For any business reinvestment will be primarily in form of Capex (Capital Expenditure) or R & D (Research and Development). These two are major drivers of business.
Business Driven by high Reinvestment into Capex –
Major Business Like Power and Utilities have high reinvestment in Capex. Utilities Business reinvests 25% of revenue in Capex, while Power reinvests 21% revenue back.
Semiconductor industry invests whopping 26% of revenue in Capex. Thus its a Capital driven industry.
Business Driven by high Reinvestment into R&D –
Business requiring constant innovation and which faces new challenge invest high on R&D. Best examples are the Pharmaceuticals and Software Industry. They reinvest 21% and 14% of revenue in R&D respectively.
Semiconductor industry invests whopping 22% of revenue back in R&D. This is because its a highly evolving industry.
Semiconductor Business –
Thus when we analyze the semiconductor industry we see that it is very unique, falling in both capital intensive and R&D intensive industry. It ranks higher than Pharma in R&D and higher than Power, Utilities in Capex. Thus we see that in both these categories around 48% of capital is invested back.