What the heck is Semiconductor Manufacturing?

[JeffKeryk]

So many industries are being crippled due to the chip shortage. Here is an article from Bloomberg that discusses, at a high level, semiconductor manufacturing.
I think some of the information is a little dated, but it is a good read.
Semiconductor Manufacturing

 

[GON]

""China has called chip independence a top national priority in its latest five-year plan""

 

[Touring5]

""China has called chip independence a top national priority in its latest five-year plan""

And, IMO we should be non-reliant on them. Since a lot is manufactured in Taiwan, we either fully commit to defending their autonomy or go elsewhere.

 

[mark pruett]

Basically as I understand it, there are the chip designers, like AMD, NVIDIA, Intel, and so forth who do all the simulation, testing and design for the various chips.

But the actual literal manufacturing of these chips in bulk is done by "chip foundries", which are essentially contract factories that do nothing but manufacture microchips. Foundries have various capabilities- 3 nm process, 5 nm process, etc... which limits what sorts of chips they can produce- for example, most modern-day high performance PC chips are 7 nm, but some high-end phone chips are starting to be made using the 5 nm process. Basically the smaller the process, the more components (i.e. transistors) can be crammed onto the same area of silicon wafer, making for a more capable chip.

From what I gather the shortage is due to a perfect storm of sorts of weirdness in ordering by electronics manufacturers, combined with dramatically different demand and demand patterns and just-in-time manufacturing patterns, so that while the foundries are going full-tilt, the combination of shifted orders and greater demand has meant that they can't produce enough of anything to satisfy demand. It's just going to take some time for them to fulfill orders and pivot to others and slowly satisfy the demand over time.

 

[JeffKeryk]

Basically as I understand it, there are the chip designers, like AMD, NVIDIA, Intel, and so forth who do all the simulation, testing and design for the various chips.

But the actual literal manufacturing of these chips in bulk is done by "chip foundries", which are essentially contract factories that do nothing but manufacture microchips. Foundries have various capabilities- 3 nm process, 5 nm process, etc... which limits what sorts of chips they can produce- for example, most modern-day high performance PC chips are 7 nm, but some high-end phone chips are starting to be made using the 5 nm process. Basically the smaller the process, the more components (i.e. transistors) can be crammed onto the same area of silicon wafer, making for a more capable chip.

From what I gather the shortage is due to a perfect storm of sorts of weirdness in ordering by electronics manufacturers, combined with dramatically different demand and demand patterns and just-in-time manufacturing patterns, so that while the foundries are going full-tilt, the combination of shifted orders and greater demand has meant that they can't produce enough of anything to satisfy demand. It's just going to take some time for them to fulfill orders and pivot to others and slowly satisfy the demand over time.

You seem to be very knowledgeable... Yes, foundries (aka fabless) manufacture chips per specification from companies like Apple and others. They do not make enduser products like computers or cell phones. Back in the day, the big computer companies like Intel, AMD and TI designed and fabbed their own chips; Intel still does. TSMC (Taiwan Semiconductor Manufacturing Company) is the biggest foundry company; there are others. You see them in the attached article.

Change over from one spec to another takes time and can be expensive. Right now, the foundries are focusing on the higher margin products, because they can. Auto chips, for the most part, do not fit in this category.
The Renesas (Japan) Naka fab fire in March was a big blow to auto chips. The government and Toyota stepped in to help, but this one hurt. I am not sure if they are back up to capacity. I think Renesas is the biggest supplier of chips for automobiles.

Interestingly, Tesla is the only auto manufacturer who designs their own chips; this is a huge advantage. Other companies outsource design to the biggies like NVIDIA.

 

[PandaBear]

If you want the latest "leak" and trend I think Broken Silicon / Moore's Law is Dead Youtube Channel is the best. The guy seems to be a semiconductor guy prior to youtubing and he has a lot of various company insiders leaking info to him, so he is able to piece together what the whole market is going on.

From my source in the industry, what is going on previously up till Pandemic time is to go fabless and let foundry do the manufacturing, because the cost of making your own chip is so big and risky, one bad product can destroy your company (3dfx, AMD almost did). By decoupling the manufacturing and the design each can find the right fit and older factory does not need to be upgraded all the time, and can be downgraded to make older mature chips. Global Foundry just did that after AMD finish their contract with them, AMD will use TSMC in the latest tech and GloFo will just stay behind making legacy older chips without expensive upgrade, they divorced happily ever after.

The Pandemic didn't change this, except those automakers just in time planning do not assume other markets will take up all the demand they can get. Due to work from home every single kind of process get booked up and people are buying all the new and used laptops, desktops, kids' desk, tablet, routers, VR headset, playstations, Xbox, etc. Everything is sold out. When automakers realize they screw up they are way behind (i.e. other companies booked 3 to 5 years ahead) in the queue that they left for 6 months. Don't forget also, due to QE inflation people are buying up crypto, and mining companies like BitMain actually eat up a lot of capacity to make ASIC for bitcoin mining. Almost all GPU are scalped to double or triple the MSRP and miners buy them up like there's no tomorrow to mine cryptos.

Since TSMC, Samsung, Global Foundries are businesses, they have to be fair to their customers who already booked up the schedules. Automakers try to put pressure on them but will not pay premium to bump Nvidia, AMD, Apple, Qualcomm off the top of the queue (and they cannot afford to anyways). Since they are all US companies I'm not sure a US president can do much political pressuring on this. This has nothing to blame China on, they also got bumped but they didn't cancel order before, and they also have problem with chips and their governments also warn companies not to scalp and gouge way too much (i.e. 20x on chip prices) because that's not fair.

Intel Foundry is a joke at the moment, hopefully the new CEO can fix that, but that will take at least 3-4 years at best and maybe 5-10 at worst. Nokia got burnt big time when Intel Foundry failed to deliver last time and they almost had nothing to sell.

Regarding to China want to be self sufficient, they knew what we have done to Huawei (chip sales to them stopped due to politics) and they got screwed because of that, I don't blame them wanting to be self sufficient after that. So far they may be able to do 14nm but without ASML nobody can make 10 or 7nm affordably. With overlay and immersion they may be able to use older tools to make newer stuff at way higher cost, however they will still need Canon and Nikon to sell them what they need. Their own tool would likely not be ready or leading for at least another 10 years, so they have to focus on low end stuff or continuous design change instead of more raw processing power and less frequent design change. Jim Keller had many presentations and interviews people uploaded to YouTube about how the process work, and the challenges the industry faces on the tool and manufacturing front.

 

[PandaBear]

And, IMO we should be non-reliant on them. Since a lot is manufactured in Taiwan, we either fully commit to defending their autonomy or go elsewhere.

We already had a defense treaty with the old China (Republic of China, the official name of Taiwan) prior to the communist take over. The defense treaty is still in effect and one of the reason our base is in Okinawa.

 

[mark pruett]

You seem to be very knowledgeable... Yes, foundries (aka fabless) manufacture chips per specification from companies like Apple and others. They do not make enduser products like computers or cell phones. Back in the day, the big computer companies like Intel, AMD and TI designed and fabbed their own chips; Intel still does. TSMC (Taiwan Semiconductor Manufacturing Company) is the biggest foundry company; there are others. You see them in the attached article.

Change over from one spec to another takes time and can be expensive. Right now, the foundries are focusing on the higher margin products, because they can. Auto chips, for the most part, do not fit in this category.
The Renesas (Japan) Naka fab fire in March was a big blow to auto chips. The government and Toyota stepped in to help, but this one hurt. I am not sure if they are back up to capacity. I think Renesas is the biggest supplier of chips for automobiles.

Interestingly, Tesla is the only auto manufacturer who designs their own chips; this is a huge advantage. Other companies outsource design to the biggies like NVIDIA.

Used to work in the IT department for a company about 25 years ago that built burn-in and test equipment for chip fabs, primarily Intel and IBM. The company ended up going under at some point, because of two things- they worked out how to manufacture them cheaper, and they outsourced the actual manufacturing and became straight-up design houses. So the equipment my company made became somewhat irrelevant; IBM and Intel still bought some for their development fabs, but not for large-scale production burn-in and test, and with the cheaper manufacturing they and the outsourced fabs just accepted a certain defect level instead of exhaustively testing their CPUs before shipping. They'd still do some cursory stuff to bin them into the various speed buckets*, but that was it. Prior to that, you could pretty much bank on your CPU working exactly as specified, because they'd done extensive testing as part of the production process.

Even back then, the major fabs weren't generally located in the US. I'm guessing there were environmental or labor reasons for that.

So yeah, I kind of saw the shift happen early in my career.

* For example, a 166 mhz, 200 mhz and 233 mhz Pentium Pro were identical off the line; they'd burn them in and test them to see what speeds they could sustain, and label them accordingly.

 

[PandaBear]

Used to work in the IT department for a company about 25 years ago that built burn-in and test equipment for chip fabs, primarily Intel and IBM. The company ended up going under at some point, because of two things- they worked out how to manufacture them cheaper, and they outsourced the actual manufacturing and became straight-up design houses. So the equipment my company made became somewhat irrelevant; IBM and Intel still bought some for their development fabs, but not for large-scale production burn-in and test, and with the cheaper manufacturing they and the outsourced fabs just accepted a certain defect level instead of exhaustively testing their CPUs before shipping. They'd still do some cursory stuff to bin them into the various speed buckets*, but that was it. Prior to that, you could pretty much bank on your CPU working exactly as specified, because they'd done extensive testing as part of the production process.

Even back then, the major fabs weren't generally located in the US. I'm guessing there were environmental or labor reasons for that.

So yeah, I kind of saw the shift happen early in my career.

* For example, a 166 mhz, 200 mhz and 233 mhz Pentium Pro were identical off the line; they'd burn them in and test them to see what speeds they could sustain, and label them accordingly.

Andy Grove said in his book that, back in the 80s. The Japanese were building memory R&D facility that are much bigger than the US. Say a DRAM development office in Intel would be 1 floor per generation each, the Japanese would have one building per generation. Andy had no idea where they get their funding from but they know it is time for them to get the heck out of DRAM.

Regarding to TSMC, I remember reading a news article a few years back from a Taiwanese media, that TSMC got the next round of investment for FAB and they came from 1) World Bank (yes that World Bank), 2) Cathay Bank (a Taiwanese bank), and some other various source.

Back a decade ago, at the launch of iPod nano (the first non hard drive ipod), there was an announcement that Apple would pay up front a huge amount of money (I think it was in the hundred of M to 1B) to Samsung and ask them to build up the nand flash capability, and Apple will get flash later on as "payment".

I think you can basically sums up why these large scale projects are no longer in the US anymore. You cannot compete with a nation when you are doing you small government every business is responsible for your own risk and reward thing. Now Japanese exit the DRAM industry a few years ago after they basically ran out of gov subsidies, layoff their workforce, and the Koreans hire them all to build up their own industry to compete. Micron ended up buying all the scrap Elpida left behind, keeping basically only their Taiwan fab alive. That's just business cycles.

 

[KneeGrinder]

You seem to be very knowledgeable... Yes, foundries (aka fabless) manufacture chips per specification from companies like Apple and others. They do not make enduser products like computers or cell phones. Back in the day, the big computer companies like Intel, AMD and TI designed and fabbed their own chips; Intel still does. TSMC (Taiwan Semiconductor Manufacturing Company) is the biggest foundry company; there are others. You see them in the attached article.

Change over from one spec to another takes time and can be expensive. Right now, the foundries are focusing on the higher margin products, because they can. Auto chips, for the most part, do not fit in this category.
The Renesas (Japan) Naka fab fire in March was a big blow to auto chips. The government and Toyota stepped in to help, but this one hurt. I am not sure if they are back up to capacity. I think Renesas is the biggest supplier of chips for automobiles.

Interestingly, Tesla is the only auto manufacturer who designs their own chips; this is a huge advantage. Other companies outsource design to the biggies like NVIDIA.

NXP Semiconductors, Infineon Technologies, Renesas Electronics, Texas Instruments and STMicroelectronics were the top five suppliers of microchips for automotive electronics .

"NXPI" ticker symbol, National Semi Conductor will also be a major player in the up coming 5g smarty pants phone. They are also a major supplier to the auto industry.

NVIDIA had been 1 of my most profitable, traded stocks till it split and I'm trying to figure out a trading pattern or range on it but the fun may be over for now on NVIDIA.

National Semi Conductor "NXPI" is a stock that is a buy and hold for the future, it's not a play and trade stock for me. As said, it's my long term play on 5g that was suggested from one of my "pay for advice" services.

I do own National Semi Conductor "NXPI" and it's in the money.

 

[KneeGrinder]

Renesas is back online 100% as of the evening of June 24.

https://www.renesas.com/us/en/about...factory-naka-factory-fire-production-capacity

 

[PandaBear]

Wait, I though National Semiconductor (now part of Texas Instrument) is TXN not NXPI, NXP and TXN are two different companies.

I have a small position in Qualcomm and Skyworks for their long term strength in wireless overall. From what I remember TXN threw in the towel back in the 3G days and never entered LTE. If TXN / Nat Semi were doing 5G it would be analog / power electronics / embedded system, not really a lot of profit and money in it. Their strength is mainly in small electronics everywhere in every market, rather than the cutting edge stuff.

NXP Semiconductors, Infineon Technologies, Renesas Electronics, Texas Instruments and STMicroelectronics were the top five suppliers of microchips for automotive electronics .

"NXPI" ticker symbol, National Semi Conductor will also be a major player in the up coming 5g smarty pants phone. They are also a major supplier to the auto industry.

NVIDIA had been 1 of my most profitable, traded stocks till it split and I'm trying to figure out a trading pattern or range on it but the fun may be over for now on NVIDIA.

National Semi Conductor "NXPI" is a stock that is a buy and hold for the future, it's not a play and trade stock for me. As said, it's my long term play on 5g that was suggested from one of my "pay for advice" services.

I do own National Semi Conductor "NXPI" and it's in the money.

 

[JeffKeryk]

NXP Semiconductors, Infineon Technologies, Renesas Electronics, Texas Instruments and STMicroelectronics were the top five suppliers of microchips for automotive electronics .

"NXPI" ticker symbol, National Semi Conductor will also be a major player in the up coming 5g smarty pants phone. They are also a major supplier to the auto industry.

NVIDIA had been 1 of my most profitable, traded stocks till it split and I'm trying to figure out a trading pattern or range on it but the fun may be over for now on NVIDIA.

National Semi Conductor "NXPI" is a stock that is a buy and hold for the future, it's not a play and trade stock for me. As said, it's my long term play on 5g that was suggested from one of my "pay for advice" services.

I do own National Semi Conductor "NXPI" and it's in the money.

I have had Lam Research (LRCX) for almost 30 years.

 

[Job]

These were the days.

 

[sk_pete]

We make industrial electronics for our big customers like abb etc.. we have big problems to buy electronic components from markets- transistors, diodes, chips...
Our production lines stop, so do theirs. It's not only about computers.
Sometimes there's small batch on specialist stocks/market for extra price, and our customers may agree to pay extra. But even then it can take weeks just get the goods.
Heck, I ordered 3phase contactor for machine, confirmed date is 1 month....