Semiconductor R&D spending rising 10% in 2012 to meet design, process challenges

September 6, 2012 – Spending on R&D by semiconductor companies worldwide is expected to grow 10% in 2012 to a record $53.4 billion, as companies all across the ecosystem try to keep up with more complex IC designs and new process technologies, according to data from IC Insights.

Total chip sales are only expected to increase 3% in 2012 to $321.4B, says the analyst firm (others aren’t so optimistic anymore), meaning R&D as a percentage of sales will rise to 16.2% — right around the 15%-17% where it’s hovered for the better part of the past decade. R&D/sales had been 10%-12% of revenues in the early 1990s, and just 7%-8% of sales in the late 1970s-early 1980s, the firm notes. Chip companies across the ecosphere (integrated device manufacturers [IDMs], fabless suppliers, and foundries) are seeing their development costs rise due to more complex IC designs and new process technologies, currently on 300mm wafers but with 450mm now in progress & due later this decade.

Worldwide semiconductor R&D spending leaders, sales in US $M.  *Renesas and NEC merged in
April 2010; that year includes combined 1Q results. ** Fabless  *** Foundry  (Courtesy of IC Insights)

A dozen companies spent more than $1B for the first time ever in 2011. Intel’s R&D expenditures accounted for nearly a third of the top-10 spending, and about 17% of total R&D expenses worldwide. The top 10 overall R&D spenders increased their R&D spending dollars by 12%; top annual increases went to Intel (27% more spending vs. 2011), Qualcomm (25%), and TSMC (23%). IDMs accounted for 66% of R&D spending by semiconductor companies in 2011, dwarfing that of fabless suppliers (29%) and pure-play foundries (5%).

Also noteworthy is the regional distribution of these dollars. By company headquarters, the US represented 57% of worldwide semiconductor R&D spending in 2011, far ahead of suppliers based in Japan (17%), Europe (10%), Taiwan (8%), South Korea (7%), and mainland China (1%).

IC Insights particularly calls out TSMC’s emphasis on R&D spending the past few years. The foundry cracked the top-10 R&D spenders in 2010, nearly lapped the field in R&D/sales growth in 2011, and its 2012 R&D budget is twice what it was just three years ago, according to recent comments by CEO Morris Chang. That’s in addition to the foundry’s capex budget of $8.25B this year, up 13% from 2011. "With the influx of IDMs turning to foundry capacity and major fabless customers needing lead-edge CMOS processes, TSMC is spending more money on both new 300mm fabs and R&D," explains the analyst firm.

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