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Understanding the semiconductor industry
The semiconductor industry is critical to technological innovation. However, the complexity of the supply chain and the subtle differences between various computer chips can raise more questions than answers. Through this broad overview, it is easier to better understand the entire industry. The first thing to note is the difference between digital and analog chips. It is commonly believed that digital chips are an upgraded version of analog chips, with more advanced technology—but this is not the case. In fact, the worlds of analog and digital chips are complementary.
The semiconductor industry is crucial for technological innovation. However, the complexity of the supply chain and the nuances of different computer chips can raise more questions than answers. Through this broad overview, it is easier to better understand the entire industry. The first thing to note is the difference between digital and analog chips. It is commonly believed that digital chips are an upgraded version of analog chips, with more advanced technology—but this is not the case. In fact, the worlds of analog and digital chips are complementary.
Digital chips are used to store and process information. Because they operate in binary, they can only handle discrete variables. Therefore, these chips have a higher purchase cost and shorter product cycles. Analog chips are used to convert continuous real-world variables into signals that digital chips can understand. Compared to digital chips, analog chips are cheaper for consumers and have longer product cycles. Chips that utilize both analog and digital elements are called mixed-signal.
Digital chips can be divided into two categories: logic chips and memory chips.
Logic chips are responsible for processing data to accomplish tasks and are produced by IDMs and foundries.
Memory chips are information storage devices produced by specialized manufacturers. Among them, DRAM chips are used to store data that must be accessed when the device is turned on, while NAND Flash chips are used to store data that must be saved when the device is turned off.
Manufacturing Process Overview
1) Constructing the initial wafer.
2) Applying a photoresist coating to the wafer.
3) Inside a lithography machine, the wafer is exposed to ultraviolet light through a photomask. This process is repeated until the wafer is completely covered.
4) Baking the wafer at a high temperature to make the modifications permanent.
5) Etching the wafer to remove unwanted elements and create three-dimensional circuits.
The Impact of Moore's Law
Intel co-founder and former CEO Gordon Moore proposed an observation in 1965, later known as Moore's Law. This law is not a law of physics, but rather states that the number of transistors in a semiconductor chip doubles every two years, while the price is halved. Moore's Law is significant because it has driven innovation across the industry. A 1970 chip contained 3,000 transistors, while today's chips contain approximately 5 billion. As the number of transistors increases, chips become faster, more powerful, and more energy-efficient.
Moore's Law applies only to digital processors (not analog processors), and the industry has successfully followed it so far. However, there are concerns about whether the industry will be able to follow it in the future.
To follow Moore's Law, the semiconductor industry has undergone many restructurings since 1980. Previously, semiconductors were vertically integrated, but today most are fabless/specialized. Fabless means that the production of chips is outsourced to specialized manufacturers known as foundries. Specialized players can achieve faster innovation. On the other hand, collaboration between players is crucial.
Current State of the Industry
Today, the semiconductor industry continues to grow. The manufacturing side can be divided into equipment manufacturers that provide the necessary equipment for foundries and the foundries themselves that manufacture the chips required by customers.
The design side of the current semiconductor industry includes companies that design chips independently for consumers, as well as US fabless companies that design chips on behalf of clients. Electronic Design Automation (EDA) companies provide crucial software for semiconductor chip design to semiconductor designers.
Foundries, fabless companies, and EDA companies are all directly related to Integrated Device Manufacturers (IDMs), who own their own fabs and design their own chips.
Global Impact
Most countries consider the semiconductor industry to be strategically important. Due to the industry's position in the global supply chain, geopolitical tensions have emerged. The conflict is primarily between the United States and China. The United States controls the top of the supply chain due to its close relationships with Japan, Europe, and South Korea.
There are concerns that China may invade Taiwan and seize its chip manufacturing industry, but Western countries have taken measures to promote local production through legislation, including the US and EU Chips Acts. If this happens, it will only be a temporary complication for the industry, but in the long run, the West will be in a stronger strategic position. China lags behind the US and Europe by many years in manufacturing.
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