Steve Clean The Semiconductor Ecosystem – Defined


The final 12 months has seen a ton written concerning the semiconductor trade: chip shortages, the CHIPS Act, our dependence on Taiwan and TSMC, China, and so forth.

However regardless of all this speak about chips and semiconductors, few perceive how the trade is structured. I’ve discovered one of the best ways to know one thing sophisticated is to diagram it out, step-by-step. So right here’s a fast pictorial tutorial on how the trade works.

The Semiconductor Ecosystem

We’re seeing the digital transformation of every thing. Semiconductors – chips that course of digital data — are in virtually every thing: computer systems, automobiles, house home equipment, medical tools, and so forth. Semiconductor corporations will promote $600 billion price of chips this 12 months.

Trying on the determine beneath, the trade appears fairly easy. Corporations within the semiconductor ecosystem make chips (the triangle on the left) and promote them to corporations and authorities companies (on the precise). These corporations and authorities companies then design the chips into methods and gadgets (e.g. iPhones, PCs, airplanes, cloud computing, and so forth.), and promote them to customers, companies, and governments. The income of merchandise that comprise chips is price tens of trillions of {dollars}.

But, given how massive it’s, the trade stays a thriller to most.  In case you do consider the semiconductor trade in any respect, you might image staff in bunny fits in a fab clear room (the chip manufacturing unit) holding a 12” wafer. But it’s a enterprise that manipulates supplies an atom at a time and its factories value 10s of billions of {dollars} to construct.  (By the way in which, that wafer has two trillion transistors on it.)

In case you had been in a position to look inside the easy triangle representing the semiconductor trade, as a substitute of a single firm making chips, you’ll discover an trade with a whole lot of corporations, all depending on one another. Taken as an entire it’s fairly overwhelming, so let’s describe one a part of the ecosystem at a time.  (Warning –  this can be a simplified view of a really advanced trade.)

Semiconductor Business Segments

The semiconductor trade has seven various kinds of corporations. Every of those distinct trade segments feeds its assets up the worth chain to the following till lastly a chip manufacturing unit (a “Fab”) has all of the designs, tools, and supplies essential to manufacture a chip. Taken from the underside up these semiconductor trade segments are:

  1. Chip Mental Property (IP) Cores
  2. Digital Design Automation (EDA) Instruments
  3. Specialised Supplies
  4. Wafer Fab Tools (WFE)
  5. “Fabless” Chip Corporations
  6. Built-in System Producers (IDMs)
  7. Chip Foundries
  8. Outsourced Semiconductor Meeting and Check (OSAT)

The next sections beneath present extra element about every of those eight semiconductor trade segments.

Chip Mental Property (IP) Cores

  • The design of a chip could also be owned by a single firm, or…
  • Some corporations license their chip designs – as software program constructing blocks, known as IP Cores – for large use
  • There are over 150 corporations that promote chip IP Cores
  • For instance, Apple licenses IP Cores from ARM as a constructing block of their microprocessors of their iPhones and Computer systems

Digital Design Automation (EDA) Instruments

  • Engineers design chips (including their very own designs on high of any IP cores they’ve purchased) utilizing specialised Digital Design Automation (EDA) software program
  • The trade is dominated by three U.S. distributors – Cadence, Mentor (now a part of Siemens) and Synopsys
  • It takes a big engineering group utilizing these EDA instruments 2-3 years to design a posh logic chip like a microprocessor used inside a telephone, laptop or server. (See the determine of the design course of beneath.)

  • Right this moment, as logic chips proceed to grow to be extra advanced, all Digital Design Automation corporations are starting to insert Synthetic Intelligence aids to automate and pace up the method

Specialised Supplies and Chemical substances

To date our chip remains to be in software program. However to show it into one thing tangible we’re going to need to bodily produce it in a chip manufacturing unit known as a “fab.” The factories that make chips want to purchase specialised supplies and chemical compounds:

  • Silicon wafers – and to make these they want crystal rising furnaces
  • Over 100 Gases are used – bulk gases (oxygen, nitrogen, carbon dioxide, hydrogen, argon, helium), and different unique/poisonous gases (fluorine, nitrogen trifluoride, arsine, phosphine, boron trifluoride, diborane, silane, and the record goes on…)
  • Fluids (photoresists, high coats, CMP slurries)
  • Photomasks
  • Wafer dealing with tools, dicing
  • RF Turbines

Wafer Fab Tools (WFE) Make the Chips

  • These machines bodily manufacture the chips
  • 5 corporations dominate the trade – Utilized Supplies, KLA, LAM, Tokyo Electron and ASML
  • These are among the most intricate (and costly) machines on Earth. They take a slice of an ingot of silicon and manipulate its atoms on and beneath its floor
  • We’ll clarify how these machines are used a bit in a while

 “Fabless” Chip Corporations

  • Methods corporations (Apple, Qualcomm, Nvidia, Amazon, Fb, and so forth.) that beforehand used off-the-shelf chips now design their very own chips.
  • They create chip designs (utilizing IP Cores and their very own designs) and ship the designs to “foundries” which have “fabs” that manufacture them
  • They might use the chips solely in their very own gadgets e.g. Apple, Google, Amazon ….
  • Or they might promote the chips to everybody e.g. AMD, Nvidia, Qualcomm, Broadcom…
  • They don’t personal Wafer Fab Tools or use specialised supplies or chemical compounds
  • They do use Chip IP and Digital Design Software program to design the chips

Built-in System Producers (IDMs)

  • Built-in System Producers (IDMs) design, manufacture (in their very own fabs), and promote their very own chips
    • They don’t make chips for different corporations (that is altering quickly – see right here.)
    • There are three classes of IDMs– Reminiscence (e.g. Micron, SK Hynix), Logic (e.g. Intel), Analog (TI, Analog Units)
  • They’ve their very own “fabs” however may use foundries
    • They use Chip IP and Digital Design Software program to design their chips
    • They purchase Wafer Fab Tools and use specialised supplies and chemical compounds
  • The common value of taping out a brand new modern chip (3nm) is now $500 million

 Chip Foundries

  • Foundries make chips for others of their “fabs”
  • They purchase and combine tools from quite a lot of producers
    • Wafer Fab Tools and specialised supplies and chemical compounds
  • They design distinctive processes utilizing this tools to make the chips
  • However they don’t design chips
  • TSMC in Taiwan is the chief in logic, Samsung is second
  • Different fabs specialise in making chips for analog, energy, rf, shows, safe army, and so forth.
  • It prices $20 billon to construct a brand new technology chip (3nm) fabrication plant


  • Fabs are quick for fabrication vegetation – the manufacturing unit that makes chips
  • Built-in System Producers (IDMs) and Foundries each have fabs. The one distinction is whether or not they make chips for others to make use of or promote or make them for themselves to promote.
  • Consider a Fab as analogous to a ebook printing plant (see determine beneath)
  1. Simply as an creator writes a ebook utilizing a phrase processor, an engineer designs a chip utilizing digital design automation instruments
  2. An creator contracts with a writer who specializes of their style after which sends the textual content to a printing plant. An engineer selects a fab acceptable for his or her kind of chip (reminiscence, logic, RF, analog)
  3. The printing plant buys paper and ink. A fab buys uncooked supplies; silicon, chemical compounds, gases
  4. The printing plant buys printing equipment, presses, binders, trimmers. The fab buys wafer fab tools, etchers, deposition, lithography, testers, packaging
  5. The printing course of for a ebook makes use of offset lithography, filming, stripping, blueprints, plate making, binding and trimming. Chips are manufactured in an advanced course of manipulating atoms utilizing etchers, deposition, lithography. Consider it as an atomic stage offset printing. The wafers are then minimize up and the chips are packaged
  6. The plant seems thousands and thousands of copies of the identical ebook. The plant seems thousands and thousands of copies of the identical chip

Whereas this sounds easy, it’s not. Chips are most likely essentially the most sophisticated merchandise ever manufactured.  The diagram beneath is a simplified model of the 1000+ steps it takes to make a chip.

Outsourced Semiconductor Meeting and Check (OSAT)

  • Corporations that package deal and take a look at chips made by foundries and IDMs
  • OSAT corporations take the wafer made by foundries, cube (minimize) them up into particular person chips, take a look at them after which package deal them and ship them to the shopper


Fab Points

  • As chips have grow to be denser (with trillions of transistors on a single wafer) the price of constructing fabs have skyrocketed – now >$10 billion for one chip manufacturing unit
  • One motive is that the price of the tools wanted to make the chips has skyrocketed
    • Only one superior lithography machine from ASML, a Dutch firm, prices $150 million
    • There are ~500+ machines in a fab (not all as costly as ASML)
    • The fab constructing is extremely advanced. The clear room the place the chips are made is simply the tip of the iceberg of a posh set of plumbing feeding gases, energy, liquids all on the proper time and temperature into the wafer fab tools
  • The multi-billion-dollar value of staying at the vanguard has meant most corporations have dropped out. In 2001 there have been 17 corporations making essentially the most superior chips.  Right this moment there are solely two – Samsung in Korea and TSMC in Taiwan.
    • Provided that China believes Taiwan is a province of China this may very well be problematic for the West.

What’s Subsequent – Expertise

It’s getting a lot more durable to construct chips which can be denser, quicker, and use much less energy, so what’s subsequent?

  • As an alternative of constructing a single processor do all of the work, logic chip designers have put a number of specialised processors within a chip
  • Reminiscence chips at the moment are made denser by stacking them 100+ layers excessive
  • As chips are getting extra advanced to design, which suggests bigger design groups, and longer time to market, Digital Design Automation corporations are embedding synthetic intelligence to automate elements of the design course of
  • Wafer tools producers are designing new tools to assist fabs make chips with decrease energy, higher efficiency, optimum area-to-cost, and quicker time to market

What’s Subsequent – Enterprise

The enterprise mannequin of Built-in System Producers (IDMs) like Intel is quickly altering. Up to now there was an enormous aggressive benefit in being vertically built-in i.e. having your individual design instruments and fabs. Right this moment, it’s an obstacle.

  • Foundries have economies of scale and standardization. Fairly than having to invent all of it themselves, they will make the most of your entire stack of innovation within the ecosystem. And simply give attention to manufacturing
  • AMD has confirmed that it’s potential to shift from an IDM to a fabless foundry mannequin. Intel is making an attempt. They’re going to use TSMC as a foundry for their very own chips in addition to arrange their very own foundry

What’s Subsequent – Geopolitics

Controlling superior chip manufacturing within the twenty first century might nicely show to be like controlling the oil provide within the twentieth. The nation that controls this manufacturing can throttle the army and financial energy of others.

  • Making certain a gentle provide of chips has grow to be a nationwide precedence. (China’s largest import by $’s are semiconductors – bigger than oil)
  • Right this moment, each the U.S. and China are quickly making an attempt to decouple their semiconductor ecosystems from one another; China is pouring $100+ billion of presidency incentives in constructing Chinese language fabs, whereas concurrently making an attempt to create indigenous provides of wafer fab tools and digital design automation software program
  • Over the previous couple of many years the U.S. moved most of its fabs to Asia. Right this moment we’re incentivizing bringing fabs and chip manufacturing again to the U.S.

An trade that beforehand was solely of curiosity to technologists is now one of many largest items in nice energy competitors.

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