Semiconductor (or chip) has been a buzzword recently among investors, politicians and companies from various sectors. But what exactly is a “semiconductor”?
It is a substance that sits between a conductor and an insulator. It allows a degree of control over the flow of electricity. Through a specific process, it can form different types of devices that are used in many electronic appliances.
For instance, one of the elements found in a chip is transistors. It acts as both an amplifier and an electrical switch to control the current. When these transistors are put together, it forms a device that process binary information – the code 1 and 0 used by computer. This device is known as “logic”.
TYPES OF SEMICONDUCTOR DEVICE
In general, there are 3 main categories of semiconductor devices:
#1: Integrated Circuits (ICs)
ICs has multiple electrical elements such as transistors, diodes, resistors, capacitors and etc. Linking these electrical elements together in a chip will form devices that has specific functions. Below are 3 main devices that can be made:
|Logic||Able to perform certain logical operation based on inputs provided. Mainly found in CPUs used in computers and smartphones.|
|Memory||Able to store information, e.g. NAND flash memory used in USB drives or solid-states hard drive.|
|Analog||Able to transform or generate signals from electricity to radio waves or light. Applications such as phone calls are dependent on this Analog ICs.|
#2: Discrete Semiconductors
Device that controls electric current such as voltage regulation, surge protection or power conversion usually require this semiconductor. It consists of transistors, rectifiers, and diodes.
#3: Optoelectronics and Sensors
These are mainly used in generating or sensing light. For example, solar powered LED traffic light or cameras.
HOW ARE SEMICONDUCTORS MADE
Currently, silicon is the industry standard for chip production even though there are other types of semiconductor materials. This is because it is cheapest amongst the other materials.
Below is an illustration of the process in making semiconductors:
According to Semiconductor Industry Association , the global sales of chips increases by 29.7% y-o-y in August 2021. As an investor, I would want to invest in this growing sector. But the big question is which company to invest in? To answer this, you must first understand the semiconductor value chain.
Below is an overview of the entire semiconductor value chain:
At its core, there are 5 main sections. The other sections which are outside of this core value chain are mainly supporting activities – materials and equipment suppliers. The “Manufacturing” is where the above chip making process comes in.
In my next post, I will talk more in detail regarding each section of the value chain. Stay tuned!
If you would like to receive more how-to guide articles like this, do subscribe to this website. You can also check out some of my past articles on company’s key insights or browse through my independent analysis on REITs here .