A brief take on Semiconductors 30/06/2023

A brief take on Semiconductors 28/06/2023

The semiconductor ecosystem is a vast industry that has grown up around the microelectronics manufacturing process. It includes companies that make parts and use them, chip designers, memory and interconnect companies, semiconductor equipment manufacturers, and a host of other companies.

Semiconductors are an integral part of the digital transformation of everything. They are chips that process digital information and are used in almost everything such as computers, cars, home appliances, medical equipment, and more. Semiconductor companies are expected to sell $600 billion worth of chips this year.

These chips are integrated into systems and devices such as iPhones, PCs, airplanes, cloud computing, etc. The finished products are then sold to consumers, businesses, and governments. The revenue generated from these products is worth $10 trillions.

The ecosystem consists of several segments. Here is a brief on each segment:

1. Semiconductor manufacturing:
This segment involves the production of semiconductor chips. The process involves several steps such as wafer fabrication, packaging, and testing.

2. Electronic Design Automation (EDA) Tools:
This segment involves the development of software tools that help in the design of semiconductor chips.

3. Specialized Materials:
This segment involves the production of materials that are used in the manufacturing of semiconductor chips.

4. Wafer Fab Equipment (WFE):
This segment involves the production of equipment that is used in the manufacturing of semiconductor chips.

5. “Fabless” Chip Companies:
These are companies that design and sell semiconductor chips but do not have their own manufacturing facilities.

6. Integrated Device Manufacturers (IDMs):
These are companies that design and manufacture their own semiconductor chips.

7. Chip Foundries:
These are companies that specialize in the manufacturing of semiconductor chips for other companies.

The industry is expected to see strong growth in the coming years, driven by increasing demand for semiconductors in a wide range of applications. The industry is a diversified one that includes companies involved in a wide range of applications, providing investors with exposure to a variety of industries.

It is a highly complex industry and requires significant investment in both R&D and capital expenditure. According to a report by Kearney, Europe’s economy depends heavily on semiconductors but has limited local production capability and capacity.

This puts Europe’s technological sovereignty at risk and makes it necessary for the region to invest in a leading-edge semiconductor ecosystem. Investors should consider investing in the semiconductor manufacturing segment as it is the backbone of the industry and involves the production of the chips. This segment requires significant investment in R&D and capital expenditure.

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