mannerisms

Ruminations on the electronics industry from David Manners, Senior Components Editor on Electronics Weekly.

Record R&D Despite Flat Market

R&D spending rose last year to record levels although the market declined, reports IC Insights.

In 2012 semiconductor R&D spending rose 7% while Intel’s spending on R&D climbed to 20% of sales in 2012; Samsung’s held steady at 8%.

2012 spending on R&D by semiconductor companies reached a record $53bn, even though the market declined 1% to $317.6bn.

The increase lifted R&D spending by chip companies to 16.7% of total semiconductor sales in 2012, the highest level since the peak of 17.5% was reached in both 2008 and 2009.

For more than three decades, R&D spending as a percentage of total semiconductor sales has trended higher due to increasing costs associated with developing complex IC designs and creating next-generation process technologies to manufacture these circuits.

In the late 1970s and early 1980s, R&D spending as a percent of semiconductor sales by chip companies was typically 7-8%. R&D-to-sales ratios grew to 10-12% of revenues by the early 1990s and then jumped to over 15% during the last decade, reaching a record 17.5% in 2008.

However, not all companies have seen a growing portion of sales consumed by R&D. For example, Samsung’s R&D-to-sales ratio fell from a peak of 25% in 2001 to 8% in 2010 and has remained there since.

Samsung’s semiconductor business is more capital-intensive than it is R&D-intensive because of the commodity nature of the DRAM and flash memory businesses in which it mainly participates.

As a result, since 2001, Samsung’s semiconductor sales have grown an average of 16% per year, while its R&D spending has increased at about one-third the rate (5%) and it’s capital expenditures have grown by an average of 19% annually.

The main focus of Samsung’s investments is in adding new fab capacity for large-diameter wafers (currently 300mm but heading toward 450mm later this decade).

Intel’s spending on new fabs and equipment in each of the past two years was about $11bn, which was only about $1bn shy of what Samsung spent in each of those years.

The short life of Intel’s microprocessors means that the Intel business model demands large R&D spending.
 
Intel’s $10.1bn in semiconductor R&D spending in 2012 was more than 7x the amount spent by Qualcomm.

Intel spent more than one-third of the combined $28.7bn spent by the Top 10 R&D spenders in 2012.

TSMC’s R&D spending-to-sales ratio has been gradually climbing over the past 6-8 years. TSMC’s spending ratio reached 8% in 2001, but that had a lot to do with the fact that its sales were hit hard by the industry recession that year.

Aside from a small dip in 2009, TSMC’s spending on R&D has grown every year since 1998 and at an average annual rate of 25%.

 Over that same 1998-2012 time period TSMC’s sales grew an average rate of 19% per year.

Tags: 1970s, 1980s, chip companies, dram, early 1990s

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1 Comment

  1. SecretEuroPatentAgentMan
    February 09, 2013 22:04

    Are we really comparing oranges with oranges here? Intel no doubt spends tons on silicon tech. Qualcomm on the other hand, being fabless, is probably spending more on RF, architecture and patents protection (ref. the famous “Qualcomm wall”)

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