Current Pace of Export Controls Risk Hindering US Chip Leadership, Industry Officials Say

U.S. share of global semiconductor design revenue has declined over the past decade, partly due to export controls and other trade restrictions, the Semiconductor Industry Association and Boston Consulting Group said in a report last week. If the U.S. continues on its path and doesn’t properly tailor its restrictions, U.S. shares of global revenues could drop 10 percentage points over this decade, the report warned.

U.S. chip design companies have “long benefited from open access to global markets,” which allows them to work with “specialized partners” in other countries to design better semiconductors, the report said. But Ramiro Palma of the Boston Consulting Group said that could soon change. “This is something where we can't simply take for granted that markets will be open on a going forward basis,” Palma said during a Dec. 1 webinar hosted by the SIA.

Export controls and tariffs are increasingly hindering the “free flow of semiconductors across global markets,” the report said, which results in fewer sales for U.S. companies and limits their investment in next-generation chip technologies. “If you cut the overall market in half, or cut the overall market in thirds, or whatever it is, you end up with smaller subscale ponds, which slows the rate of innovation,” Palma said, adding that some chip firms may not be able to “justify” new projects if they can’t sell to a global market.

Open markets “really open up the revenue aperture that's important if we're going to keep investing,” Mark Fuselier, senior vice president of technology and product engineering for AMD, said during the webinar. “Anything that we do that really limits the abilities to build revenue bases, or access talent from around the world, is really going to hinder our ability to solve these really challenging problems.”

The U.S. in October announced a new set of new export controls aimed at limiting China’s ability to acquire advanced computing chips and manufacture advanced semiconductors (see 2210070049). The report said U.S. export restrictions against China have encouraged the country -- whose original equipment manufacturers (OEMs) are responsible for 27% of global semiconductor demand -- to find other sources of semiconductor design.

“As a direct result of U.S. export restrictions,” the report said, “non-U.S. OEMs are increasingly turning to locally designed semiconductors.” It also said Chinese companies are adopting open-source design technologies to “avoid dependency on technologies that might be subject to export restrictions.”

The risks extend beyond reducing demand from China, the report said. If the EU, India, Japan, South Korea and other countries “increasingly seek to localize elements of the semiconductor value chain,” the report said, “large global markets” could “become balkanized by subscale local champions, to the detriment of all participants.”

“Trade restrictions have profoundly negative repercussions for the semiconductor industry in the U.S. and globally, harming all participants,” the report said, also pointing to rising chip investment costs and a dwindling pool of foreign talent as other factors that could threaten U.S. semiconductor design leadership. “Should the U.S. aim to defend its leadership position in design and reap the associated downstream benefits of design leadership, it would need to address [these] three challenges.”