Economics

All about the Semiconductor Industry

Worth over $300 billion USD today, this high-tech industry has grown to immense levels since its inception less than 70 years ago.

5. Description

Semiconductors are among the most essential building blocks to our modern way of life. They are materials that are used, due to the way they interact with electricity, in the flow and control of electric currents. Semiconductors are used in semiconductor devices to control the flow of electricity, and part of essentially every electric device used in the world today. These devices, primarily transistors, have replaced vacuum tube technology in the primary means of manipulating the flow of electricity within electric circuits. They have drastically increased the efficiency of this process over the past several decades, and transistors have gotten ever smaller, allowing for the devices they are used in to be reduced in size as well. Because of this technology’s own successes and universality, the industry has undergone one of the most remarkable periods of growth of any product in history. The global semiconductor industry is now over $300 billion USD, and represents one of the most important technological sectors on the planet.

4. Location

The United States yields more than half of the world’s semiconductor production. Silicon Valley, the greatest technology hub in the US, is named for the element which is one of the most common in semiconductors. This is a testament to how important the use of semiconductors and transistors have been in the development of the use of technology in the United States. While Silicon Valley is more broadly a technological center, the state of California as a whole contains the vast majority of the country’s semiconductor production capacities. Japan and South Korea are the other two dominant countries in the world in terms of semiconductor production. The demand for semiconductors is driven by the desire of consumers to purchase all forms of modern electronics. Semiconductors are used in essentially all electronics, from computers and cars to phones and lighting systems. This means that regardless of whether a device may be in or out of fashion at a given time, the overall trend in technological advances and the resulting demand continues to drive the sale of this industry’s products. The growth in the use of technology in the developing world is one of the major trends relevant to the semiconductor industry's continued expansion. While the Americas have traditionally been the dominant destination for technological goods, and therefore semiconductor devices, Asia is now by far the world’s largest market in this arena.

3. Process

Research and development (R&D) represent an unusually high portion of the semiconductor industry relative to other sectors. The rapid change of pace in the industry demands that companies therein must actively pursue more efficient technologies, and commit large portions of their budgets to R&D. The advances in this industry are responsible for a significant portion of both the technological and economic efficiencies that have been achieved during the Information Revolution. Due to their nature, any explanation of the actual production of semiconductor devices tends to be highly technical. Basically, chemical processes employ semiconductor materials, like silicon, to either create individual semiconductor devices, like transistors, or larger circuits, such as computer processors. These are then sold to manufacturers that use these components in the development of their individual consumer technologies, such as personal computers and smartphones.

2. History

The transistor, the first real semiconductor device, was invented in 1948 at Bell Laboratories. The commercial semiconductor industry began in earnest in the early 1960s, and surpassed $1 billion USD in annual revenue for the first time in 1964. In 1965, Gordon Moore, a semiconductor researcher and co-founder of the Intel Corporation, the world’s largest semiconductor device producer, developed a groundbreaking theory. He famously predicted that developments in semiconductor technology would allow producers to double the number of transistors they included per electric circuit every year. The effect of this would be that they would drastically increase the speed and functionality of each processor. While Moore later amended this forecast, it proved to be a remarkably accurate insight into the remarkable rates of growth that would be seen in this industry. Processors, a form of integrated electric circuits, were able to hold only 2,300 transistors in 1971. By 1982, processors were capable of containing 134 thousand transistors. In 2004, that number had increased to 592 million individual transistors. These increases have had an enormous impact on the efficiency of modern computing and, more generally, technology as a whole. Behind these trends, the semiconductor industry, first in the United States and later globally, has had a huge role to play in how we are able to use and interact with technology. As our reliance on technology grows, so will our dependence upon the semiconductor industry.

1. Regulations

Often seen as a gauge of the state of a country’s technological ability and a strategically important sector, each producing nation's respective domestic semiconductor industries have often carried a lot of weight in terms of lobbying their federal governments. Industry participants have at times been advocates of policies that pursue trade protectionism, and defenses against foreign “dumping” of products, wherein goods were sold internationally at very low prices in an effort to disrupt foreign competitors. The ability of this industry to effectively lobby various governments is further evidence of how important semiconductor device production is, both within individual countries they are produced in, and internationally as exports.

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