Semiconductors

Some of the largest companies in the world by market cap include Semiconductor companies (such as Nvidia with a market cap of USD 3.52 trillion (against Microsoft, which is largest with USD 3.55 trillion market cap). Apple, Amazon and Alphabet follow with market cap between USD 2 to USD 3 trillion. At number 9 is another semiconductor company TSMC with market cap of $1.1 trillion (Broadcom is no. 8 with market cap of $1.17 trillion, this too is related to semiconductors, is a chip designer.)

But first, a broad map of the companies and the industry. 

Samsung seems to operate in both foundries (manufacturing) and integrated device manufacturing, but then it is present in many many industries (and hence its market cap does not figure in top 10, although by revenue, it is perhaps 26 ranked globally, but by market cap, 33rd, and that too recent price increase. What I mean to imply is that there is currently much higher valuation relatively for chip designers than for founderies alone.

For example, see this infographic, showing January 2025 market cap of key semiconductor companies.

What is interesting is the share of market cap of companies in US, because these are mainly design companies. Others are manufacturers. China seems to have small share in market cap. But this is not the true chart of the industry, this just shows valuation - and design IP seems to command a very high premium.

Here again is the first chart now explaining a bit more of the value chain. The top portion shows the key value chain of companies each operating in its unique space - some as designers, some as foundries (manufacturers), some for testing. And the bottom boxes are integrated players, performing all these functions inhouse. (This affects valuation of each set). The middle boxes are service providers or raw material suppliers supplying to both fabless and integrated players.

An indication of revenue: Nvidia is ~$149 billion, Intel is around ~$53 billion, TSMC is around $88.34 billion (this are around pure play. Other big players have several other business interests).

Semiconductor

Now that we see the broad set of players in this space and have some sense of market context, what is a semiconductor?

Semiconductors are critical to modern life. According to economic historian Chris Miller, “You can’t understand the modern world without putting semiconductors at the center of the story.” But many people have a murky understanding of what a semiconductor actually is. A first step would be to break down the word. A conductor is something through which electrons freely move from one type of material to another. Have you ever gotten a shock in the winter from touching a doorknob? That’s because metal is a great conductor of electricity. (In fact, so is the human body, which is why you can sometimes pass the shock on to someone else.) The opposite of a conductor is an insulator, which impedes the flow of electrons from one material to another. Rubber is a great insulator, which is why it’s safe to be inside a car (with rubber tires) during a lightning storm.

A semiconductor is a class of materials that falls somewhere on the continuum between conductor and insulator. Manufacturers process silicon and other materials into wafers, which are then lithographically printed with various functionalities. The wafer is then cut into the chips that make up semiconductor devices, which enable all kinds of machines to harness electricity for processing power. Semiconductors are in greater demand than ever: The Fourth Industrial Revolution (4IR), which is currently transforming manufacturing, production, and, more generally, global business, is characterized by smart computers and connected devices. Smart means connected, and connected means semiconductors.

While semiconductors can create a wealth of opportunity for industries around the world, reliance on semiconductors could also introduce some vulnerabilities. In this Explainer, we’ll explore the pandemic-era semiconductor shortage, how organizations can mitigate the risks associated with reliance on semiconductors, and why semiconductors stand to dominate the next decade in global business.

Rest of the article here.

McKinsey analysis suggests that industry revenues will climb to $1 trillion by 2030 (exhibit). - from around $600 billion in 2021.

In terms of physical dimensions:

As small as a fingernail, semiconductors are arguably the most complex products ever manufactured. A common chip is only about 1 millimeter thick and contains roughly 30 different layers of components and wires called interconnects that make up its complex circuitry. Billions of microscopic switches called transistors make semiconductors work.

According to Intel:

$10-15B - The approximate cost to build a new semiconductor factory or “fab”
$574.1B - Global semiconductor industry sales in 2022

The making, or fabrication, of semiconductors is one of the most complex and sophisticated processes in all of manufacturing. Semiconductor fabrication requires precision down to the nanometer (that’s one-billionth of a meter), atomic ordering, and high chemical purity. And many semiconductor fabrication plants have daily quotas of thousands of wafers and chips.

One key process in semiconductor manufacturing is lithography. Lithography involves coating a wafer with a light-sensitive material called photoresist, shining light through a mask (which contains the chip’s pattern) onto the wafer, and chemically developing the exposed areas of the wafer to reveal the pattern. This patterned layer ultimately serves as the guide for building or removing materials in specific regions of the wafer, which determines the final, detailed structure of the chip.

Strong semiconductor ecosystems can be found all over the world. Here are five of the largest:

• At just three square miles in size, Hsinchu Science Park in Taiwan is home to three universities, more than 150 semiconductor companies and suppliers, more than 600 manufacturers, and more than 160,000 highly skilled full-time employees.
• Silicon Saxony, centered in Dresden, Germany, is the largest semiconductor cluster in Europe and contains more than 400 industry actors, universities, and research centers. Over the past 20 years, Saxony has more than doubled the number of employees in the country’s semiconductor industry.
• In South Korea, the cities of Giheung, Suwon, and Icheon are part of the country’s semiconductor mega cluster. The nation plans to invest about $470 billion through 2047 in partnership with major South Korean electronics companies.
• China is also a major producer of semiconductors. Shanghai, Beijing, and the provinces of Jiangsu, Fujian, and Guangdong are all hubs. And China is scaling up fast: Of all the fabrication plants that are currently under construction, about half are in China.
• In the United States, semiconductor companies have announced investments that are estimated to reach $200 billion to $350 billion within the next decade—with the largest investments in Arizona, New York, Ohio, and Texas.

As to what really is a semiconductor:

To a materials scientist, a semiconductor is a crystal with atoms and defects; to a physicist, it has a conduction band and valence band; and to an electrical engineer, it has electrons and holes.

You can see semiconductors in the frame of energy, which typically device physicists do. They see two energy bands – a conduction band and a valence band – and a very important energy gap (aka bandgap) that separates the two. The bands are full of “rooms” for electrons, which are called states. In the conduction band, only some of the states are filled with electrons and the others remain empty, where the electrons can jump into. This is how a semiconductor conducts current. A valence band, which otherwise is full of electrons, has some empty states that are called “holes”. Holes are positive in charge and electrons are negative. They can combine to emit light or generate heat!

If you see through the lens of charges, like an electrical engineer, the current in a semiconductor is generally carried by electrons or holes, or both.

Last but not least, through the lens of a material scientist, we have lattices – a repeated geometrical pattern – of atoms that create a very crystalline structure. Sometimes you will have one or two atoms or more missing from a given set of lattices and those give vacancies, or defects.

--

All information in a computer is transmitted or stored in forms of binary digits – zeros and ones – and these zeros and ones are ‘voltages’ that are generated, transmitted and stored using little switches made out of transistors and diodes, and those are made of semiconductors. Powering up a computer to function also happens through semiconductor switches.