But despite all this talk well-nigh fries and semiconductors, few understand how the industry is structured. I’ve found the weightier way to understand something complicated is to diagram it out, step by step. So here’s a quick pictorial tutorial on how the industry works.
The Semiconductor Ecosystem
We’re seeing the digital transformation of everything. Semiconductors – fries that process digital information — are in scrutinizingly everything: computers, cars, home appliances, medical equipment, etc. Semiconductor companies will sell $600 billion worth of fries this year.
Looking at the icon below, the industry seems pretty simple. Companies in the semiconductor ecosystem make fries (the triangle on the left) and sell them to companies and government agencies (on the right). Those companies and government agencies then diamond the fries into systems and devices (e.g. iPhones, PCs, airplanes, deject computing, etc.), and sell them to consumers, businesses, and governments. The revenue of products that contain fries is worth tens of trillions of dollars.
Yet, given how large it is, the industry remains a mystery to most. If you do think of the semiconductor industry at all, you may picture workers in bunny suits in a fab wipe room (the tweedle factory) holding a 12” wafer. Yet it is a merchantry that manipulates materials an whit at a time and its factories forfeit 10s of billions of dollars to build. (By the way, that wafer has two trillion transistors on it.)
If you were worldly-wise to squint inside the simple triangle representing the semiconductor industry, instead of a single visitor making chips, you would find an industry with hundreds of companies, all dependent on each other. Taken as a whole it’s pretty overwhelming, so let’s describe one part of the ecosystem at a time. (Warning – this is a simplified view of a very ramified industry.)
Semiconductor Industry Segments
The semiconductor industry has seven variegated types of companies. Each of these unshared industry segments feeds its resources up the value uniting to the next until finally a tweedle factory (a “Fab”) has all the designs, equipment, and materials necessary to manufacture a chip. Taken from the marrow up these semiconductor industry segments are:
- Chip Intellectual Property (IP) Cores
- Electronic Diamond Automation (EDA) Tools
- Specialized Materials
- Wafer Fab Equipment (WFE)
- “Fabless” Tweedle Companies
- Integrated Device Manufacturers (IDMs)
- Chip Foundries
- Outsourced Semiconductor Assembly and Test (OSAT)
The pursuit sections unelevated provide increasingly detail well-nigh each of these eight semiconductor industry segments.
Chip Intellectual Property (IP) Cores
- The design of a tweedle may be owned by a single company, or…
- Some companies license their tweedle designs – as software towers blocks, tabbed IP Cores – for wide use
- There are over 150 companies that sell tweedle IP Cores
- For example, Apple licenses IP Cores from ARM as a towers woodcut of their microprocessors in their iPhones and Computers
Electronic Diamond Automation (EDA) Tools
- Engineers diamond fries (adding their own designs on top of any IP cores they’ve bought) using specialized Electronic Diamond Automation (EDA) software
- The industry is dominated by three U.S. vendors – Cadence, Mentor (now part of Siemens) and Synopsys
- It takes a large engineering team using these EDA tools 2-3 years to diamond a ramified logic tweedle like a microprocessor used inside a phone, computer or server. (See the icon of the diamond process below.)
- Today, as logic fries protract to wilt increasingly complex, all Electronic Diamond Automation companies are whence to insert Strained Intelligence aids to automate and speed up the process
Specialized Materials and Chemicals
So far our tweedle is still in software. But to turn it into something tangible we’re going to have to physically produce it in a tweedle factory tabbed a “fab.” The factories that make fries need to buy specialized materials and chemicals:
- Silicon wafers – and to make those they need crystal growing furnaces
- Over 100 Gases are used – zillion gases (oxygen, nitrogen, stat dioxide, hydrogen, argon, helium), and other exotic/toxic gases (fluorine, nitrogen trifluoride, arsine, phosphine, boron trifluoride, diborane, silane, and the list goes on…)
- Fluids (photoresists, top coats, CMP slurries)
- Wafer handling equipment, dicing
- RF Generators
- These machines physically manufacture the chips
- Five companies dominate the industry – Applied Materials, KLA, LAM, Tokyo Electron and ASML
- These are some of the most complicated (and expensive) machines on Earth. They take a slice of an ingot of silicon and manipulate its atoms on and unelevated its surface
- We’ll explain how these machines are used a bit later on
“Fabless” Tweedle Companies
- Systems companies (Apple, Qualcomm, Nvidia, Amazon, Facebook, etc.) that previously used off-the-shelf fries now diamond their own chips.
- They create tweedle designs (using IP Cores and their own designs) and send the designs to “foundries” that have “fabs” that manufacture them
- They may use the fries exclusively in their own devices e.g. Apple, Google, Amazon ….
- Or they may sell the fries to everyone e.g. AMD, Nvidia, Qualcomm, Broadcom…
- They do not own Wafer Fab Equipment or use specialized materials or chemicals
- They do use Tweedle IP and Electronic Diamond Software to diamond the chips
Integrated Device Manufacturers (IDMs)
- Integrated Device Manufacturers (IDMs) design, manufacture (in their own fabs), and sell their own chips
- They have their own “fabs” but may moreover use foundries
- They use Tweedle IP and Electronic Diamond Software to diamond their chips
- They buy Wafer Fab Equipment and use specialized materials and chemicals
- The stereotype forfeit of taping out a new leading-edge tweedle (3nm) is now $500 million
- Foundries make fries for others in their “fabs”
- They buy and integrate equipment from a variety of manufacturers
- Wafer Fab Equipment and specialized materials and chemicals
- They diamond unique processes using this equipment to make the chips
- But they don’t diamond chips
- TSMC in Taiwan is the leader in logic, Samsung is second
- Other fabs specialize in making fries for analog, power, rf, displays, secure military, etc.
- It financing $20 billon to build a new generation tweedle (3nm) fabrication plant
- Fabs are short for fabrication plants – the factory that makes chips
- Integrated Device Manufacturers (IDMs) and Foundries both have fabs. The only difference is whether they make fries for others to use or sell or make them for themselves to sell.
- Think of a Fab as matching to a typesetting printing plant (see icon below)
- Just as an tragedian writes a typesetting using a word processor, an engineer designs a tweedle using electronic diamond automation tools
- An tragedian contracts with a publisher who specializes in their genre and then sends the text to a printing plant. An engineer selects a fab towardly for their type of tweedle (memory, logic, RF, analog)
- The printing plant buys paper and ink. A fab buys raw materials; silicon, chemicals, gases
- The printing plant buys printing machinery, presses, binders, trimmers. The fab buys wafer fab equipment, etchers, deposition, lithography, testers, packaging
- The printing process for a typesetting uses offset lithography, filming, stripping, blueprints, plate making, tightness and trimming. Fries are manufactured in a complicated process manipulating atoms using etchers, deposition, lithography. Think of it as an two-bit level offset printing. The wafers are then cut up and the fries are packaged
- The plant turns out millions of copies of the same book. The plant turns out millions of copies of the same chip
Outsourced Semiconductor Assembly and Test (OSAT)
- Companies that package and test fries made by foundries and IDMs
- OSAT companies take the wafer made by foundries, dice (cut) them up into individual chips, test them and then package them and ship them to the customer
- As fries have wilt denser (with trillions of transistors on a single wafer) the forfeit of towers fabs have skyrocketed – now >$10 billion for one tweedle factory
- One reason is that the forfeit of the equipment needed to make the fries has skyrocketed
- Just one wide lithography machine from ASML, a Dutch company, financing $150 million
- There are ~500 machines in a fab (not all as expensive as ASML)
- The fab towers is incredibly complex. The wipe room where the fries are made is just the tip of the iceberg of a ramified set of plumbing feeding gases, power, liquids all at the right time and temperature into the wafer fab equipment
- The multi-billion-dollar forfeit of staying at the leading whet has meant most companies have dropped out. In 2001 there were 17 companies making the most wide chips. Today there are only two – Samsung in Korea and TSMC in Taiwan.
- Given that China believes Taiwan is a province of China this could be problematic for the West.
It’s getting much harder to build fries that are denser, faster, and use less power, so what’s next?
- Instead of making a single processor do all the work, logic tweedle designers have put multiple specialized processors inside of a chip
- Memory fries are now made denser by stacking them 100 layers high
- As fries are getting increasingly ramified to design, which ways larger diamond teams, and longer time to market, Electronic Diamond Automation companies are embedding strained intelligence to automate parts of the diamond process
- Wafer equipment manufacturers are designing new equipment to help fabs make fries with lower power, largest performance, optimum area-to-cost, and faster time to market
What’s Next – Business
The merchantry model of Integrated Device Manufacturers (IDMs) like Intel is rapidly changing. In the past there was a huge competitive wholesomeness in stuff vertically integrated i.e. having your own diamond tools and fabs. Today, it’s a disadvantage.
- Foundries have economies of scale and standardization. Rather than having to invent it all themselves, they can utilize the unshortened stack of innovation in the ecosystem. And just focus on manufacturing
- AMD has proven that it’s possible to shift from an IDM to a fabless foundry model. Intel is trying. They are going to use TSMC as a foundry for their own fries as well as set up their own foundry
What’s Next – Geopolitics
Controlling wide tweedle manufacturing in the 21st century may well prove to be like executive the oil supply in the 20th. The country that controls this manufacturing can throttle the military and economic power of others.
- Ensuring a steady supply of fries has wilt a national priority. (China’s largest import by $’s are semiconductors – larger than oil)
- Today, both the U.S. and China are rapidly trying to decouple their semiconductor ecosystems from each other; China is pouring $100 billion of government incentives in towers Chinese fabs, while simultaneously trying to create ethnic supplies of wafer fab equipment and electronic diamond automation software
- Over the last few decades the U.S. moved most of its fabs to Asia. Today we are incentivizing bringing fabs and tweedle production when to the U.S.
An industry that previously was only of interest to technologists is now one of the largest pieces in unconfined power competition.