Ⅰ One image to learn global semiconductor supply chain

The Visual Capitalist website published an image from ASE Global highlighting the complex global semiconductor supply chain that powers the modern world.

Ⅱ How important are semiconductors and chips?

Fully understanding the importance of semiconductors to the modern world is not easy, especially when the devices themselves are small. But a semiconductor device, also known as an integrated circuit (IC) or chip, actually contains many smaller circuits that consist of millions of transistors all packaged in a few millimeters of silicon (semiconductor). These semiconductor devices allow electronics to perform calculations that are essentially functional and operational. This makes semiconductors critical to modern electronics, and they are the fourth most traded product globally, after crude oil, auto parts, and refined petroleum products.

The following are the segments of semiconductor devices by size for different applications in 2019.

-- Smartphones: 25.3%

-- Personal computers: 20.5%

-- Servers, data centers, storage: 14.6%

-- Industrial electronics: 11.7%

-- Consumer electronics: 10.0%

-- Automotive: 9.8%

-- Wireline/Wireless Infrastructure: 8.1%

Ⅲ A Brief History of Global Wafer Fabrication Development

In 1965, when Gordon Moore published his article "The number of IC transistors doubles every 18 months", the chip was manufactured on a 1.25-inch (30 mm) wafer. At that time, the cost of building a fab was about $1 million. For the past half-century, chipmakers have followed the rhythm of Moore's Law in developing and manufacturing chips, integrating more features onto a single chip in the process, which has fueled the growth and popularity of computers, smartphones, and other electronics.

Over time, chipmakers began moving to larger wafer sizes because larger wafers could cut more die, which could reduce chip costs. Beginning in 2000, chipmakers began upgrading from 200 mm (8-inch) wafers to modern 300 mm (12-inch) wafers. Initially, the cost of building 200-mm wafer fabs was about $700 million to $1.3 billion, while the cost of building 300-mm wafer fabs was about $2 billion. According to IBS, in 2001, there were 18 chipmakers worldwide with fabs that could handle 130nm chips, which at the time was the most advanced process.

At the same time, TSMC-led foundries began to attract the attention of the industry, they do not design and sell their own chips, but exclusively for external customers to provide chip manufacturing services. Many chipmakers are no longer able and willing to bear the cost of developing new processes and building advanced fabs and chose the fab-lite model, which is part of the chip manufacturing outsourced to foundries. Fabless design companies such as Qualcomm, Nvidia, and Ceres are growing into more competitive chip suppliers than IDM vendors.

Due to the rise of the foundry, wafer manufacturing began to shift from the United States and Europe to Asia. According to the SIA and BCG report statistics, Taiwan is now the global leader in wafer manufacturing capacity, with a 22% share in 2020, followed by South Korea (21%), Japan (15%), China (15%), the United States (12%) and Europe (9%).

Ⅳ What does the semiconductor supply chain look like?

An integrated semiconductor supply chain involving thousands of companies, millions of people, and billions of dollars. The chain can be divided into five stages.

-- Design: Semiconductor chips are designed for specific or general devices.

-- Manufacturing (front end): Silicon wafers go through an extensive series of manufacturing steps and are then cut into multiple chips (also called dies or devices).

-- Manufacturing (back-end): The chips are layered and assembled into packages that can be mounted on a circuit board, and then the packaged chips are tested under various electrical and temperature conditions.

-- End-product integration: electronics and device manufacturers integrate the chips to create end-products for consumers.

-- Consumption: The final product is shipped to companies, retailers, and consumers around the world.

The entire process, from the start of design and production to the integration of the final product, takes several months. Ultimately these manufactured chips end up in smartphones, computers, automobiles, servers, smart homes, and other technology areas around the world.

Different types of companies in the semiconductor manufacturing industry

In 2020, despite the economic slowdown caused by the pandemic, an estimated 1.4 trillion semiconductor chips will be shipped worldwide. These chips are manufactured by many types of companies that occupy different parts of the supply chain. Some are household-name electronics companies, while others are lesser-known manufacturing-stage companies.

-- Fabless semiconductor companies and electronics manufacturers (as well as independent design houses) create the designs and specifications needed for their chips.

-- Foundries manufacture the designed chips.

-- OSAT (outsourced semiconductor assembly and test) companies assemble, package, and test chips for consumption.

-- OEMs (original equipment manufacturers) and contracted EMS (electronics manufacturing services) companies integrate packaged chips into devices.

Ⅴ Global semiconductor supply chain and value chain segmentation

Wafer manufacturing is only one node in the global semiconductor supply chain and value chain, chip design, EDA/IP, and packaging and testing also play their different roles. As shown in the figure below, the global semiconductor supply chain includes the following links: basic research, EDA/IP, chip design (subdivided into logic devices, DAO, and memory), semiconductor manufacturing equipment and materials, and manufacturing (subdivided into front-end wafer manufacturing, back-end packaging, and testing).

Global semiconductor value breakdown by geographic distribution (based on 2019 global semiconductor data). (Source: SIA & BCG)

Note: DAO stands for discrete, analog, and others (optoelectronic devices and sensors); OSAT stands for outsourced packaging and testing; and East Asia includes Japan, South Korea Taiwan, China.

From the above chart, we can see that in the EDA/IP segment, the U.S. dominates (74%), while China only accounts for 3%; in wafer manufacturing, the U.S. accounts for 12% and China accounts for 16%; in the packaging and testing market, China accounts for 38% and the U.S. only 2%.

There are more than 30 kinds of semiconductor devices, but the industry is generally divided into three categories: logic, storage, DAO.

Logic devices are digital chips that deal with "0" and "1" and are the building blocks of all device computing and processing, accounting for about 42% of the entire semiconductor value chain. Logic categories include microprocessors (such as CPUs, GPUs, and APs), microcontrollers (MCUs), general-purpose logic devices (such as FPGAs), and connectivity devices (such as WiFi and Bluetooth chips).

Memory chips are used to store data and code information, mainly including DRAM and NAND, accounting for about 26% of the entire semiconductor value chain. DRAM can only temporarily store data and program code information, storage capacity is generally large; NAND is commonly known as flash memory. Even if the power is lost, it can also be long-term preservation of data and code. Cell phone SD card and computer SSD are all used this type of memory Chips.

DAO represents discrete devices, analog devices, and other types of devices (such as optoelectronic devices and sensors), accounting for about 32% of the entire semiconductor value chain. Diodes and transistors are discrete devices; analog devices include power management chips, signal chains and RF devices; other categories of devices, although a small percentage, but can not be ignored (computers and electronic devices can not work without a device), such as sensors in the emerging Internet of Things applications are increasingly important.

If subdivided by these three categories, overall sales of Global semiconductors by the application are divided as follows: smartphones accounted for 26%; consumer electronics accounted for 10%; PC accounted for 19%; ICT infrastructure equipment accounted for 24%; industrial control accounted for 10%; automotive accounted for 10%.