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Semiconductors: 2020 State Of The Industry

The Blue Water Team

Technology powered by semiconductors continues to advance and now includes such cutting-edge technologies as artificial intelligence, quantum computing, and wireless networks. Steady investments in the U.S. industry continue to solidify its market leadership position, even as it faces challenges such as pandemic-related market uncertainty and increasing costs associated with innovation. This article by the Semiconductor Industry Association examines the current state of the U.S. semiconductor industry. 

Thanks to the ubiquitous presence of semiconductors in the global economy (in everything from national security to autonomous vehicles), long-term market demand for semiconductors is virtually guaranteed. However, the COVID-19 pandemic has turned the record semiconductor sales of 2018 into a decrease in the market for both 2019 and 2020. 

Semiconductors are an essential part of a cycle that drives demand for technological innovation and that drives ongoing advances in semiconductors and related technologies. As semiconductors drive new technology, demand for that technology drives research and development, which produces better products that consumers continue to purchase. As a result, despite decreasing end-use sales in 2019, semiconductors are positioned to continue generating end-use demand. 

Three areas in particular are creating new areas of demand for semiconductors: Artificial Intelligence (AI), quantum computing, and advanced wireless networks such as 5G. These emerging fields of technology will eventually lead to previously unimaginable technologies. 

Despite ongoing challenges to its leadership from other Information-Age countries, the United States retains its dominance of the semiconductor market. It currently possesses half of the market's global share and consistently grows year over year. More specifically, it leads the global market in advanced semiconductor chip design and in logic process technology. In addition, American semiconductor manufacturing is strong and currently accounts for 1 million American jobs. 

This overall leadership, however, does not reflect certain aspects where the U.S. falls behind its Asian counterparts: Memory, discrete semiconductors, and outsourcing. Asia possesses 80 percent of semiconductor manufacturing and processing facilities. Even America's leadership in logic process technology has diminished over the last decade.

The U.S. semiconductor industry needs strong investments, particularly in these areas, to remain a growing industry. These investments are particularly important to help fund the steady growth of semiconductor research and development, which has increased at a rate of 6.6 percent every year for the last decade. R&D as a percent of sales in the United States is greater than in any other nation and allows the U.S. to develop leading semiconductor technology. 

The industry needs certain changes to continue to lead globally:

●    Access to China's thriving 5G market, as China continues to create and implement 5G technology faster than the United States. 

●    Continued investments in manufacturing in order to maintain its lead in capital expenditures. 

●    Triple current federal agency investment in semiconductor research.

●    Manufacturing incentives, such as tax credits

●    50 percent more investments in STEM education

●    Improved free trade agreements and increased resources for intellectual property protection

Historically, we haven't seen a lot of people specifically target semiconductor investments, but as noted in the article, they are an essential component of technological innovation.