Stage 1: design
Semiconductor design represents the most research-intensive phase where chips are conceptualised using specialised software. Companies employ Electronic Design Automation (EDA) tools and intellectual property (IP) cores to create chip architectures.
This stage demands significant engineering expertise and innovation. While US firms like Nvidia lead in cutting-edge chip design, Taiwan’s MediaTek has carved out a substantial position in mobile and automotive chips.
Design companies typically operate with high margins due to their intellectual property advantages. However, they depend entirely on manufacturing partners to produce physical chips.
Stage 2: wafer production
Silicon wafer production creates the base material for all semiconductor chips. Manufacturers produce pure silicon cylinders, slice them into thin wafers and polish them to perfect smoothness.
These blank wafers serve as the canvas upon which circuits are printed during fabrication. The process requires extraordinary precision and purity standards.
Japan’s Shin-Etsu and SUMCO together supply more than half the world’s silicon wafers. Their dominance in this foundational material gives them significant influence over global chip production capacity.
Wafer suppliers benefit from steady demand across all semiconductor segments, making them relatively defensive plays within the sector.
Stage 3: front-end manufacturing
Front-end manufacturing represents the most capital-intensive stage where actual chips are fabricated on silicon wafers. This process involves repeated cycles of deposition, lithography, etching and polishing.
Producing advanced chips requires over 1000 steps spanning four to six months. Modern fabrication facilities cost billions of dollars to construct and equip.
Fabrication and foundry services
Taiwan’s TSMC commands approximately 70% of global foundry revenue, manufacturing chips for Apple, AMD, Nvidia and many more. The company pioneered high-volume production of 3nm chips, cementing its technological leadership in the world’s most advanced chips.
South Korea’s Samsung Electronics operates the second-largest foundry business, whilst China’s SMIC ranks fourth globally.
Memory chip dominance
South Korea is home to memory chip giants Samsung and SK Hynix, which dominate the global DRAM and NAND flash memory markets. Together, they control more than 70% of DRAM market share.
Memory chips are found in virtually every computer, smartphone and data centre worldwide. However, demand can be cyclical, closely tied to consumer electronics upgrade cycles and data centre expansion.
Materials and equipment suppliers
Japanese firms hold commanding positions in photoresists and photomasks essential for printing circuit patterns onto chips. Hoya and Shin-etsu are key players in these specialised materials markets.
Manufacturing equipment represents another crucial dependency. Tokyo Electron supplies deposition tools and etching equipment, whilst Advantest provides testing systems that no modern foundry can operate without.
Raw materials form the foundation of semiconductor production. China controls 69% of global silicon production and 98% of gallium production according to US Geological Survey data. These raw materials represent powerful bargaining chips in trade negotiations.
Stage 4: assembly, test and packaging
After fabrication, wafers are cut into individual chips, tested for defects and packaged into protective frames for circuit board mounting. This back-end manufacturing stage is more labour-intensive than fabrication.
Taiwan’s ASE dominates outsourced assembly, test and packaging (ATP) services globally. China’s JCET and Tongfu Microelectronics have rapidly expanded their market share in recent years.
The shift towards artificial intelligence (AI) computing has increased demand for complex packaging solutions, benefiting established players with technical expertise.