TheSeries Title Growing Challenge
Cover Title
of Semiconductor
DesignSubtitleLeadership
Month Year
By Author Name, Author Name, and Author Name
[Cover - Authors style]
November 2022
By Ramiro Palma, Raj Varadarajan, Jimmy Goodrich,
Thomas Lopez, and Aniket PatilBoston Consulting Group partners with leaders The Semiconductor Industry Association (SIA) is
in business and society to tackle their most the voice of the semiconductor industry, one of
important challenges and capture their greatest America’s top export industries and a key driver
opportunities. BCG was the pioneer in business of America’s economic strength, national security,
strategy when it was founded in 1963. Today, and global competitiveness. Semiconductors—
we work closely with clients to embrace athe tiny chips that enable modern technologies—
transformational approach aimed at benefiting all power incredible products and services that have
stakeholders—empowering organizations to grow, transformed our lives and our economy. The
build sustainable competitive advantage, and semiconductor industry directly employs over a
drive positive societal impact. quarter of a million workers in the United States,
and US semiconductor company sales totaled
Our diverse, global teams bring deep industry and $258 billion in 2021. SIA represents 99% of the
functional expertise and a range of perspectives U.S. semiconductor industry by revenue and
that question the status quo and spark change. nearly two-thirds of non-US chip firms.
BCG delivers solutions through leading-edge
management consulting, technology and design, Through this coalition, SIA seeks to strengthen
and corporate and digital ventures. We work in a leadership of semiconductor manufacturing,
uniquely collaborative model across the firm and design, and research by working with Congress,
throughout all levels of the client organization, the Administration, and key industry stakeholders
fueled by the goal of helping our clients thrive and around the world to encourage policies that
enabling them to make the world a better place. fuel innovation, propel business, and drive
international competition. Learn more at
semiconductors. Executive Summary
Semiconductors are ubiquitous, powering technologies that range
from cell phones to the Mars rovers Curiosity and Perseverance, and
economically important. In 2021, worldwide semiconductor sales
totaled $556 billion. Semiconductor design—which includes design of
both physical integrated circuits and associated software—accounts
for roughly half of all industry R&D investment and value add.1
US companies have played a leading role in semiconductor and South Korea. Bringing US public investment in design
design, and as a result the US has benefited from a virtuous and R&D into line with international peers—including, for
cycle of innovation, enhancing its ability to shape technical example, direct incentives such as tax credits for advanced
standards, strengthen national security, offer high-quality design and R&D performed in the US—will help ensure a
employment, and generate competitive advantage forlevel playing field for design in the US relative to other
original equipment manufac-turers (OEMs) in adjacent regions.
industries. (See Exhibit 1.)
Challenge 2: The supply of design talent is dwindling.
In recent years, however, the US’s share of design-related Although most of the world’s semiconductor design engi-
revenues has begun to show signs of a decline, dropping neers today are based in the US, the US semiconductor
from over 50% in 2015 to 46% in 2020.2 Other regions, design industry faces a shortage of skilled workers and is
especially South Korea and China, are seeing local growth on track to see this shortage increase to 23,000 designers
in their design capabilities. Our analysis shows that at the by 2030, given trends in the number of science, technology,
current trajectory (that is, if planners take no action), the engineering, and mathematics (STEM) graduates and the
US share could fall to 36% by the end of this decade as number of experienced engineers leaving the industry.
other regions capture a larger share of future growth. Public and private sectors must work together to encour-
age more US workers to enter the field of design, as well as
Should the US aim to defend its leadership position in to encourage experienced designers not to leave the field
de-sign and reap the associated downstream benefits of or the country. Further, the private sector must continue to
design leadership, it would need to address three challenges. enhance the productivity of its workforce by developing
and deploying new tools and prioritizing the highest value--
Challenge 1: Design and R&D investment needs are add R&D and design.
rising. As chips have grown more complex, development
costs have risen, especially for chips made on leading-edge Challenge 3: Open access to global markets is
manufacturing nodes. Today, the US private sector invests under pressure. Sales are the ultimate source of funding
more in design R&D than any other region’s private sector for investment in R&D, but tariffs, export restrictions, and
does, but governments around the world offer significant other factors threaten US semiconductor players’ access to
incentives to attract advanced design, and the US risks global markets, implicitly putting R&D reinvestment at risk.
falling behind. In addition, the relative level of public sup- Secular trends may reverse some elements of globalization,
port for R&D in the US lags that of other regions. The over- but ensuring that markets remain as open as possible will
all share of semiconductor--specific design and R&D funded benefit the US, which gains significantly from free trade and
by public investment is 13% in the US, compared to an aver- has the most to lose from proliferating restrictions.
age of 30% across mainland China, Europe, Taiwan, Japan,
1. Industry value add is the amount by which the value of an article increases at each stage of its production, exclusive of initial costs.
2. Design revenue calculations are based on fabless companies and estimated share of integrated device manufacturer (IDM) revenues
attributable to design.
BOSTON CONSULTING GROUP X THE SEMICONDUCTOR INDUSTRY ASSOCIATION 1The US private sector is likely to invest $400 billion to $500 As a result, public investment in design and R&D of approx-
billion over the next ten years in design-related activities, imately $20 billion to $30 billion through 2030 (including a
including R&D and workforce development. But to maintain $15 billion to $20 billion design tax incentive) would yield
leadership over the coming decade, the US needs comple- incremental design-related sales of about $450 billion over
mentary public-sector investments aimed at addressing the ten years, while also supporting training and employment
key challenges laid out above to strengthen both the domes- for about 23,000 design jobs and 130,000 indirect and
tic semiconductor industry and the country as a whole. induced jobs, and fortifying the US leadership position in
semiconductor design.
Further, the leverage provided by public-sector investments
would be substantial. Our analysis suggests that each
public dollar invested in design and R&D would induce
additional private-sector investment in design and R&D,
ultimately yielding $18 to $24 of design-related sales.3
Exhibit 1 - Market Leadership in Semiconductor Design Confers
Multiple Advantages
Virtuous cycle Ability to shape StrongerHigh-qualityBenefits
of innovation standards securityemployment for OEMs
Leadership attracts First movers have an National security The average annual Close collaboration
globa