The Semiconductor Industry Association has just released its 2024 State of the U.S. Semiconductor Industry report. It highlights opportunities for continued growth and innovation across the semiconductor industry and notes current and upcoming challenges to the semiconductor industry’s sustained success.
Last year, industry global sales reached $527 billion and nearly 1 trillion semiconductors were sold globally, more than 100 chips for every person on earth. With a cyclical market downturn now over and demand for semiconductors high, estimates from World Semiconductor Trade Statistics project sales to increase to over $600 billion in 2024.
Here are some highlights from the report. Click here to download a full copy.
Chips implementation
The implementation of the CHIPS and Science Act continues in 2024 with significant headway made in rolling out the law’s landmark manufacturing incentives and R&D investments. In this section of the report, SIA highlights some interesting statistics and numbers about manufacturing incentives, company investments, R&D investments, as well as insights about how to strengthen the U.S. supply chain.
The semiconductor workforce
Having a competitive domestic workforce and resilient manufacturing capabilities are critical to America’s lead in semiconductors, combined with a strong domestic semiconductor industry for the U.S. economy. The semiconductor industry has a considerable economic footprint in the U.S., with roughly 338,000 people working in the industry, including roles in chip design, electronic design automation (EDA), semiconductor manufacturing, and equipment manufacturing. Additionally, semiconductors enable over 300 downstream economic sectors accounting for over 26 million U.S. workers. The U.S. semiconductor industry accounts for more than 300,000 direct U.S. jobs and nearly two million additional indirect and induced U.S. jobs.
Expanding the talent pipeline
With chip demand on the rise and new capacity coming online in the years ahead, demand for industry ready talent will also increase. According to a 2023 study by SIA and the Boston Consulting Group, the U.S. faces a significant shortage of technicians, computer scientists, and engineers, with a projected shortfall of 67,000 workers in the semiconductor industry by 2030 and a gap of 1.4 million such workers throughout the broader U.S. economy. To meet this challenge and address the growing talent gap, SIA recommends a holistic public policy approach with the three following pillars:
- Build the supply of engineers and scientists
- Improve and simplify the training of skilled technicians
- Cross-cutting workforce challenges – expanding the pipeline and addressing affordability
Promoting sustainability
The semiconductor industry has a long history of leadership on environmental sustainability, ranging from actions to reduce greenhouse gas emissions associated with semiconductor fabrication processes to replacing chemicals of concern within semiconductor manufacturing processes
Supply chain rebalancing
Strengthening American and global semiconductor supply chains remains a top priority for the U.S. semiconductor industry, with companies across the sector working to diversify risk by broadening their operational footprint. Governments have also taken a particular interest in advancing supply chain resilience when it comes to the production of chips and upstream materials capacity, with a goal to reduce strategic dependencies.
Governments race to develop chip strategies and incentives
Governments around the globe are developing comprehensive strategies and offering targeted incentive packages to attract semiconductor investment. Companies have responded by announcing large-scale investments in new front-end and back-end manufacturing capacity, R&D and design centers, and workforce development. When offering incentives, governments should require a minimum level of private sector investment in projects to ensure government support is market based. SIA and BCG published a report in August 2024 outlining key factors semiconductor companies evaluate when selecting sites for semiconductor ecosystem investments.
Trade and semiconductors
The semiconductor industry is one of the most globally integrated industries, spanning dozens of nations and thousands of suppliers. SIA and its members are committed to ensuring global semiconductor supply chains are resilient, further promoting access to global markets and facilitating increased global trade through deeper international collaboration with government and industry. U.S.-headquartered semiconductor companies generate roughly three-quarters of their revenue from sales to foreign markets. To maintain U.S. semiconductor leadership, the U.S. needs a robust trade policy to complement efforts to build domestic capacity through the CHIPS and Science Act. SIA is currently leading efforts to promote global industry cooperation and expand global markets in multiple fora.
Geopolitics and the semiconductor industry
The global structure of the semiconductor supply chain has enabled SIA member companies to deliver continual leaps in cost savings and performance enhancements, but chip supply chains also face unprecedented risks. Geopolitical unrest, conflicts, and escalating restrictions on semiconductor technologies and raw materials have disrupted semiconductor supply chains, exacerbated labor shortages, and created new trading networks that facilitate illicit diversion of semiconductors to conflict areas. Global cooperation between governments and industry is crucial to ensure supply chains are resilient and operational, with appropriate safeguards to prevent access and misuse of sensitive technologies by malign actors.
The global semiconductor market
Over the past three decades, the semiconductor industry has experienced rapid growth and delivered enormous economic impact. Chip performance and cost improvements made possible the evolution from mainframes to PCs in the 1990s, the Web and online services in the 2000s, and the smartphone revolution in the 2010s. Innovation in AI, electric vehicles, and industrial manufacturing will drive continued growth in the chip market through the next decade. By 2030, AI alone is projected to contribute more than $15 trillion to the global economy. Semiconductors have become essential to our modern world, which is why long-term market demand for semiconductors remains strong.
Semiconductor demand drivers
Over the next decade, further innovation in semiconductor technology will enable a host of transformative technologies, including artificial intelligence (AI), autonomous electric vehicles, and the internet of things (IoT). Indeed, long-term growth drivers for semiconductor demand are firmly in place. Shifts in end-use market share reflect growing innovation and demand for semiconductors in the automotive, industrial, and consumer markets.
Global market share
The U.S. semiconductor industry accounts for half of the global market and on average has displayed steady annual growth. Since the late 1990s, the U.S. has been the global sales market share leader for chips, and in 2023 the U.S. semiconductor industry continued that trend, accounting for 50.2% of global sales revenue. In addition, U.S. semiconductor firms maintain a leading or highly competitive position in R&D, design, and manufacturing process technology. Global sales market share leadership also allows the U.S. semiconductor industry to benefit from a virtuous cycle of innovation. That sales leadership enables the U.S. industry to invest heavily in R&D, which helps ensure continued U.S. sales leadership. As long as the U.S. semiconductor industry maintains global market share leadership, it will continue to benefit from this virtuous cycle of innovation.
U.S. technology competitiveness
U.S. semiconductor R&D expenditures are consistently high, reflecting the inherent link between U.S. market-share leadership, research investments, and continued innovation. The U.S. semiconductor industry maintains one of the highest levels of R&D as a percent of sales of any U.S. industry. In 2023, overall U.S. semiconductor industry investment in R&D totaled $59.3 billion. The growth in R&D spending in 2023 represented an increase of 0.9% over 2022. R&D expenditures by U.S. semiconductor firms tend to be consistently high, regardless of cycles in annual sales, which reflects the importance to our industry of investing in innovation. The U.S. semiconductor industry invested 19.5% of revenue into R&D in 2023, ranking second to the U.S. pharmaceuticals and biotechnology industry in terms of the rate of R&D spending as a percent of sales. While global competitors are increasing their R&D investments to compete with the U.S. industry, American firms spend more on R&D than any other country’s semiconductor industry. These high levels of reinvestment into R&D drive innovation in the U.S. semiconductor industry and, in turn, help maintain global sales market leadership and jobs throughout the United States.
U.S. semiconductor industry domestic economic contribution
Semiconductors continue to be one of America’s top exports, totaling $52.7 billion in 2023, the sixth-highest behind exports of refined oil, crude oil, aircraft, natural gases, and autos. Consistent with the overall performance of the chip industry, U.S. chip exports decreased by 14%, causing the industry to drop out of the top five. Meanwhile, U.S. exports of cars increased by 8%, becoming the fifth-largest U.S. export. In 2023, sales outside the U.S. comprised about three-quarters of total U.S. semiconductor industry sales. Despite the downturn in sales and export value in 2023, growth in the U.S. chip industry continues to be promising with projections of double-digit growth in 2024.
U.S. semiconductor innovation policy landscape
To ensure continued U.S. leadership in the global semiconductor industry, the U.S. must carry forward an ambitious competitiveness and innovation agenda. The right policies listed below can help the U.S. build its semiconductor ecosystem and grow its economy, strengthen national security, and advance technology leadership.
- Invest in U.S. semiconductor leadership
- Strengthen America’s technology workforce
- Open new global markets for semiconductors and protect IP
- Cooperate closely with like-minded economies