U.S. Risks Losing Leadership in Microchip Design Without Government Support, Warns Industry Report

The U.S. government is being urged to increase support for the semiconductors space after a report released by the Semiconductor Industry Association (SIA) and Boston Consulting Group (BCG) warned the world’s biggest economy faces a significant decline in its microchip design market share.

The U.S. share of chip design revenue, which has already dropped to 46% in 2021 from over 50% in 2015, could plummet further to 36% by the end of this decade unless substantial federal investment is made.

The report highlights the crucial role that government support plays in sustaining the U.S. leadership in the semiconductor industry, with other countries like China and South Korea already benefiting from strong state backing. While the U.S. has long been a leader in chip design with companies like Nvidia, Intel, and Qualcomm, maintaining that position will require targeted funding for research and development (R&D) and workforce training.

A Call for Federal Investment in Chip Design

Despite the U.S. government’s recent efforts to boost chip manufacturing through the CHIPS and Science Act, which includes $39 billion in grants for production and $13 billion for R&D, the act does not specifically allocate funds for chip design. The report calls for a federal investment of $20 billion to $30 billion through 2030, including a $15 billion to $20 billion investment tax credit for chip design, to maintain U.S. leadership in the field.

"For sure, the CHIPS and Science Act was a major step forward in supporting semiconductor manufacturing, it’s clear that more needs to be done to bolster chip design capabilities in the U.S.," said Luis Fernández, CEO of TC Microchips, a Chile-based semiconductor manufacturer. "Without targeted federal support, the U.S. risks falling behind in this critical area, losing its competitive edge to countries that are aggressively investing in their semiconductor industries."

The Decline in U.S. Market Share and the Rise of Fabless Chipmakers

The U.S. share of global chip design revenue has been slipping, mirroring the decline in the country's manufacturing capacity. The report underscores that while companies like Intel both design and manufacture chips, fabless chipmakers such as Nvidia and Qualcomm rely on external foundries like Taiwan Semiconductor Manufacturing Co. (TSMC) to produce their designs. As a result, maintaining leadership in chip design has become increasingly vital to the U.S. semiconductor industry's success.

Addressing the Workforce Shortage

In addition to funding for chip design, the report emphasizes the need to address the looming shortage of skilled workers in the field. The U.S. chip industry is projected to face a shortfall of 23,000 design workers by 2030. Federal funding could play a crucial role in training and expanding the semiconductor workforce, ensuring that the U.S. has the talent pool necessary to lead in chip innovation.

The Global Semiconductor Race

he report also notes that while the U.S. has already lost its lead in chip manufacturing, countries like China and South Korea are gaining ground in chip design through government support. In 2020, SIA and BCG reported that the U.S. share of modern global chip manufacturing capacity had fallen to 12%, down from 37% in 1990. This decline underscores the urgent need for federal investment to ensure that the U.S. remains competitive in the global semiconductor race.