Chip Wars #2: Who does What?

Who are the top players in the semiconductor industry today? Pranay Kotasthane looks into that in When the Chips are Down. We instinctively think of the chip design companies only, but there are a lot of other elements.

 

A technology node in semiconductors can be taken to represent the size of a single transistor. In 1965, one chip could hold a few tens of transistors. Today, it can hold more than a billion transistors. The smallest technology node today is 3 nm (nanometers).

 

The smaller the size, the more expensive it is to manufacture.

“Tools must be able to print the design onto a silicon disk precisely, and lasers must cut it finely.”

Achieving this required both technological and economic revolutions. The latter was done via the creation of lean supply chains. Each stage has become more and more specialized over time, and different countries are the apex in different steps.

 

Start with chip design. Some firms design for their own use; while other companies outsource design to specialist firms. Then there is manufacturing – it’s done in factories called foundries. Foundries etch the design onto a silicon disk and have long supply chains. The manufactured silicon disk is sent to assembly and packaging units, where the chips are separated and packed with housing to protect them.

 

Now let us look at the global distribution of the above. The highest-grade silicon, the raw material to make semiconductor chips, lies in China. Progressively, China has made “rare earth metals” a strategic asset, buying up and controlling most trace metals that are vital for chip manufacturing. The ultraspecialized software tools to design chips (EDA’s) are all American/Western owned (Cadence, Synopsys and Mentor Graphics). Some chip firms focus on IP (intellectual property), which they then license to others e.g. Arm. The world’s highest-end foundry is a Taiwanese company named TSMC (It is so critical and niche that the company is called the “silicon shield” of Taiwan – America can let Taiwan fall to China, but not TSMC!). In manufacturing, the critical tool is the photolithography one. It is used to etch the chip design onto the silicon disk. There is only one company that makes the highest end photolithography tool, a Dutch firm named ASML. The expertise in assembly and packaging, called OSAT (outsourced semiconductor assembly and test), lies in South East Asia.

 

You could call this globalization at its best. It also meant no one country knows or controls it all. But now, an increasingly nervous and apprehensive America wants to change that…

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