Understanding semiconductors industry through 10 minutes with chatGPT

This is the chat transcript with chatGPT, the latest large language AI model that's shaking the world. The chat lasted less than 10 minutes. I haven't edited any of the answers. I tried gaining a basic understanding of semiconductors industry and some policymaking aspects around it. 

TK: what is the size of semiconductors market in the world?

chatGPT: The size of the semiconductor market in the world varies from year to year, but it is generally considered to be a large and rapidly growing market. According to a report from the World Semiconductor Trade Statistics (WSTS) organization, the global semiconductor market reached $529 billion in revenue in 2020. This represents a decline of 10.5% compared to 2019, due to the impact of the COVID-19 pandemic on global economic activity. However, it is expected to grow in the coming years as well.

TK: How much of market does the semiconductors support downstream? For example, semiconductors are used in mobile phones, computers, appliances etc.

chatGPT: Semiconductors are used in a wide variety of downstream products, including mobile phones, computers, appliances, cars, industrial equipment, and many other electronic devices. The market for these downstream products is vast and the demand for semiconductors is driven by the growth in these industries.

According to estimates by the Semiconductor Industry Association (SIA), in 2021, the semiconductor industry supported more than $1.2 trillion in global sales of electronics, and the semiconductor content in electronics is expected to grow around 7% per year in the future. It has been reported that smartphones and PCs are the two major downstream products that drive the demand for semiconductors, accounting for over 40% of the global semiconductor consumption in 2021.

However, the semiconductor industry's dependence on downstream industries varies depending on the specific product and market. For example, automotive industry has been growing in recent years, with semiconductors being used in cars for driver assistance, powertrain, and infotainment systems. This is one of the reason why the industry has been expanding to become one of the most important drivers of the semiconductor industry in the recent years.

Similarly, the Internet of Things (IoT) and the emergence of new technologies like 5G, AI and automation is also increasing the demand for semiconductors in a wide range of industries, including healthcare, industrial, and smart cities.

It's safe to say that, the semiconductor industry is closely tied to the growth of the downstream industries it supports, the industry's continued innovation and technical advancements is driving the demand for semiconductors in an increasing number of products and applications.

TK: what are the main stages in manfucaturing of a semiconductor chip?

chatGPT: The process of manufacturing a semiconductor chip typically involves several stages, which can be broadly grouped into the following categories:

1. Wafer fabrication: This is the process of creating the basic semiconductor material, such as silicon, and turning it into a wafer. This includes steps such as growing a crystal, cutting it into wafers, and cleaning and polishing the wafers.

2. Photolithography: This is the process of using light to transfer a pattern onto the wafer. This is done by using a photomask, which contains the desired pattern, and shining light through the mask and onto the wafer coated with a light-sensitive material called photoresist.

3. Etching and doping: These processes are used to create the desired electrical properties in the semiconductor material. Etching is used to remove unwanted material, while doping is used to add impurities to the material to create n-type and p-type semiconductors.

4. Metalization: This is the process of adding metal contacts to the semiconductor material to allow for electrical connection to the chip.

5. Assembly and packaging: Finally, the individual chips are cut out from the wafer, and then undergo further testing and assembly into a package with bonding wires and encapsulant (plastic or ceramic)

6. Testing: Finally, the chips are tested to make sure they are functioning properly.

This is a general overview and many specific process can vary depending on the chip or technology.

TK: Who are the key players in each of the categories above?

chatGPT: There are a number of key players in each of the categories of semiconductor manufacturing that I listed.

In wafer fabrication, some of the leading companies include:

• Intel
• TSMC (Taiwan Semiconductor Manufacturing Company)
• Samsung
• SK Hynix
• Micron Technology
• GlobalFoundries
• UMC (United Microelectronics Corporation)
• SMIC (Semiconductor Manufacturing International Corporation)

In photolithography, some of the leading companies include:

• ASML (Netherlands-based company that designs, develops, and sells lithography systems)
• Nikon ( Japan-based company that designs and manufactures photolithography equipment)
• Canon (Japan-based company that designs and manufactures photolithography equipment)

In etching and doping, some of the leading companies include:

• Applied Materials (US-based company that designs, manufactures, and supplies equipment and services used in the fabrication of semiconductor chips)
• Lam Research (US-based company that designs, manufactures, and supplies equipment used in the fabrication of semiconductor chips)
• Tokyo Electron (Japan-based company that designs, manufactures, and supplies equipment used in the fabrication of semiconductor chips)

In metalization, some of the leading companies include:

• Applied Materials (US-based company that designs, manufactures, and supplies equipment and services used in the fabrication of semiconductor chips)
• KLA (US-based company that designs and manufactures process control and yield management systems for the semiconductor and related nanoelectronics industries)
• Lam Research (US-based company that designs, manufactures, and supplies equipment used in the fabrication of semiconductor chips)

In assembly and packaging, some of the leading companies include:

• ASE (Advanced Semiconductor Engineering)
• J-Devices
• Amkor Technology
• Siliconware Precision Industries
• UTAC (United Test and Assembly Center)

In testing, some of the leading companies include:

• Teradyne (US-based company that designs and manufactures automatic test equipment and services)
• Advantest ( Japan-based company that designs, manufactures, and sells automatic test equipment)
• LTX-Credence ( US-based company that designs, manufactures, and sells automatic test equipment)

It should be noted that these are only some of the key players in each category and there are many other companies around the world that also play an important role in the semiconductor manufacturing industry.

TK: Among the categories you mentioned above, rank them based on investments needed to establish the industry.

chatGPT: The amount of investment required to establish different categories of the semiconductor industry can vary widely depending on factors such as the technology used, the scale of production, and the level of automation and complexity of the processes. Here is an estimate of a rough ranking of the categories based on the amount of investments required, from the most to the least:

1. Wafer fabrication: Wafer fabrication requires significant investments in equipment, facilities, and R&D, as well as large sums of capital to support the operation and maintenance of fabs. Due to the fact that the cost of building a foundry can reach billions of dollar and having the latest fabrication technology is always needed, this is the most capital intensive category

   
   

2. Photolithography: Photolithography equipment is also expensive, and it requires a significant investment in R&D to design, develop and test.

   
   

3. Metalization: Metalization also requires significant investments in equipment and facilities, as well as R&D for the development of advanced metallization technologies.

   
   

4. Etching and Doping: Investment in equipment, facilities, and R&D for etching and doping processes is also significant.

   
   

5. Assembly and packaging: Assembly and packaging require investments in equipment, facilities, and the development of advanced assembly technologies, although it's not as capital intensive as the above categories.

   
   

6. Testing: The investment in testing is relatively lower compared to the above categories. It requires investments in equipment and facilities, but it's usually a smaller portion of the total cost of the semiconductor manufacturing process.

It's worth to mention that the investment needs to be in a long-term perspective and the industry should be developed in a comprehensive way that covers all the categories together, this will ensure that each category can leverage the capabilities of the others and create a more efficient and cost-effective manufacturing process.

TK: Explain how South Korea became an important player in semiconductor industry. Who were the key players and how did the government play a role?

chatGPT: South Korea has become an important player in the semiconductor industry over the past several decades due to a combination of factors including government policies, investments in R&D and manufacturing, and the emergence of key players in the industry.

In the late 1960s, the South Korean government recognized the importance of the semiconductor industry for the country's economic development and began to invest in the industry through the creation of research institutes and the establishment of tax incentives for companies in the industry. In addition, government provided significant funding for the R&D, and education related to the semiconductor industry.

In the 1970s and 1980s, companies like Samsung and Hyundai began to invest heavily in the semiconductor industry. They were the key players that established South Korea as a major player in the memory chip market, with Samsung becoming one of the largest memory chip producers in the world.

In the late 1990s and early 2000s, the South Korean government continued to support the industry through the establishment of industry-specific research institutes and the funding of R&D projects. Additionally, the government provided financial incentives to companies to invest in new facilities and technologies, and developed policies to promote exports and attract foreign investment.

In the last decade, South Korea's semiconductor industry has grown into a global powerhouse, with the likes of Samsung and SK Hynix becoming some of the largest and most technologically advanced chip manufacturers in the world. South Korea is also one of the largest exporter of semiconductor chips, which are used in a wide variety of products, such as smartphones, laptops and consumer electronics.

As a result of government's strong support and investment, South Korea's semiconductor industry has been able to emerge as a significant player on the global stage, competing with other countries such as the United States, Taiwan, Japan, and China. The government has played a crucial role in supporting the industry through funding, policies, and other initiatives, which has allowed South Korea's chip makers to achieve global scale, leading-edge technology, and high efficiency.

TK: Explain how Taiwan became an important player in semiconductor industry. Who were the key players and how did the government play a role?

chatGPT: Taiwan has become an important player in the semiconductor industry due to a combination of factors, including a skilled workforce, government support, and a focus on technology and innovation.

In the 1970s and 1980s, a number of Taiwan-based electronics companies, such as Acer and Mitac, began manufacturing and assembling personal computers and electronic components. These companies saw the potential for growth in the semiconductor industry and began to invest in semiconductor manufacturing capabilities. They also began to build relationships with major international companies, such as IBM and Intel, to gain access to technology and manufacturing know-how.

In the late 1980s and early 1990s, the Taiwanese government recognized the potential of the semiconductor industry and began to provide financial and other forms of support to help the industry grow. This included investments in research and development, subsidies for the construction of new fabs (semiconductor fabrication plants), and tax breaks for high-tech companies.

The Taiwan Semiconductor Manufacturing Company (TSMC) founded in 1987, was one of the key players in establishing Taiwan as a major player in the semiconductor industry. TSMC was the world's first dedicated semiconductor foundry and began by manufacturing chips for other companies and it quickly gained a reputation for high-quality, low-cost manufacturing. The company then became one of the leading semiconductor manufacturers in the world in terms of market share, revenue and technology.

With a strong, government supported semiconductor industry, many companies in Taiwan began to invest in semiconductor manufacturing capabilities, including TSMC and United Microelectronics Corporation (UMC). Taiwan has now a number of world-class semiconductor companies, including TSMC and UMC, that produce some of the most advanced semiconductor products in the world.

The government played a significant role in Taiwan's semiconductor industry development by providing funding and infrastructure support, as well as by creating an environment that is conducive to innovation and technology development. The government also played a vital role in the fostering of strategic partnerships between private companies and research institutions.

TK: Explain how Japan became an important player in semiconductor industry. Who were the key players and how did the government play a role?

chatGPT: Japan has become an important player in the semiconductor industry due to a combination of factors, including the country's strong technological capabilities, its highly educated workforce, and its robust infrastructure. One of the key drivers of Japan's semiconductor industry has been government support, which has been provided through a combination of policies, programs, and investments.

In the 1970s and 1980s, the Japanese government identified the semiconductor industry as a key area for growth and development, and it implemented a number of policies to support the industry's growth. One of the main ways it did this was through the creation of the Electronics Industry Development Association (EIDA), which provided funding and other support to companies in the industry. The government also provided subsidies to companies that were engaged in R&D, and it invested in the creation of new fabs, as well as in upgrading existing ones.

Another key factor that helped Japan become an important player in the semiconductor industry is the presence of some major Japanese companies like Sony, Toshiba, and Hitachi, which were some of the early key players. They had been working on developing the technology to create semiconductors and building their own semiconductor manufacturing facilities. The government helped these companies by providing them with subsidies and incentives to research and develop semiconductors.

Over time, these efforts led to the emergence of a number of large and successful Japanese semiconductor companies, including:

• NEC
• Fujitsu
• Toshiba
• Renesas (formed by the merger of Hitachi, Mitsubishi Electric and NEC's semiconductor businesses)
• Sony

These companies, and others like them, were able to leverage the technological capabilities and infrastructure of the country to develop advanced semiconductor technologies and products. In addition, they have been very successful in exporting their products around the world.

Finally, the government's role has not been limited to investments, subsidies and incentives, it also helped to develop a highly educated and skilled workforce. Japan has a strong education system that produces a large number of engineers and scientists, many of whom are employed in the semiconductor industry. This has helped to ensure that the country has a steady supply of workers with the skills and knowledge needed to drive the industry forward.

All these factors together helped Japan to become an important player in the semiconductor industry and it still remain to be important till today.

TK: Is there any country that didn't use government's help and yet developed a strong semiconductor industry?

chatGPT: Yes, there are some countries that have developed a strong semiconductor industry without significant government support. The United States, for example, has a long history of innovation and entrepreneurship, and its semiconductor industry has been shaped by the actions of individual companies and private investors.

One of the key examples is Intel, which was founded in 1968 by Robert Noyce and Gordon Moore, two scientists who left Fairchild Semiconductor to start their own company. They were able to develop advanced semiconductor technologies and products, and build a successful business by leveraging private investments and by forming partnerships with other companies. Similarly, other US-based companies like Texas Instruments, Micron and Broadcom has grown with very less government help.

Another example is the Israeli semiconductor industry, which is relatively small but has produced a number of successful companies like Mobileye, Mellanox, and Cognivue. This industry has developed largely due to the efforts of private companies and entrepreneurs, who have been able to attract private investment and build successful businesses.

It's worth noting that, these countries have strong institutions in place and favorable business environment, this helped the companies to grow without government's direct involvement. However, it's also true that government does play a role in creating an environment that is conducive for technology innovation, business development and education, which are important for developing a strong semiconductor industry or any industry.

TK: Why is China struggling to take a lead in semiconductor industry?

chatGPT: China has been working to develop its semiconductor industry for many years, but it has struggled to take a leading role in the global industry. There are several reasons why this has been the case:

1. Lack of Intellectual Property: China has had a problem with protecting intellectual property (IP) and also with the domestic innovation and R&D which is critical to succeed in semiconductor industry. This has made it difficult for Chinese companies to develop and commercialize advanced technologies, and has also made it difficult to attract foreign investment and partners.

2. Dependence on foreign suppliers: China relies heavily on imports for the most advanced technologies, for instance the foundry manufacturing technology. This dependence on imports has made it difficult for China to build up its own manufacturing capabilities.

3. Quality and reliability concerns: Chinese companies have struggled to produce semiconductors that meet the high standards for quality and reliability that are required in the global market.

4. Shortage of skilled labor: China's semiconductor industry is also facing a shortage of skilled labor, as many Chinese engineers and scientists have moved to other countries for better job opportunities.

5. Bureaucracy: Government bureaucracy and lack of coordination has also affected the Chinese semiconductor industry, where the lack of a clear strategy or agenda has made it difficult for the industry to make progress.

6. Economic factors: China's economic slowdown and increasing competition in the global market also have been a challenge.

Despite these challenges, China has made significant progress in recent years, it has invested heavily in the industry, has been focusing on building a strong intellectual property regime and has been making acquisitions and strategic investments to bolster its capabilities. However, it will take time and sustained effort to overcome these challenges and establish a leading role in the global semiconductor industry.

TK: India wants to develop semiconductor industry in the country. In the long run, R&D and investement in skill development is the way to go. However, what can the policymakers do in the short run to ensure that India gets a part of semiconductor manufacturing capacity?

chatGPT: In the short run, policymakers in India can take a number of steps to ensure that the country gets a share of semiconductor manufacturing capacity:

1. Attract foreign investment: India can work to attract foreign investment in the semiconductor industry by offering tax incentives and other forms of support, such as subsidies or grants, to companies that are willing to invest in the country.

2. Develop public-private partnerships: India can also develop public-private partnerships to help build the infrastructure and resources needed to support semiconductor manufacturing. This includes investing in fabs, equipment, and other resources required.

3. Create special economic zones: India can create special economic zones dedicated to the semiconductor industry, which would be designed to attract investment and provide the necessary resources for companies to set up operations.

4. Provide subsidies for R&D: The government can provide subsidies for R&D to companies that are looking to develop new technologies and products. This will help to create a strong base for innovation and technology development in the country.

5. Establish regulations and standards: Establishing regulations and standards can help to attract investment and ensure that the products manufactured in India are of high quality. This will help to build confidence among investors and customers.

6. Encourage domestic companies: Government can encourage domestic companies to expand their operations, and also invest in building their own fabs.

7. Look for opportunities to participate in existing supply chains: India can look for opportunities to participate in existing supply chains by identifying areas where it can add value, such as by developing specialized manufacturing capabilities or services. This can help to build a foothold in the industry and gain access to new markets.

8. Leverage existing strengths: India has existing strengths in areas such as software development and IT services. It can leverage these strengths to develop capabilities in areas such as design and testing, which are important parts of the semiconductor manufacturing process.

9. Make trade policies favorable: India should make trade policies favorable by negotiating trade agreements, and allowing the import of the latest technologies and the export of products made in India.

It's worth noting that, each of these steps would require careful planning, execution and coordination between the government and the industry. In addition, it should be part of a long-term plan that focuses on developing the industry's capabilities and competitiveness over time. Additionally, policymakers should be aware that the semiconductor industry is a capital intensive and technology-driven industry, it will require significant investment and support to establish a strong and sustainable industry.

TK: What's the amount of subsidy or grants we are looking at for the step number 1 mentioned above.

chatGPT: The amount of subsidy or grants required for attracting foreign investment in the semiconductor industry will depend on various factors such as the size and scope of the investment, the technology and equipment being used, and the location of the manufacturing facility. In general, subsidies or grants for the semiconductor industry can be quite substantial, as the cost of building a fab can reach billions of dollars.

The exact amount of subsidies or grants required will depend on the specific investment proposal and the terms of the agreement between the government and the investing company. However, as a rough estimate, subsidies or grants can range from tens of millions of dollars to several hundred million dollars, or even more.

It's worth noting that, subsidies or grants are not the only form of government support that can be used to attract foreign investment. Incentives such as tax holidays, low-interest loans, and duty exemptions can also be effective in attracting investment. Additionally, providing infrastructure, land and other resources can also be a way of supporting the industry.

It's important to remember that the subsidies and grants should be used as a tool to attract investment, but it should not be the only way to build a sustainable industry. The government should also focus on building the ecosystem, creating a favorable environment for innovation, and providing education and workforce development to create a sustainable industry.