The demand for semiconductors, or chips, has never been greater. And it will continue to increase due to emerging technologies such as mobility, smart cities, smart buildings, 5G, artificial intelligence and the Internet of Things (IoT). Meeting this demand requires an increase in semiconductor production, which will result in a significant rise in energy consumption and water usage.
The challenges in the supply chain during the pandemic and data nationalism have accelerated the race in technology. Every country is reevaluating its dependencies on data and processors. The war between Russia and Ukraine and the sanctions imposed on Moscow has led all countries to reconsider their dependencies on data and chips. Sanctions previously imposed on Chinese companies before the pandemic are also intensifying the wars in data and processor economies.
Tech giants like Google, Meta Platforms, Amazon, Twitter, Alibaba and TikTok emerge as the owners of the world's big data.
These tech giants are changing the conditions of global competition with their artificial intelligence, cloud technology and processor capabilities. Technological solutions that drive the growth of the data economy are shaping the future of competition worldwide. The U.S., home to the heart of technological advancements, Silicon Valley, still aims to maintain its leadership in speed and performance in the 3-nanometer processor architecture. Moreover, the most powerful operating system and application ecosystem running on these processors are also in the hands of the United States.
The announcement this week by China that it would restrict exports of two metals, gallium and germanium, widely used in semiconductors and electric vehicles, as of Aug. 1 has prompted companies to strive to secure their supplies.
As the world becomes more dependent on computers and continues to enhance the capabilities of various devices, from electronics to motor vehicles, semiconductors are becoming increasingly important.
Despite its rapid growth and expansion, only a handful of countries dominate the semiconductor field. As the number of sectors involved in the data economy increases, the need for powerful and fast processors grows. For instance, the increase in the number of electric and autonomous vehicles leads to an increased demand for processors. It is inevitable to invest in data for measurement, and cloud and chip technology for processing big data. Sustainability goals are forcing manufacturers to be cautious. A single semiconductor factory can consume up to 1 terawatt-hour of energy per year and 2 to 4 million gallons of ultra-pure water per day. Major semiconductor manufacturers like Taiwan Semiconductor Manufacturing (TSMC) and Intel are taking proactive steps.
Taiwan, an East Asian country whose diplomatic status is a subject of debate by China, is the undisputed leader in raw semiconductor production.
Approximately 50% of the world's semiconductors are produced by TSMC alone. Unlike semiconductor manufacturers like Samsung or Intel, which produce semiconductors for their own products, TSMC manufactures semiconductors for many other companies, including Apple, AMD, Nvidia, Qualcomm and more.
The United States accounts for approximately 12% of the world's global chip production capacity as of 2021. This is a significant decrease compared to the 37% it held just 20 years ago in the 1990s. Taiwan and China have increased their semiconductor production capacities. Despite this decline, the semiconductor industry continues to be highly lucrative in the United States.
According to the Semiconductor Industry Association (SIA), chip exports added $62 billion to the U.S. economy in 2021, surpassing all other products except refined petroleum, aircraft, crude oil and natural gas. Most of these chips return to the U.S. in the form of finished consumer electronics. Although the United States accounted for only 12% of the world's total semiconductor production capacity in 2021, U.S.-based companies held approximately 46.3% of the total semiconductor market share.
10. Israel
Number of operational and planned factories: 4
Israel has the most NASDAQ-listed companies after the U.S. and China as of 2016. It also has four semiconductor foundries. Two of these belong to the U.S. chipmaking giant Intel Corporation, and two below to Tower Semiconductor.
9. Netherlands
Number of operational and planned factories: 4
The Netherlands hosts some of the largest multinational firms in the world, and one of the most crucial firms headquartered there is ASML. Like Intel Corporation, QUALCOMM Incorporated and Taiwan Semiconductor Manufacturing Company, ASML is one of the biggest semiconductor companies in the world.
ASML is the only company in the world that is capable of manufacturing high-end machines that print semiconductors. Chip manufacturing plants in the Netherlands belong to NXP and Philips, among others.
8. Malaysia
Number of operational and planned factories: 7
Malaysia exports semiconductors and natural resources, among other products. Seven chipmaking plants are located in the country, with four belonging to the German firms Infineon and Osram Licht. Another belongs to a Belgian firm and two belong to Malaysian entities.
7. United Kingdom
Number of operational and planned factories as of Dec. 4, 2022: 12
The United Kingdom of Great Britain and Northern Ireland is home to one of the most consequential semiconductor designers, Arm Ltd. Arm's products are at the heart of most of the world's smartphones and its designs are also used in data center chips. Chip fabrication facilities in the country are owned by Dutch and American firms, among others.
6. South Korea
Number of operational and planned factories: 15
South Korea is home to two of the world's three largest memory manufacturers – SK Hynix and Samsung. Samsung's chipmaking divisions are also responsible for manufacturing semiconductors for other companies, and Samsung Foundry is only of two companies in the world (the other being TSMC) that make chips for others with leading-edge process technologies such as 5-nanometer and now 3-nanometer.
Out of the 15 chipmaking facilities in South Korea, eight are owned by Samsung which also makes processors and graphics processing units (GPUs) for its own smartphone lineup. Semiconductors accounted for more than 15% of South Korea’s total exports, which stood at $644 billion in 2021.
5. Germany
Number of operational and planned factories: 20
Germany’s exports stood at a staggering $1.6 trillion in 2021, with the U.S. and China the country’s largest trading partners. There are 20 chipmaking facilities in the country, belonging to various countries – both German and international.
It is making strategic investments in chip manufacturing to continue to have a say in the automotive industry.
4. China
Number of operational and planned factories: 70
China’s Semiconductor Manufacturing International Corporation (SMIC) is one of the largest contract chip manufacturers in the world, and the country is also aiming to achieve self-reliance in chip manufacturing this century. Fabs in China are owned by both local and international firms.
With the recent decision, China has imposed restrictions on the export of semiconductor technologies out of the country.
3. U.S.
Number of operational and planned factories: 76
The U.S. leads in aerospace, biotechnology, artificial intelligence and semiconductor fabrication, all of which are at the forefront of today’s technological revolution.
U.S.’ crown semiconductor jewel is Intel Corporation, which is credited with having invented the modern-day semiconductor. Intel has some of the most advanced chipmaking facilities in the world, and it has pioneered leading transistor designs such as FinFET.
QUALCOMM has the largest market share, especially in mobile phones and wireless network technologies.
2. Taiwan
Number of operational and planned factories: 77
Taiwan is home to the Taiwan Semiconductor Manufacturing Company, which is the world’s largest contract chip manufacturer both in terms of market capitalization, as of December 4, 2022, and output. TSMC is often referred to by the Taiwanese as the “sacred mountain.”
Taiwan is home to some of the most advanced chipmaking facilities in the world, including the brand-new 3-nanometer factories that just entered production in the latter half of 2022.
1. Japan
Number of operational and planned factories: 102
Japan is one of the most technologically advanced nations in the world, and also one of the most prosperous. It also has one of the strongest semiconductor ecosystems in the world, and 102 chipmaking facilities operate in the country. These are owned by a mix of different firms, several of them Japanese as well, and others too including Taiwanese and American companies.
As in other leading semiconductor manufacturing countries, the Japanese government is working to expand the country's chip-producing capacities.
For over 50 years, the x86 architecture has dominated the microprocessor industry. While Arm's architecture initially emerged from the need for low-power chips for vertical applications, it is also beginning to emerge as a high-performance competitor.
As a result, when giants like Apple, Google and AWS decided to develop their own chips, they chose the Arm architecture for its performance and low power consumption, which has become critical for power-hungry data centers, consumer products and sustainability efforts.
The industry is shifting toward where the volume is, and companies are already starting to develop a wide range of applications and solutions specifically for the Arm platform. And this growing shift towards Arm is changing the dynamics in the semiconductor ecosystem.
Unlike the x86 platform where companies could purchase from one or two suppliers, Arm has become an intermediary that provides its IPs to multiple companies. By choosing Arm, businesses have the flexibility to design their own chips while having them manufactured by TSMC without the need to invest in the costly construction of a factory. Additionally, it is gaining traction in IoT devices and other applications due to its touted better power consumption.
