Semiconduttori e chip, un'industria mondiale che condiziona anche la geopolitica

Chip War

Why are semiconductors the most valuable and disputed piece of technology?
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The smartphones in our pockets, the data centres that power the Internet, cars, hypersonic fighter jets, and Mars rovers all share an essential piece of technology: semiconductors. The list could get longer, considering that more than 1 trillion chips are sold yearly. In other words, about 140 chips for every person on Earth. This number is estimated to double by the end of the decade, bringing the semiconductor industry’s global value to 1.4 trillion of dollars.

From smartphones to cars

Share of global demand by product type/buyer
Source: World Semiconductor Trade Statistics

About one out of two of all the chips produced this year ended up in a smartphone, Pc, or server. Manufacture and automotive also represent an essential slice of the semiconductors’ final market. Indeed, on average, each car contains 1,400 semiconductors that enable the operation of almost every major component, from the engine and power steering to safety devices. The centrality of these chips to the automotive industry was highlighted in 2021 when their shortage contributed to a 26% drop in global car production.

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Chips are not all the same

Today a new chip shortage seems a remote possibility. Recent weakness in some end markets, such as consumer electronics, has even resulted in an oversupply of semiconductors. However, in the second half of the year, demand is expected to pick up strongly for specific chips, such as those needed to train generative artificial intelligence algorithms. For instance, U.S. chipmaker Nvidia, the market leader in GPU processors used by services such as ChatGPT, had quarterly revenue more than 50% higher than analysts' initial estimates.

Global semiconductor demand

Billions of dollars of sales
Source: SIA

The word “chip” encompasses a very diverse ecosystem, to be broken down according to the different functionality of semiconductors. In each smartphone, for example, we find logic chips (such as CPU and GPU), which represent the brain of the device. These chips are complemented by memory ones, which store information on the device. Given the wide spread of smartphones in our society, it's not surprising that logic and memory chips are the most sold.

Analogue chips are also top sellers. They receive and transform information based on nonbinary parameters such as temperature and voltage to enable the operation of sensors and energy management processes. With an 8% market share, opto semiconductors are also high in rank, as they are an essential element for LEDs, solar cells, and lasers.

Chips’ state of technological advancement is a further element of classification. It is measured by the size of a specific component (gate) of transistors: miniature switches that can turn an electric current on or off. The smaller the transistors, the more of them can be installed on the chip, the greater its power and efficiency.

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The smaller the transistors, the more of them can be installed on the chip, the greater its power and efficiency.
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For the past 50 years, the electronics industry has been driven by the so-called "Moore's Law", formulated by Intel co-founder Gordon Moore, which stated that the number of transistors embedded on a chip would double roughly every two years. In 2022, the ceiling of 100 billion transistors per chip has been exceeded by miniaturising gates down to 3 nanometers (nm, equal to one-millionth of a millimetre), or 25,000 times smaller than the diameter of a human hair.

Moore's law in action

Number of transistors on integrated circuits
Source: OWID

Different sizes of chips correspond to different uses. For example, chips with 65-nm gates are the most widely used by the automotive industry because they are best suited for technical characteristics and production costs (18 times lower than the most advanced chips). On the other hand, top-of-the-line smartphones, cloud computing, autonomous driving, and artificial intelligence use 3- or 7-nm chips, which only a small number of companies and countries can produce.

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The global
value chain

The semiconductors value chain is among the most complex ever conceived: from design to production, more than 1,000 steps are required across 70 different countries, involving 300 materials from 16,000 suppliers. It is, therefore, a highly segmented industry in which very few companies hold market leadership concerning specific processes and types of chips.


Share of value added by region
Source: Semiconductor Industry Association

The first step in manufacturing a chip is the design of its architecture. The U.S. is the undisputed leader in this phase, especially for logic and analogue chips. Only for memory chips the US leadership is challenged by South Korea. Furthermore, the U.S. market share reaches near-monopoly percentages relative to intellectual property licensing and Electronic Design Automation (EDA) software, considered state-of-the-art for automating the design process.

Some companies, such as Intel and Samsung, design and manufacture their chips. However, most U.S. (and non-U.S.) companies such as Qualcomm, Nvidia, and AMD only make the design and contract the production to foundries concentrated in the Far East. Indeed, Taiwan, South Korea, and China account for more than 80% of the value added in this market segment.


% of global production capacity by chip size (nanometres)
Source: ESPAS

Taiwan's role becomes even more central when considering chips with transistors smaller than 10 nm: 92% of the market share. 9 out of every 10 chips found in the latest smartphones, computers, and cutting-edge technologies are thus produced by the Taiwanese company TSMC. Beijing is a bystander in this segment, with a share that increases the larger the size of transistors on the chips.

The manufacturing processes then require the fabrication of silicon wafers onto which the integrated circuits are etched as well as the use of chemicals to change their electrical conductivity. These steps are again dominated by Asian companies, including Japan's JSR and Shin-Etsu Chemical. European companies such as Merck, BASF, and Solvay manage to carve out a leading niche for themselves. However, Europe has an actual leadership position in the machinery segment alone.

The Dutch company ASML is the only one in the world capable of producing extreme ultraviolet radiation lithography machines (EUV). EUVs technology use lenses from German company Zeiss (the exclusive supplier in the world) to etch with very high resolution the silicon wafers on which most-advanced microchips are fabricated. Without ASML, the 7 nm, 5 nm, and 3 nm levels of miniaturisation would be impossible. That is why ASML is an essential ally for the U.S. in their geopolitical competition with China on semiconductors.

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The geopolitics of chips


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