Semiconductors
SIC 3674
NAICS 334413
The semiconductor industry consists of manufacturers of semiconductors and related solid-state devices. Industry products include semiconductor diodes and stacks (for example, rectifiers, integrated microcircuits, transistors, solar cells, and light-sensing and emitting semiconductor devices). Semiconductors are used in the manufacture of electronic goods that range from television sets and toys to computers and missiles. High-speed computer processor chips and computer memory chips rank among higher profile industry products. The manufacture of products that integrate semiconductors and the manufacture of machines used to produce semiconductors are not categorized as part of the semiconductor industry itself.
The semiconductor industry has traditionally been characterized by swift change, hefty capital investments, and high risk. It is highly consolidated, with just a handful of companies in a few countries supplying the majority of industry output. According to the Semiconductor Industry Association (SIA) 2006 Annual Report, the industry employed nearly 234,000 people in the United States. With an excess of US$43 billion in exports for 2005, the seminiconductor industry was the leading U.S. exporter. More than 75 percent of U.S. chip industry sales, however, occurred outside the United States.
High technological requirements, massive capital investments related to research and production facilities, and entrenched market leaders generally discourage new entrants to the industry. However, leaps in technology in recent years made by the industry's market leaders opened the door to new manufacturers who specialized in commodity products and helped to satisfy increased customer demand.
On average, the semiconductor industry has enjoyed a growth rate of 17 percent per annum since 1959. In 1990, global sales hit a then record US$50.5 billion. Five years later, sales had tripled to US$144.4 billion, and in 2000 sales reached US$204.0 billion. By 2004, after the sharp economic downturn in the early years of the decade, global sales topped $200 billion for the first time since 2000. As reported in CMR, semiconductor sales for 2004 were US$227.246 billion. Of that total, 13 percent was earned by industry leader Intel. World semiconductor shipments were expected to continue rising into the late 2000s, as the rapid expansion of the telecommunications industry continued to create more demand for semiconductors, used in devices for networking and wireless communications. The rapid increase in the use of digital technologies and the world's appetite for electronic devices assured that robust growth would continue to characterize the industry.
In 2004, the semiconductor market was strongest in the Asia Pacific region. Japan retained its position as the global leader with a market value of $8.2 billion, followed by Taiwan with $7.7 billion, and North America, with $5.81 billion. Coming up close were Korea with $4.61 billion and China with $2.68 billion.
By 2005, according to Standard & Poor's Semiconductor Industry Survey, the top 10 largest semiconductor companies mainly featured established, dominant industry leaders. They were Intel, Samsung, Texas Instrument, Toshiba, STMicroelectronics, Infineon, Renesas, TSMC, Freescale and NXP.
According to World Semiconductor Trade Statistics, growth of 8.6 and 12.1 percent was expected for 2007 and 8 respectively. Asia-Pacific was expected to be the largest regional market. The forecast anticipated a consistent, positive growth peaking in 2008. Although the semiconductor market did not show a pronounced cyclical pattern, it did reflect that some product groups maintained cycles similar to historical patterns.
Semiconductor devices effectively act as the brains of the mechanisms that they control and coordinate. In essence, a semiconductor is a material that conducts electricity at room temperatures better than an insulator. When treated or "doped," a semiconductor (e.g., silicon) can be made to act as an insulator under some conditions and a conductor under others. Besides managing global communication, financial, and information systems, semiconductors are found in automobiles, planes, tractors, toys, consumer electronics, medical equipment, and other goods. The single largest market for semiconductors is the computer industry, which uses the chips primarily in the construction of personal computers and workstations. Other markets for semiconductors include both the rapidly growing consumer electronics industry and the automotive industry.
Categories of semiconductor devices utilized in analysis of the global semiconductor market include metal oxide semiconductor (MOS) memory (including DRAM), MOS micro (microprocessors and digital signal processors), MOS logic, analog products, and discretes (devices that perform a single function affecting the flow of electrical current).
The MOS memory market declined in the mid-2000s, depressed in part by lowered prices for DRAM memory chips and the uncertainty in the Asian economy. However, during the 2000s, memory sales recovered, thanks to the booming wireless market and demand for flash devices used in consumer electronics applications. The DRAM market grew 61 percent during 2004, earning $26.8 billion.
The United States' Bell Laboratories invented the solid state transistor, the first semiconductor device, in 1948. The device was an improvement over conventional vacuum tube mechanisms because it had no filament to burn, consumed less power, and was dramatically smaller. Further, transistor operation was dependent on the characteristics of the solid material rather than heat. In 1956 Bell Laboratory scientists William Shockley, John Bardeen, and Walter H. Brattain were awarded a Nobel Prize for their 1948 invention. That same year, Shockley left the company to form his own concern, Fairchild Semiconductor. Fairchild Semiconductor and Texas Instruments, also of the United States, simultaneously unveiled the integrated circuit (IC) in 1958, a pivotal breakthrough that effectively combined the functions of several discrete devices into a single silicon wafer. Robert N. Noyce, the head of Fairchild during the development of the IC, left the company in 1968 to form an enterprise called Intel, which introduced the memory integrated circuit in 1971. That and other developments spawned a massive rise in consumption of semiconductors during the 1970s.
In addition to huge technological advances, declining prices boosted semiconductor use during the 1970s. Industry employment reflected this increased semiconductor usage and surged from about 100,000 in the early 1970s to about a quarter million by 1980. Despite a cyclical downturn in 1975, global semiconductor production grew at a rate of about 30 percent annually between 1976 and 1980. Although the United States still supplied nearly 70 percent of all semiconductors and had a near lock on the high tech, high margin segments, other countries were entering the marketplace. Most notably, Japan invested heavily in semiconductor technology and controlled 25 percent of the world market by the early 1980s.
The industry experienced a major production shift during the 1980s. Japan, buoyed by a government/industry consortium, targeted the quickly growing DRAM market. It flooded the United States with inexpensive integrated circuits (ICs) and managed quickly to gain market share. By blocking semiconductor imports and taking advantage of low export barriers into the United States, Japan...
To continue reading
Request your trial