential. Something the US has been very much aware of all along.
In 2010, the global semiconductor market was worth $298.32 billion. As of January 2022 the industry is worth $550.88 billion, and is predicted to reach $606.48 billion next year, rising to $803.15 billion by 2028.
The US has always appreciated the value these tiny chips hold, both economically and in terms of security. As such, they’ve often been the driving force behind the sector's evolution as they drive design and innovation forwards.
Let's take a look at the history of the US semiconductor industry and what the future has in store for America.
From the invention of computers, and the benefits the tech had on military applications, the US, inventors of semiconductors, have always been heavily invested in the technology.
Since the 1990s, the US has taken the lead in ensuring the growth and advancement of chips. In addition to taking an interest in the R&D aspects of semiconductor technology, the US also controlled 40% of chip assembly globally.
SEMATECH was established in 1987 and has been a significant pillar in US semiconductor history, comprising of 14 leading US producers of semiconductors and $100 million of government funding.
The consortium aimed to encourage semiconductor firms to pool their resources regarding research and development and establish US-based semiconductors manufacturing facilities.
Following SEMATECH's establishment, research and development intensity rose, both for companies within the consortium and outside it.
While a 1996 Proceedings of the National Academy of Sciences of the United States of America (PNAS) research article concluded that SEMATECH had a 'negative, economically significant impact' on R&D spending, the report also concluded that the consortium allowed for more idea sharing, reduced research duplication, and encouraged more research and development within the semiconductor field.
There was a considerable chip shortage in 1988 caused by newer production methods and the time it took to establish new FABS disrupting manufacturing alongside a rise in chip demand.
In 1994, the development of new technologies required clean rooms, leading to multiple circuit batches being discarded, resulting in another shortage.
There were more minor chip shortages in 2000 and 2004, but the subsequent and considerable shortage was seen in 2011, caused by an earthquake in Japan.
Fast forward to 2020, and the semiconductor sector took a significant hit with extreme shortages globally, with consequences still being felt today.
The COVID-19 pandemic, supply chain disruptions, geopolitical fallouts and more that contributed to this shortage highlighted not only the importance of these chips to those not in the know but further alerted the US to a vulnerability in their foothold in the industry.
With the semiconductor shortage expected to continue into at least 2023, semiconductor companies have had to get even more creative and make plans to troubleshoot future problems that could disrupt production and lead to more instability within the sector.
While not the first, or predictably the last, shortage of semiconductor chips, this latest challenge will undoubtedly be a driving force for competitiveness both now and into the future.
Over the years, the US semiconductor industry has seen growth in design, core IP, semiconductor manufacturing equipment, and electronic design automation. However, it has lost its global market share position regarding assembly and test manufacturing, wafer fabrication and capacity, and supplier ecosystem.
While the chips may be down regarding manufacturing facilities based in the US, numerous American semiconductor companies are boldly leading the industry forward, with ten US-based companies included in our list of twenty major players in the semiconductor space.
According to the SIA's 2020 State of the US semiconductor industry report, America very much remains a leader in the semiconductor marketplace, particularly within logic and analog semiconductor sales.
The report highlighted the following market share position statistics regarding the US semiconductor industry:
65% Global fabless market
51% Global IDM market
40% Global equipment market
15% Global outsourced assembly/test market
10% Global pure-play foundry market
“While America’s position has been challenged many times over the decades, it has always prevailed due to its amazing resilience and ability to run faster.”
SIA 2020 State of the US semiconductor industry report
Today, numerous sectors including aerospace, automotive, entertainment, industrial and medical, have benefitted from semiconductor tech breakthroughs.
Technology such as quantum computing, AI and advanced wireless networks are heralded as being emerging demand drivers within the semiconductor field. All of which, according to the SIA, America is poised and ready to respond to.
The future for the US semiconductor industry will most likely see a focus on building FABS to bring manufacturing back to US soil. Currently, chip assembly within the US accounts for 12% of global production, a dip of 28% compared to its position in the 1990s.
This is being pushed forward through the CHIPS Act, which has support from multiple representatives but is currently stalled by the House of Representatives.
If the US can increase domestic production, which history has proved it can, the US may find itself in a position to dominate every aspect of semiconductor processes.
If you’re based in the US and want to play a part in the future of semiconductors, we can help you put your talents to fantastic use.