Research and development spending by semiconductor companies worldwide is forecast to grow 4% in 2021 to US$71.4 billion after rising 5% in 2020 to a record high of US$68.4 billion, according to IC Insights.

Total R&D spending by semiconductor companies is expected to rise by a compound annual growth rate (CAGR) of 5.8% between 2021 and 2025 to US$89.3 billion, IC Insights said.

When the world was hit by the COVID-19 pandemic in 2020, wary semiconductor suppliers kept a lid on R&D spending increases even though total semiconductor industry revenues grew by a surprising 8% in the year, IC Insights indicated. Semiconductor R&D expenditures as a percentage of worldwide industry sales slipped to 14.2% in 2020 compared to 14.6% in 2019, when R&D spending slipped 1% and total semiconductor revenues fell 12%.

Total semiconductor R&D spending has declined in only four years (2001, 2002, 2009 and 2019) since the end of the 1970s, IC Insights said. In the aftermath of the global recession of 2008-2009, R&D spending recovered strongly in 2010 and 2011, but then outlays slowed during the rest of the last decade for a variety of reasons including ongoing uncertainty about the global economy and an historic wave of acquisitions in the chip industry.

Since the year 2000, total semiconductor R&D spending as a percent of worldwide sales has exceeded the four-decade historical average of 14.6% in all but five years (2000, 2010, 2017, 2018 and 2020), IC Indicated. In these five years, lower R&D-to-sales ratios had more to do with the strength of total revenue growth than weakness in R&D spending by semiconductor suppliers.

Intel continued to top all other semiconductor suppliers in R&D expenditures in 2020, accounting for about 19% of the industry's total, IC Insights said. However, cost cuts, the elimination some product categories, and a drive to maximize efficiencies resulted in a 4% decrease in Intel's R&D outlays in 2020 to an estimated US$12.9 billion after its spending declined 1% in 2019, when its share was 22% of the industry's total.

The 2019-2020 drops in Intel R&D expenditures were the first consecutive annual declines for the company since 2008 and 2009, IC Insights noted. The 4% decrease in 2020 was the largest R&D decline for Intel since the mid 1990s.

Second-ranked Samsung increased its R&D spending by 19% in 2020 to US$5.6 billion partly because the memory giant stepped up development of leading-edge logic processes (of 5nm and below) to compete in the advanced IC foundry business with market leader TSMC, which raised its expenditures on R&D by 24% to nearly US$3.7 billion last year.

The top 10 R&D spenders (Intel, Samsung, Broadcom, Qualcomm, Nvidia, TSMC, MediaTek, Micron, SK Hynix and AMD) collectively increased their R&D expenditures by 11% in 2020 to US$43.5 billion, which was 64% of the industry's total, according to IC Insights. Moving up in the 2020 top-10 R&D ranking were Nvidia (up one place to fifth), MediaTek (up two places to seventh), and AMD (at 10th place up from 11th in 2019). The top 10's R&D investment ratio for R&D/sales was 14.5% in 2020 versus 15.0% in 2019.