Semiconductor R&D loses steam at only 0.5% growth in 2015

IC Insights has revealed that industry-wide R&D expenditures climbed 0.5 per cent to a record-high $56.4 billion in 2015 from the previous peak of $54.1 billion set in 2014. Overall, the top 10 R&D spenders increased expenditures by roughly two per cent last year. This was the smallest increase since the 2009 downturn year and significantly below the CAGR of four per cent in R&D expenditures during the last 10 years, according to IC Insights' 2016 edition of The McClean Report.

Growing concerns about the weak global economy, slumping sales in H2, and unprecedented industry consolidation through a huge wave of merger and acquisition agreements weighed on semiconductor R&D spending in 2015. The report showed Intel continuing to lead all semiconductor companies in R&D spending in 2015, accounting for 22 per cent of the industry's total research and development expenditures.

Following Intel in the 2015 R&D ranking are Qualcomm, Samsung, Broadcom, and the world's largest wafer foundry, TSMC. The top five spenders were unchanged from 2014, but below that point, the rankings of most companies were shuffled. Micron Technology moved up to sixth in 2015, swapping positions with Toshiba, which fell to seventh in the new ranking. MediaTek went from ninth in 2014 to eighth place, while SK Hynix climbed from 12th to ninth in 2015. ST slid from eighth in 2014 to 10th in 2015, and Nvidia fell out of the top 10 to 11th place in 2015.

The top 10 in the R&D ranking collectively increased spending on research and development in 2015 by about two per cent compared to the half-per cent increase for total semiconductor R&D expenditures in the year. Combined R&D spending by the top 10 exceeded total expenditures by the rest of the semiconductor companies (about $30.8 billion versus $25.6 billion) in 2015, something that has continued to hold true since 2005 and probably well before that, according to the report.

Top 10 R&D ranking

Intel's R&D expenditures grew five per cent in 2015, which is significantly below its 13 per cent average increase in spending per year since 2010 and slightly under its eight per cent annual growth rate since 2001, the report added. Underscoring the growing cost of developing new IC technologies, Intel's R&D-to-sales ratio has climbed significantly over the past 20 years. In 2010, Intel's R&D intensity level was 16.4 per cent of revenue spent in research and development compared to 24 per cent in 2015. Intel's R&D-to-sales ratios were 14.5 per cent in 2005, 16 per cent in 2000, and just 9.3 per cent in 1995.

With worldwide semiconductor sales falling nearly one per cent in 2015 to $353.6 billion and R&D spending rising 0.5 per cent to $56.4 billion, the industry's R&D-to-sales ratio grew slightly to 16 per cent from 15.8 per cent in 2014. Since 2000, the semiconductor industry's annual R&D-to-revenue ratio has average 16 per cent. The report forecasted semiconductor R&D spending to grow about four per cent in 2016 $58.9 billion and reach $76.3 billion in 2020, which would represent a CAGR of 6.7 per cent from 2015. Between 2016 and 2020, the semiconductor industry's R&D-to-revenue ratio is expected to average 16.4 per cent compared to 16.2 per cent in the 2011-2015 time period.