The semiconductor supply chain goes beyond foundries in Asia. The semiconductor supply chain is a highly intricate and globalized process that involves multiple critical steps, each requiring specialized expertise and coordination across different regions. Within this process there are upstream and downstream inputs. Upstream refers to the early stages of the supply chain, primarily involving research, raw materials and manufacturing equipment, with four critical segments:
1. Raw materials: high-purity silicon wafers, rare earth elements, chemicals and gases essential for chip fabrication.
2. Equipment: highly specialized tools such as photolithography machines, etching systems and deposition equipment, which enable precise semiconductor production.
3. Electronic Design Automation (EDA) software: software tools that enable engineers to create, simulate and optimize semiconductor architecture before physical production begins.
4. Design & Intellectual Property (IP): conceptualization, engineering and verification of semiconductor architecture before they proceed to fabrication.
The upstream phase is critical in the development and improvement of modern semiconductors, which have become smaller but substantially more powerful and efficient in terms of capacity. This phase is highly research-intensive and requires a high level of expertise, coming before an order is placed with plants to manufacture chips. The downstream phase focuses on the later stages of the process in which fabricated semiconductors are assembled, distributed and integrated into final products. Here there are three critical segments:
1. Testing & Packaging: chips undergo rigorous quality checks before being encapsulated in protective casings.
2. Distribution & Logistics: semiconductors are transported to various industries, including consumer electronics, automotive and telecommunications.
3. End-Product Manufacturing: final assembly occurs when chips are integrated into smartphones, computers, vehicles and industrial systems.
The final product is either shipped directly to consumers or via a retailer for sale or to a third-party wholesaler that deals with corporate equipment resources. The interdependence between upstream and downstream actors highlights the semiconductor industry's complexity and its vulnerability to disruptions. Any disruption in upstream supply – such as material shortages – can have cascading effects downstream, delaying product manufacturing and shipping to final customers, as highlighted in recent years, especially amid trade tensions between the US and China.
Source: Allianz