Source: Koc, Cagan. ASML Shows Off $380 Million, 165-Ton Machine Behind AI Shift (Feb 9, 2024). Bloomberg, ASML. Available at Bloomberg: https://www.bloomberg.com/news/articles/2024-02-09/asml-shows-off-380-million-165-ton-machine-behind-ai-shift
Applied Materials- Applied Materials is a global leader in nano manufacturing technology solutions with a broad portfolio of innovative equipment, services and software products for semiconductor chip, flat panel display and photovoltaic cell manufacturing.
Lam Research- Lam Research Corp is an American manufacturer and supplier of wafer fabrication equipment and services. A wafer is a basic semiconductor disc used as a substrate on which microcircuits are formed.
Electronic Design Automation and IP
Companies in this category provide software tools, techniques and methodologies for the design and manufacture of electronic systems. These tools help engineers and designers visualize, simulate, and analyze the performance of electronic circuits before they are physically fabricated. We can also include chip architecture companies like Arm in this category.
Synopsis- This company provides products and tools for the physical design of integrated circuits and development simulators to assist in the design of logic chips and computer systems.
Arm- Arm is a leading provider of processor IP (intellectual property) and offers the widest range of processors to meet performance, power and price requirements. The IP or intellectual property of a chip consists of all the specifications, source code or other information needed to manufacture that chip. Arm designs instruction sets for advanced chips and licenses these sets to various companies, which then design chips with a wide variety of modifications.
Foundries
These companies make chips for design firms. Instead of making their own chips, these design firms hand their designs over to manufacturers, who then turn the designs into physical chips.
TSMC- This Taiwanese company is the largest chip manufacturer in the world and is one of the most important companies in the entire semiconductor value chain. More than 60% of chips and more than 90% of state-of-the-art chips are produced in Taiwan. TSMC produces the majority of these chips. TSMC is also expanding its production outside Taiwan. Two chip manufacturing facilities are already under construction in Arizona. Just recently, the company announced that it will build a third facility in Arizona. The total expenditure to build these factories is expected to reach more than $65 billion. In the picture below we can see the construction of one of these facilities.
Source: Drummer, Randyl. TSMC Expects to Triple Investment in Arizona With Plans for Second Computer Chip Plant (Dec 7, 2022). CoStar. Available at CoStar: https://www.costar.com/article/143549305/tsmc-expects-to-triple-investment-in-arizona-with-plans-for-second-computer-chip-plant
Fabless design
These companies focus on semiconductor chip design and development, but do not have their own manufacturing facilities to produce physical chips. Nvidia, mentioned in the introduction, falls into this category
Nvidia- US company that designs and supplies graphics processing units (GPUs), application programming interfaces (APIs) for data science and high-performance computing, as well as system-on-chip (SoCs) for the mobile computing and automotive markets. As mentioned in the introduction, Nvidia is also a dominant supplier of hardware and software in the field of artificial intelligence.
AMD- This California-based company develops computer processors and related technologies. The company has also expanded into new markets such as data center, gaming, and high-performance computing.
Integrated Device Manufacturers
There are companies that handle both design and production in-house. They run their own factories where they produce chips that they have previously designed themselves. This integrated approach can give them more control over production, quality assurance and supply chain dynamics.
Intel- American semiconductor designer and manufacturer, founded in 1968. Intel is best known for its processors, which are found in most computers.
Samsung- A South Korean company that is one of the world's largest manufacturers of electronic equipment. Samsung specializes in manufacturing a wide range of consumer and industrial electronics. It also designs and manufactures its own chips and therefore we also classify this company in the semiconductor sector.
Conclusion
As we have seen, the semiconductor value chain is a complex network of multiple companies involved in everything from the sale of materials and tools to the actual manufacturing of the chips. Most people have probably heard of or read about the more well-known companies in this chain, such as Nvidia, TSMC or AMD. However, to understand the complexity of this sector and to understand the whole 'ecosystem', it is important to understand what exactly these companies do and what role they play in the value chain. The semiconductor sector is vital to the running of the whole world. Although we may not realise it, semiconductor chips are all around us, whether in cars, various electronics or the device you are reading this blog on. Some of the stocks of companies in this sector can also be found in a number of our funds, such as the Fond maximalizovaných výnosov or the Fond reálnych aktív. As of the date of writing this blog, Nvidia was the largest position in the Fond maximalizovaných výnosov, and in fourth place we also find a company from the semiconductor sector, namely Lam Research.
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