In the last few decades, electronics have become increasingly central in our lives, and since the beginning of the pandemic, their role has held an even greater importance. This role makes it worth looking into one of its key components - semiconductors. Semiconductors are used extensively in electronic circuits. As its name implies, a semiconductor is a material that conducts current, but only partly. Its conductivity is somewhere between that of an insulator, which has almost no conductivity, and a conductor, which has almost full conductivity. Most semiconductors are crystals made of certain materials, most commonly silicon.
The semiconductor industry is a massive and growing unit that serves millions of customers worldwide. It is the aggregate of companies engaged in the design and fabrication of semiconductors and semiconductor devices, such as Integrated Circuits (IC). It formed around 1960 once the fabrication of semiconductor devices became a viable business. The invention of the point-contact transistor by John Bardeen and Walter Brattain at Bell Laboratories in 1947, as well as the invention of the junction transistor by William Shockley in 1948 also had a role to play in its growth as it heralded the arrival of the transistor era.
This multi-billion dollar industry employs hundreds of people, both directly and indirectly, and commands several important supply chain structures. The industry's annual semiconductor sales revenue has since grown to over $439 billion as of 2020; the semiconductor industry is, in turn, the driving force behind the wider electronics industry. Even today, it continues to grow in leaps and bounds with new discoveries and efficient solutions to age-old problems. A simple explanation of its growth can be done using the example of the US economy - the US semiconductor industry doubled its share of the GDP between the period of 1987 and 2011. During this period, the industry’s real contribution to U.S. GDP has grown annually by 5.5 percent, more than two times faster than the GDP. In absolute terms, the U.S. semiconductor industry’s share of U.S. GDP is the third largest of all U.S. manufacturing industries, behind only the petroleum refinery and pharmaceutical preparations industries. Apart from this, USA has 47% of the global sales market share of semiconductors. The given figures clearly indicate two things:
The semiconductor industry, of both USA and across the world, is growing at a rapid rate.
The US semiconductor industry is becoming ever more important to its economic growth.
ANALYSIS
Top Competitors of the Semiconductor Industry
Today, the key players of the semiconductor industry include companies such as Intel, Samsung and TSMC (Taiwan Semiconductor Manufacturing Company).
Of these companies, the ones holding the top spots generally have great stability - Intel has had the first rank since more than a decade, except for the years 2017 and 2018, where Samsung held that spot. The chart also clearly indicates that these companies originate either from USA or the Asia Pacific region.
2. Global Sales
The aggregate of sales occurring throughout the year, across the world, sums up to global sales. This helps us understand not only the rise and fall of demand for semiconductors over the years, but also the respective production and supply by manufacturers. The figures given below show the global sales of semiconductors over the past decade.
The figures show that there has been an overall rise in the demand and supply of semiconductors in the market. There has been a dip in sales in 2019 and 2020 caused due to a confluence of factors, including ongoing global trade unrest and cyclicality in product pricing; the highest ever sales recorded was in 2018. However, the SIA (Semiconductors Industry Association) has predicted that the annual sales will increase by 19.7% to $527.2 billion in 2021, which would mean a new sales record.
3. Market Shares
There are multiple ways and differentiations that can be made to understand the market shares in the semiconductor industry. Semiconductors have helped in creating a wide range of products, such as computers, smartphones, home appliances and even industrial equipment. They have also enabled the creation of emerging markets, such as AI (Artificial Intelligence), IoT (Internet of Things), Blockchains and 5G (Advanced Wireless Network). These products are a strong driving force behind the semiconductor market. In terms of purely the end product, the shares can be divided into six such areas:
Apart from these products themselves, countries are also in a constant race to occupy the top spot in the market by reaching out to more customers and receiving greater demand and thereby greater revenue and profits. These can be divided into seven different regions:
While the graph above may show USA as the top country in terms of market share, there are several other variances in the picture. Since semiconductors have different sub-products, its market shares differ depending on which sub-product it is. For instance, while USA maintains the leadership in the market share of Logic and Analog semiconductors, Korea leads the market in Memory semiconductors and Europe does so in Discrete semiconductors. Similarly, in terms of business model, USA leads in some areas but not all. Asia continues to dominate the outsourced aspects of semiconductor production. Nearly 80 percent of semiconductor foundries, assembly and testing operations are concentrated in Asia.
THE FUTURE
Given today’s rapid technological advancement, the semiconductor industry is expected to continue its growth trends. The rise of AI (Artificial Intelligence) will also play a major role in this growth. According to the Semiconductor Industry Association’s forecast, the industry shall grow by 19.7% in 2021 and 8.8% in 2022. One main point of understanding the growth of an industry involves focus on the Research and Development for the creation of new technologies and the advancement of current ones. In those terms, the semiconductor industry spends a significant portion of its sales on R&D. In fact, the US semiconductor industry spends 16.4% of its total sales on research and comes second only to the US Pharmaceuticals & Biotechnology industry in R&D spending.
Apart from the industry as a whole, the gap between countries is also starting to lessen as European and Asian countries have begun grabbing larger parts of the global market. While US based companies such as Intel, Qualcomm and Texas Instruments still maintain a large share of the market (Intel is currently the global leader in terms of revenue and sales), companies like Samsung, TSMC and SK Hynix are also increasing their market shares, making the competition stiffer than ever before.
The overall growth trends and the emerging competition between countries and companies points to one clear outcome - massive technological advancements, and this brings with it improved performance, new inventions and the technological push beyond the current boundaries of imagination.
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