semiconductor
The integrated semiconductor circuit sector is the backbone of the vast digitalization process, i.e., the key enabling technology for existing and forthcoming applications. This has been facilitated by the immense miniaturization and performance enhancement of IC processes foreseen by Moore’s Law which, beginning from around 103 transistors on the initial Intel 4004 microprocessor in 1970, reached 1011 transistors in March 2022 an unparalleled and unmatched rate of improvement, which has made possible, among other innovations, the Internet, cellular telecommunications, and now intelligent cars. In summary, each market to which latest IC chips microchips have been brought has gained through increased efficiency, intelligence, and added functions.
As a result of this success, chips are now the fourth-most traded item in the world 1.15 million semiconductor units sold last year, 2021 following crude oil, motor vehicles and parts, and refined oil in a market that was worth 0.6 trillion dollars in 2021, with a 26% rise in year-on-year sales, and which is forecast to hit 1 trillion dollars by 2035.
Others have even referred to semiconductor chips as the new oil, in that chips drive applications, by providing the nation that can make the best-performing chips due to advanced technology with more power than other nations, in terms of computing and communication power, but also from a strictly military perspective. One idea that has been highlighted so far by the Russia–Ukraine war is that Ukrainian soldiers have employed inexpensive and small arms, including the Javelin and Stinger anti-air missiles, which incorporate advanced semiconductors, ai chips, latest semiconductor chips, semiconductor devices, integrated circuit to use in their guidance systems.
One Javelin holds around 250 chips. Western nations have prohibited the sale of semiconductors to Russia, and Russia lacks its sophisticated chip-making capability; absent imports, the Russian military is unable to equip itself with precision-guided munitions. Much to our surprise, the central place of chips in international economies has not been discovered by governments and engaged in public discourse until very recently.
In the past decades, international economies have become more preoccupied with software and tertiary services and left semiconductor chips as a commodity per se. However the COVID-19 pandemic and the war in Ukraine have revealed issues with chip shortages lack of sufficient production of chips in comparison to demand, vulnerability of the semiconductor supply chain, and chips as strategic components. Therefore, most governments want to enhance their resilience against external shocks and protect their technological sovereignty by heavily backing the integrated circuit industry.
Chipmakers, however, as they enhance the quality and quantity of their manufacturing facilities fabs to meet the rising demand brought about by the exponential proliferation of applications, have better realized their roles as well as their newly reinforced position of dominance, which in theory enables them to choose their customers, and to decide who can and who cannot obtain their chips. But the Ukrainian war and Sino-U.S. trade war complicated the scenario further, upsetting an international order that sermonized about the merger of markets despite geopolitical differences, and leading to the demise of the era of globalization.
IC Market, Supply Chain, and Types of Semiconductor Companies
ICs are the key drivers of today’s and tomorrow’s technologies and applications, including 5G/6G, smart cars and factories, blockchains, artificial intelligence, and machine learning. It is the semiconductor supply chain industry that makes all this possible. The semiconductor chain can be divided into six principal stages, which occur in various regions of the world and involve thousands of firms and millions of individuals. For analysis below, these phases, and the company types, will be summarized in the subsequent subsections.
Before that, however, let us make a brief mention of the various segments that IC manufacturing can be categorized into, Logic Memory Analog MPU microprocessor unit MCU microcontroller unit optoelectronics Sensor, Actuators Discrete, machine learning, latest ai, DSP digital signal processor. In this framework not specified in the figure Graphic Processing Units GPUs alone have a market of $23.90 billion. Powered by power ICs, discrete semiconductors have gotten a substantial boost, as they used to be worth $23.8 billion in 2020.
Logic and memory devices will witness the highest growth rate in the next few years, followed by the analog ICs utilized in data conversion, new automotive use cases, power management, and microcontrollers and sensors, as a result of high-performance IoT applications.
Back-End Fabrication
There are a few steps to get a completed semiconductor chip. First, an Optical/E-beam inspection of the wafer is performed, to detect defects like metal shorts up to 10 nm and 3 nm, respectively, and finally mend them. Secondly, a Wafer Probe/Test, for the first time the chips are tested whether they function as intended highly accurate non-destructive measurement of a test element group TEG comprising transistors, interconnects and other devices is done using a probe board that connects the wafer and test equipment.
Thirdly, Wafer Dicing individual cuts in the wafers. Fourthly, Die Bonding, which involves mounting the naked die onto a substrate, and supplying electrical access to the external environment, as well as to the package’s base. Fifthly, Wire Bond/Solder Bump, whereby every die pad is wire bonded to an associated pad on the substrate through a thin wire of gold, or through the use of latest flip chip technology. Sixthly, encapsulation, where the die is encased.
Last, testing, to identify defects that could have been introduced during assembly; an integrated circuit socket is employed in the final testing, which has the critical function of attaching the device to the tester, just like a probe board used in wafer testing. Every integrated circuit has to be tested using a custom test socket.
Automated Test Equipment ATE is a computerized device which utilizes test tools to execute and analyze the outcomes of tests for functionality, performance, quality, and stress tests conducted on integrated circuits. The ATE will have minimal human intervention and is directly accountable for making sure not only that the IC will perform as desired, but also that the IC will not pose hazards due to its use.
Supply Chain Bottlenecks, Global Shortages, and Countermeasures
It becomes clear from Section 2.3 that the semiconductor supply chain is very volatile and has many bottlenecks that can ensure disruptions. Secondly, the COVID-19 pandemic in 2020 and the U.S.-China trade conflict brought into sharper focus and even hastened all these issues rapidly, creating an instant chip shortage that continues unabated to the present day. The shortage, together with economic and military rivalries, has persuaded businesses and governments to act. The chokepoints, the reasons for the silicon shortage, and some industry and government reactions are addressed below.
Bottlenecks
We have seen that there are only a limited number of businesses, or even one, which control the entire world market. Samsung and Intel dominate the total semiconductor market, TSMC the foundry market for leading nodes <10 nm, Qualcomm and Nvidia the fabless market, ASML the production of EUVL equipment, ARM the IP core design, Form Factor and Techno probe the probe card market, Foxconn the production of goods, etc.
Besides, geographic areas, or even a nation, have become specialized in the manufacture of specific raw materials for instance, in 2021, China provided over 85% of the globe’s processed Rare Earth Elements, followed by the remainder of Asia at 13%, and Europe at 2%, or in particular manufacturing latest processes and technologies. As a result of the factory lockdown, most OSAT firms built up orders. The mean lead time for packaging was 8 weeks pre-COVID, now it is 20 weeks and can even be 50 weeks for prototype.
Conclusions
Integrated circuit demand is increasing steadily, with the advent of more and more new applications, driving exponential semiconductor market growth that incorporates both advanced and mature technology nodes. A broad increase in chip manufacturing capacity is in the making, which in itself necessitates a new type of robust commercial contract between manufacturers and customers facilitated by the new power balance of foundries and by the agreement that chips are not commodities, but strategic and key components. But if new fabs are constructed through advance agreement with customers, then labor too should be contracted for in advance.
New fabs do indeed require new workers and engineers, which are already in short supply; not to mention other kinds of industries are building in-house chip design skills, and will be competing in the talent war. Thus, governments, companies, universities, and associations will have to collaborate on efforts like orientation and communication to young people, support for girls’ studies in STEM Science and Technology, Engineering, and Mathematics, grants to universities to establish new degree programs, new jobs, and new laboratories, and exchanges of study with foreign nations, to support passion among the younger generations.
But, reinforcing passion cannot be the sole solution. Increasing pay, and enhancing career prospects, rewards, and entitlement are required measures to stem the drift of the interested youth keen on engineering opting massively for software over the laboratory. The second unknown factor looming over the IC industry’s future involves the China-U.S. trade war, as well as to a smaller extent the Ukraine conflict.
Evolution within these tensions is resulting in incomplete or even total supply chain decoupling with markets that cease to be global, which induces significant concern on the profitability of foundries particularly those at the leading edge which are subjected to such stringent restraint and market confinement. The Ukrainian war impacts have been on the prices of commodities as well as energy, supply chain restrictions, as well as broad uncertainty. The future of the semiconductor industry and exchanges of study with foreign nations even as it continues to be potentially disruptive, is inextricably linked to these issues, whose implications must be taken into consideration.