Business · General Industry
Semiconductor value chain
The full sequence from EDA tools and IP through design, mask making, wafer fabrication, assembly, test and distribution to system integration. Its extreme specialisation and geographic concentration are the root of nearly all supply-security concern.
- Also known as
- Chip value chain, Semiconductor supply chain
- Type
- Business
- Domain
- General Industry, Value chain and business models
Notes
Roughly fifty distinct process steps in the chain have a single dominant supplier, which is why chokepoint analysis is now routine.
Overview
The semiconductor value chain is the sequence of specialised activities that together add the value in a chip, from research, design tools and licensed IP through chip design, manufacturing equipment, materials and wafer fabrication to assembly, packaging and test. Analysts, companies and governments use the idea to ask which activities create most value, where each is done, and which depend on just a few suppliers. It overlaps with the supply chain, but the emphasis is on the stages and their economics rather than on the day-to-day flow of parts.
How it works
The chain is usually described in layers. At the start sit research, electronic design automation (EDA) software and core IP, which chip designers combine with their own work to produce a design. Equipment makers supply tools for lithography, deposition, etch and measurement, while materials suppliers provide wafers, photoresists, gases and specialty chemicals. Fabs then make the wafers, and assembly, packaging and test (ATP) turns them into finished parts that reach electronics makers directly or through distributors.
Each stage has a different economic profile. In the 2021 analysis by the Semiconductor Industry Association (SIA) and Boston Consulting Group (BCG), design, EDA, core IP and advanced equipment are described as research-intensive activities led by the United States, wafer fabrication as capital-intensive and led by East Asia, and ATP as less skill- and capital-intensive, with China the largest region. Different business models map onto these stages: fabless companies design, foundries fabricate, outsourced assembly and test companies (OSATs) package, and integrated device makers do several stages themselves.
That specialisation brings efficiency but also concentration, since several stages rely on one region or a handful of firms. Government incentives since then, such as those under the US CHIPS Act, aim to spread some stages across more regions; the 2024 SIA and BCG follow-up projects a larger US share of global fab capacity by 2032, while noting that vulnerabilities remain.
Examples
- A fabless company that designs chips with licensed EDA tools and IP, has them made at a foundry and packaged at an OSAT.
- An integrated device maker that designs, fabricates and tests its own chips in its own facilities.
- A government strategy document mapping which value chain stages are done domestically and which are imported.
- An analyst comparing research spending in design and EDA with capital spending in wafer fabrication.
Related terms
Part of the General Industry glossary, with every term in the topic and the lifecycles, tools and standards that use them.
Where it appears on the Hub
Used on 11 pages of the Hub. In each group, the pages that mention it most come first.
Skills
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Last reviewed . Written by The Semiconductor Hub editorial team. The full glossary