Innovation Lightbulb: Capital Expenditures among U.S. Chip Firms
Analyzing capital expenditure, or “capex,” from leading semiconductor firms headquartered in the United States can provide valuable insight into the nature of the industry. Publicly reported capex from fifteen leading U.S. companies over the past ten years shows dramatic growth in spending across the sector. Driven primarily by semiconductor manufacturing firms like Micron and Intel, capex reached nearly $50 billion in 2022.
That Micron and Intel should be the biggest spenders is unsurprising: as manufacturing chips at the leading-edge becomes more labor and capital intensive with increased tool and facility costs, more manufacturing process steps, and lower yields. The high capital expenditure by these firms goes towards the hugely expensive equipment required to produce leading, or near-leading edge memory and logic chips at-scale with the expectation that major returns will be won through volume production.
While the scale of capital expenditure among U.S. chip manufacturing companies dwarfs that of their neighbors across the semiconductor value chain, FY22 saw the highest capex of the last decade from U.S. design firms, analog chip makers, and tool/equipment makers. This data underscores the fact that increasing cost of competition at the leading-edge is not restricted to chip manufacturers.
This nearly $50 billion in capital expenditure, which is just a sample from selected U.S.-headquartered firms, puts the U.S. CHIPS Act into perspective. The $39 billion in subsidies and 25 percent investment tax credit in the Act represent an historic level of support for this strategic industry, but these funds represent a small part of the investment needed to grow U.S. manufacturing capacity. Timely execution and continued support will be key to achieving the CHIPS Act’s goals.
Data visualization by Jaehyun Han