The manufacturing of semiconductor-based technologies is arguably the most advanced of human endeavours in terms of engineering.
Semiconductor materials include silicon, which can either act as a conductor of electricity or as an insulator, stopping the flow of electricity.
This strange duality, along with other features, has made semiconductors the most valuable commodity in electronics, and enabled it to form the basis of today’s technological, increasingly computerised machines and gadgets.
Silicon is not the only semiconductor – diamond, germanium, and various compositions of aluminium, as well as a whole range of other materials, can also be used semiconductors.
But silicon is the most well-known and most widely used in the electronics products most people buy – from computers to smartphones and, increasingly, in cars.
John Neuffer, CEO of the Semiconductor Industry Association, references a Wall Street Journal story when he says, “There are over 600 chips in every car now.”
“Chips” is a catch-all term people use to refer to microprocessors, microcontrollers and even integrated circuits.
In this article, we won’t go into too much detail about the differences between each of those items, but most readers of this website might know the basic differences between them.
And even if they don’t, they will almost certainly know that such microelectronics are inside many of the products they use every day.
This means that the overall semiconductor market or ecosystem is vast, and – difficult to believe perhaps – this is probably just the start.
Peak silicon
While some say the desktop computer has reached its peak, with growth in sales slowing, mobile computing is in its early days and has been expanding exponentially in the past few years, mostly because of the smartphone.
Now, with cars and road-going vehicles of all types becoming more like computers – because of advanced driver assistance systems and the engine itself going electric – another era of spectacular growth is on the horizon for the semiconductor industry, also led by mobile computing.
It follows, then, that there is a surge in demand for the equipment used to manufacture semiconductor technologies, with several countries competing like crazy to keep their leading positions in the market, and overtake competitor nations, if possible.
At the moment, in terms of revenues generated through the sales of semiconductor products, the US is by far the leading nation.
However, the equipment used to produce those semiconductor products is often built elsewhere.
Taiwan is said to be the world’s leading supplier of semiconductor-manufacturing equipment, followed by South Korea, which is determined to overtake Taiwan.
China, too, has committed itself – and more than $150 billion of government money – to becoming the leading nation in this sector, as it might like to in every other sector.
According to the research organisation Semi, global semiconductor manufacturing equipment sales were more than $40 billion in 2016, and Taiwan was the top supplier.
Semi describes the equipment as “capital goods” used to manufacture semiconductor products. Below is a table of the countries and region which sold the most amount of such equipment.
Countries which sell the most semiconductor equipment
| Country | 2016 | 2015 | % change |
|---|---|---|---|
| Taiwan | $12.23 billion | $50 billion | 27% |
| South Korea | $7.69 billion | $7.47 billion | 3% |
| China | $6.46 billion | $4.90 billion | 32% |
| Japan | $4.63 billion | $5.49 billion | -16% |
| North America | $4.49 billion | $5.12 billion | -12% |
| Rest of World | $3.55 billion | $1.97 billion | 80% |
| Europe | $2.18 billion | $1.94 billion | 12% |
| Total | $41.24 billion | $36.53 billion | 13% |
Note the 80 per cent growth in the “Rest of the World” category. As mentioned earlier, the semiconductor industry is probably set for much more growth.
Data equality
One of the issues facing the industry now is the Chinese government’s decision, taken in 2015, to invest more than $150 billion into domestic manufacturing of integrated circuits.
The money could be given as grants, soft loans or in other ways, none of which necessarily has to do with what is understood to be free market policies – essentially they could be government subsidies.
This is something that observers, especially in the US, are wary of, arguing that it would adversely affect the market.
In terms of semiconductor product sales – microprocessors, microcontrollers, integrated circuits and so on – it’s US companies which earn the most revenues from the market.
China’s policy of centrally planned investment in the industry is prompting some in the US to argue in favour of government initiatives to boost the domestic manufacturing industry.
While the current administration has prioritised manufacturing, some argue that it should develop an industrial policy specifically aimed at semiconductors.
According to the Semiconductor Industry Association, US semiconductor exports reached more than $43 billion in 2016.
This is said to be the third-highest earnings of any US manufactured product – after aircraft and automobiles.
Moreover, the majority of US semiconductor companies undertake a significant amount of their manufacturing in the US, says the SIA, which has positive effects on a range of related sectors.
“About half of US semiconductor companies’ advanced manufacturing base is in the United States, and 21 states are home to advanced semiconductor manufacturing facilities,” says the SIA.
And, because semiconductors are the basis of almost all advanced technologies, the sector is seen as a strategic industry in which the US is determined to maintain its leading position.
Semiconducting semicollider
Judging from a variety of lists published in numerous sources, Applied Materials is probably the leading supplier of semiconductor equipment.
The company is headquartered in the US, employs approximately 15,000 people and has a market capitalisation of almost $60 billion. Its annual net income is close to $2 billion from revenues of around $10 billion.
Its lead in the market is significant, as shown in the list below, originally published by SeekingAlpha.com, although things can change in a sector where new inventions and technologies are emerging all the time, especially in the automotive electronics segment.
If an automaker could do what Apple did in the smartphone market, who knows how the world will change.
Top 10 semiconductor equipment suppliers
| Rank | Company | 2016 revenue |
|---|---|---|
| 1. | Applied Materials | $8.102 billion |
| 2. | Lam Research | $5.170 billion |
| 3. | ASML | $5.061 billion |
| 4. | Tokyo Electron | $4.975 billion |
| 5. | KLA-Tencor | $2.180 billion |
| 6. | Screen Semiconductor | $1.303 billion |
| 7. | Hitachi High-Technologies | $970 million |
| 8. | Nikon | $823 million |
| 9. | ASM International | $544 million |
| 10. | Hitachi Kokusai | $531 million |
| Total top 10 | $29.659 billion | |
| Others | $4.373 billion | |
| Total market | $31.483 billion |
While these numbers are not meant as a definitive guide, they give you an idea of the amounts involved in the market and where the companies are.
And although the top 10 companies apparently generate more revenues than the “others” combined, there is nonetheless a multitude of companies in the market.
With Moore’s Law apparently coming to a point at which it could no longer apply, future growth opportunities in this market – as in many others – could be found in new innovations, such as quantum computing.
Traditional transistors have become so small now that it’s almost impossible to pack them into the tiny spaces allocated for them.
New techniques and equipment for manufacturing semiconductors are emerging, about which we may write an article in the future.
The car in front is full of chips
As automakers integrate an increasing amount of electronics into their vehicles, there has been increasingly intense competition in the chipmaking sector.
One approach is to consolidate, either through business partnerships or takeovers.
NXP, one of the leading suppliers of chips to the automotive companies, last year bought Freescale, a company whose microcontrollers were widely used in robotics.
The acquisition catapulted NXP into the top 10 chipmakers’ lists. But then, Qualcomm decided to buy NXP, which will create an even more gigantic company.
What may balance things out a bit is if Apple decides not buy chips from Qualcomm any more, or buy significantly less. It’s a possibility that Qualcomm is concerned about enough to take Apple to court over.
Qualcomm’s bid to buy NXP hasn’t been approved yet, with European Union regulators looking into the matter. But whatever conditions the EU may set, Qualcomm is likely to make every effort to complete the deal, especially if its Apple argument doesn’t get much further.
Intel, meanwhile, is said to have missed the whole smartphones and mobile computing thing. But it leads in many crucial segments, including data centre servers and desktop computers.
And while the desktop computer market may not be growing as fast as it did in the past, data centres are popping up everywhere.
Everyone and his granny is building a data centre. Even automakers, which maybe previously weren’t mentioned in stories about computing infrastructure, are investing heavily in information technology systems.
Volkswagen has become a customer of D-Wave, which builds quantum computers costing $15 million dollars each, while BMW is building the largest data centre it has ever built in its history.
All that to provide their cars with the necessary computer environment in which to get and stay connected, download maps and perform all sorts of other functions buyers of new cars are increasingly coming to expect.
It’s all gone binary
Even industrial companies such as General Electric and Rockwell Automation are talking much more about computing infrastructure these days.
GE has signed two significant deals recently, one with Amazon Web Services to use its infrastructure instead of building its own data centres, and another with Apple to provide Predix apps to iOS.
Predix is GE Digital’s industrial internet platform, which enables apps for monitoring machinery and industrial processes.
Rockwell, meanwhile, has just launched an infrastructure-as-a-service offering, known in tech circles as IaaS.
All of these developments, and the many more, obviously, further emphasise the growth prospects for the semiconductor industry.
According to an article on AnySilicon.com, the world’s biggest semiconductor company is still Intel.
Top 20 semiconductor companies
| Rank | Company | Revenue in 2016 |
|---|---|---|
| 1. | Intel | $56.313 billion |
| 2. | Samsung | $43.535 billion |
| 3. | Taiwan Semiconductor | $29.324 billion |
| 4. | Qualcomm | $15.436 billion |
| 5. | Broadcomm | $15.332 billion |
| 6. | SK Hynix | $14.234 billion |
| 7. | Micron | $12.842 billion |
| 8. | Texas Instruments | $12.349 billion |
| 9. | Toshiba | $10.922 billion |
| 10. | NXP | $9.498 billion |
| 11. | MediaTek | $8.610 billion |
| 12. | Infineon | $7.343 billion |
| 13. | STMicroelectronics | $6.944 billion |
| 14. | Apple | $6.493 billion |
| 15. | Sony | $6.466 billion |
| 16. | Nvidia | $6.340 billion |
| 17. | Renesas | $5.751 billion |
| 18. | GlobalFoundries | $5.085 billion |
| 19. | ON Semi | $4.858 billion |
| 20. | United Microelectronics | $4.455 billion |
The above list was published at the end of last year and has probably been revised somewhat since then. There are more recent lists available, but this one gives you the top 20, whereas the others are top 10s.
It seems important to include the companies lower down the list because a lot of things are likely to change in the coming year, which might change the order.
Apple, for example, is reported to be considering manufacturing its own chips for its own devices. While Apple is unlikely to sell its chips to outside companies, such a move will certainly impact the companies it currently buys from.
Apple has been sourcing chips for its devices and computers from a variety of suppliers – Intel, Qualcomm, Taiwan Semiconductor – for many years, to the enormous profit of all companies involved. So, whoever Apple turns away from is likely to face having to restructure their business in some way.
And if it does go ahead and manufacture its own chips, Apple may be on the market for semiconductor manufacturing equipment, although that seems unlikely.
Demand for Apple products is just too massive for one company to do all the manufacturing by itself – even one as gargantuan as Apple.
With around 2 billion iPhones, iPads and other devices sold so far, such are the colossal manufacturing requirements of Apple that it’s even had to turn to its rival in the smartphone market, Samsung, for the fancy new organic light-emitting diode screens it needs for the recently launched and massively expensive iPhone X.
