Semiconductor Manufacturers

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 720 semiconductor manufacturers in the US design and build a variety of semiconductor and related solid-state devices including integrated circuits, memory chips, microprocessors, diodes, transistors, and solar cells. Semiconductors are used in a wide range of products, but major categories include computers and electronic devices, machinery, appliances, transportation equipment, solar panels, and lighting equipment.

Rapid Technology Innovation

Semiconductor manufacturers spend significant amounts of cash on research and development to meet customer demand and stay ahead of competition.

Shrinking Nodes, Fewer Labs

The number of cutting-edge semiconductor manufacturers is shrinking as fewer firms have the financial resources needed to further miniaturize semiconductors.

Industry size & Structure

A typical semiconductor manufacturer operates out of a single location, employs 258 workers, and generates about $71 million annually.

    • The semiconductor manufacturing industry consists of about 720 companies which employ about 185,900 workers and generate about $51 billion annually.
    • Customer industries include manufacturers of computers and electronic devices, telecommunications equipment, machinery, appliances, transportation equipment, solar panels, and lighting equipment.
    • The industry is highly concentrated with the 20 largest firms representing 78% of industry revenue.
    • Large companies include Intel, Global Foundries, Cypress Semiconductor, IBM, and Texas Instruments.
                                  Industry Forecast
                                  Semiconductor Manufacturers Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Coronavirus Update

                                  May 9, 2022 - Federal Funding Proposals Advance Slowly
                                  • Legislation introduced in 2021 to boost domestic semiconductor production continues moving through the US Congress. The House-passed America COMPETES Act has been merged with the Senate-passed United States Innovation and Competition Act (USICA), creating the “Bipartisan Innovation Act” (BIA). The combined legislation includes a $52-billion proposal for building US-based semiconductor foundries. Most lawmakers agree that the BIA must be passed and advanced to the White House by the end of the summer, before lawmakers turn their attention to the November midterm congressional elections. Gartner analyst Gaurav Gupta said in early April that investments will need to continue to be made to support the US semiconductor industry beyond the initial $52 billion.
                                  • Some US firms such as Intel Corp and Micron Technology still make chips onshore, but the industry's center of gravity has shifted to Asia, according to the CNBC news network. American companies secured 45% of the global semiconductor market in 2019, according to the Semiconductor Industry Association.
                                  • The semiconductor shortage will not be as severe in 2022 as it was in 2020 and 2021, according to Ariane Bucaille of consulting firm Deloitte. The shortage will also not affect all chip varieties. Customers were waiting between 20 and 52 weeks in mid-2021 for multiple kinds of semiconductors, according to Bicaille. Those lead times will be closer to 10-20 weeks by the end of 2022, and the industry will be in balance by early 2023.
                                  • About 80% of chip makers say that it's become hard to find workers, many of whom have to be specially trained to handle the highly toxic compounds used in semiconductor manufacturing. The problem is worse in North America and in Asia, where more companies are reporting rising labor costs compared to those in Europe.
                                  • Semiconductor manufacturer Intel’s chief executive Pat Gelsinger said that carmakers have bombarded him with requests to invest in brand-new production capacity for semiconductors featuring designs that, at best, were state of the art when the first Apple iPhone launched. “It just makes no economic or strategic sense,” said Gelsinger. “Rather than spending billions on new ‘old’ fabs, let’s spend millions to help migrate designs to modern ones.” Experts say that many, if not most chips found in everything from electronic brake systems to airbag control units tend to rely on obsolete technology that is often well over a decade old. These employ comparatively simple transistors that can be anywhere from 45 nanometers to as much as 90 nanometers in size, far too large—and too primitive—to be suitable for today’s smartphones. “I’ll make them as many Intel 16 [nanometer] chips as they want,” Gelsinger said.
                                  • Experts believe that the ongoing semiconductor shortage could result in an increase of counterfeit components. “We’re seeing companies that have never been rated by any other company in the industry showing significant quantities of parts that are in shortage. But what sounds too good to be true is too good to be true,” said Steve Calabria, the founder of independent distributor PC Components. Experts are concerned that these chips may pass the eye test and even meet basic quality standards, but they will not have gone through any of the testing processes or reliability criteria that authentic chip manufacturers invest time and money in. "Many frauds occur simply because buyers are being pressured to release funds to hastily-erected web-based chip distributors who just as hastily shut down these websites by the time the promised product is supposed to arrive, destroying any potential for recourse," according to John Annand, an analyst and director at the enterprise IT analyst firm Info-Tech Research Group. Meanwhile, many victimized firms determine that it's not in their best interest to release that information. "Companies don't want to admit that they are not savvy enough or don't have sufficient control over their supply chain to prevent chip fraud," according to Mike Borza—the principal security technologist at the electronic design automation firm Synopsys.
                                  • Many experts say that lawmakers hoping to revitalize US semiconductor manufacturing in response to a global chip shortage face major obstacles. The US still leads the world in chip design, but manufacturing has largely been ceded to foreign firms. The few companies that do make chips domestically, including Intel and Texas Instruments, don’t currently have the capacity or execution track record to compete with Taiwan Semiconductor Manufacturing and Samsung Electronics. Lawmakers are expected to try to address the issue by creating tax incentives and supplying billions of dollars in federal grants as incentives for building semiconductor plants in the US. Advocates say that approving subsidies as part of a broader infrastructure package could prevent the next shortage, but won’t do much to help the current one. Experts also note that attempts to re-shore semiconductor manufacturing will be difficult due to China's specialized production capacities, co-location of key suppliers, and economies of scale. The ecosystems of qualified suppliers and skilled labor are less concentrated outside of China, making it difficult to shift operations entirely from one country to another. Many companies also want to continue operations in China to supply the country’s growing markets.
                                  • The US is projected by the Semiconductor Industry Association to make up 10% of the global semiconductor manufacturing capacity by 2030, down two percentage points from 2020 projections. China will increase its share from 15% to 24%.
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