Chip Wars #3: Scope

Everyone has heard of Moore’s law. (It was and is a prediction, not a law like the laws of physics). It says the number of transistors that can be packed in a chip will double every 18 months or so. For decades, it has held true. The other side of that equation is less well known and is called Rock’s law. It says the cost of setting up a chip manufacturing unit doubles every 4 years. Why? As transistors get tinier, the tech to manufacture gets more expensive. Foundries have to keep pouring money into improving manufacturing capabilities. The manufacturing units for the highest end chips are very expensive, writes Pranay Kotasthane in When the Chips are Down.

 

Obviously the majority of chips do not need to be at the cutting edge. And the further away one moves from the cutting edge, the more one finds Asian countries at the pinnacle.

 

While the cutting-edge lithography machines are made in the Netherlands (ASML), Japanese companies (Canon and Nikon) dominate the market for the less demanding nodes (bigger size chips). Over half the top fifteen manufacturing equipment companies are Japanese.

 

When it comes to memory chips, South Korean companies rule the roost. Samsung and SK Hynix dominate the DRAM chip market. Samsung, with support from the Korean government, has planned a $230 billion investment over the next 20 years. (Unlike other countries in the semiconductor space, South Korea has good relations with China).

 

Taiwan is globally #2 in IC design, #1 in chip manufacturing capability, and #1 in packaging and testing. But Taiwanese companies are being arm twisted by the US to move part of their facilities to lie within the US, even if it makes things costlier.

 

For its tiny size, Singapore has an impressive tally of IC design centers, fabrication units, and assembly and test operations. Malaysia has a decent share of packaging and testing units; and Vietnam is starting to make gains in packaging and testing. South East Asian and East Asian countries then have a significant role in the global chip ecosystem.

 

The chip wars are about the highest-end chips only. The run of the mill chips are not in scope of these wars.

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