Top ten semiconductor R&D spenders increase expenditures to $35.9bn

In addition to representing 21.2% of its semiconductor sales last year, Intel’s R&D spending accounted for 36% of the top ten R&D spending and about 22% of total worldwide semiconductor R&D expenditures of $58.9bn in 2017, according to the 2018 edition of The McClean Report that was released in January 2018. Figure 1 shows IC Insights’ ranking of the top semiconductor R&D spenders, including both semiconductor manufacturers and fabless suppliers.

Intel’s R&D expenditures increased just three percent in 2017, below its eight percent average annual growth rate since 2001, according to the new report. Still, Intel’s R&D spending exceeded the combined R&D spending of the next four companies - Qualcomm, Broadcom, Samsung, and Toshiba - listed in the ranking.

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 2017, Intel’s R&D spending as a percent of sales was 21.2%, down from an all-time high of 24.0% in 2015. In 2010, the ratio was 16.4%, 14.5% in 2005, 16.0% in 2000, and just 9.3% in 1995.

Qualcomm was again ranked as second-largest R&D spender, a position it first achieved in 2012. Qualcomm’s semiconductor-related R&D spending was down four percent in 2017, after a seven percent drop in 2016, and it was close to being passed up by third place Broadcom and fourth placed Samsung, whose R&D spending increased four percent and 19%, respectively.

Figure 1

Despite increasing its R&D expenditures by 19% in 2017, Samsung had the lowest investment-intensity level among the top-10 R&D spenders with research and development funding at 5.2% of sales last year. Samsung’s 49% increase in semiconductor revenue in 2017 (driven by strong growth in DRAM and NAND flash memory) lowered its R&D as a percent of sales ratio from 6.5% in 2016.

Micron Technology’s revenues surged 77% in 2017, but its research and development expenditures grew eight percent, resulting in an R&D/sales ratio of 7.5% compared to 12.5% in 2016. Similarly, SK Hynix’s sales climbed 79% in 2017, while its research and development spending increased 14% in the year, which resulted in an R&D/sakes ratio of 6.5% versus 10.2% in 2016.

Fifth-ranked Toshiba and sixth-ranked Taiwan Semiconductor Manufacturing Co. (TSMC) each allocated about the same amount for R&D spending in 2017. Toshiba’s R&D spending was down seven percent while TSMC had one of the largest increases in R&D spending among the top ten companies shown in the figure. TSMC’s R&D expenditures grew by 20% as the foundry raced rivals Samsung and GlobalFoundries in launching new process technologies, while its sales rose nine percent to $32.2bn in the year.

Rounding out the top ten list were MediaTek, Micron, Nvidia, which moved from 11^th place in 2016 to 9^th position to displace NXP in the 2017 ranking, and SK Hynix. Collectively, the top ten R&D spenders increased their outlays by six percent in 2017, two points more than the four percent R&D increase for the entire semiconductor industry. Combined R&D spending by the top ten exceeded total spending by the rest of the semiconductor companies ($35.9bn versus $23.0bn) in 2017.

A total of 18 semiconductor suppliers allocated more than more than $1.0bn for R&D spending 2017. The other eight manufacturers were NXP, TI ST, AMD, Renesas, Sony, Analog Devices, and GlobalFoundries.