Research and development spending in the semiconductor space is expected to rise by at least 4%, IC Insights reported in The McClean Report—A Complete Analysis and Forecast of the Integrated Circuit Industry.

The R&D spending will grow from $68.4 billion in 2020 - a 5% increase from the previous year - to an estimated $71.4 billion in 2021, Electronics Weekly noted. “Intel stays on top of the R&D ranking, but its share of total industry R&D expenditures dipped after its spending decreased 4% in 2020.  AMD moved into the R&D top 10”.

Semiconductor companies total R&D spending is expected to rise by a CAGR of 5.8% between 2021 and 2025 to $89.3 billion.

“R&D as a percentage of worldwide industry sales slipped to 14.2% in 2020 compared to 14.6% in 2019, when R&D spending declined 1% and total semiconductor revenue fell 12%,” EW reported.

Semiconductor R&D spending levels and the spending-to-sales ratios over the past two decades and IC Insights’ forecast through 2025.

Total semiconductor R&D spending has declined in only four years since the end of the 1970s (-1% in 2019 during an economic slowdown, -10% in 2009 after the industry was hit by a major global recession, and back-to-back drops of -1% in 2002 and -10% in 2001 when an economic downturn coincided with the implosion of the Internet “dot-com” bubble at the turn of the century).

R&D spending recovered strongly in 2010 and 2011 after the global recession of 2008-2009, but outlays slowed during the rest of the decade for reasons, including ongoing uncertainty about the global economy and major acquisitions in the chip industry.

Total semiconductor R&D spending as a percent of worldwide sales exceeded the four-decade historical average of 14.6% in all but five years (2000, 2010, 2017, 2018, and 2020). In these five years, R&D-to-sales ratios were lower due to the strength of total revenue growth rather than weakness in research and development spending by semiconductor suppliers.

Intel continued to top all semiconductor suppliers in R&D expenditures in 2020, with 19% of the industry’s total a slight decline of its 22% of the industry’s total in 2019. The 2019-2020 drops in Intel R&D expenditures were the first consecutive annual declines for the company since 2008 and 2009. 

Samsung, ranked second, increased its R&D spending by 19% in 2020 partly because the South Korean memory giant increased development of leading-edge logic processes (of 5nm and below) to compete with TSMC, EW noted.

“The McClean Report shows the top 10 R&D spenders (Intel, Samsung, Broadcom, Qualcomm, Nvidia, TSMC, MediaTek, Micron, SK Hynix, and AMD) increased their research and development expenditures by 11% in 2020 to $43.5 billion, which was 64% of the industry’s total.”

Diodes, thyristors and transistors are major semiconductor components.