From sand to chip: how is a modern semiconductor made?

Reading time: approx. 10min

1) INTRODUCTION

Since 2023 at the latest and the rapid rise of Nvidia $NVDA (+2,01%) semiconductors and "AI chips" in particular have been the talk of the town. Since then, investors have been chasing after almost every company that has something to do with the manufacture of chips, driving share prices to unimagined heights. However, hardly any investors really know how complex the value chain is within the production of modern chips.

In this article, I will give you an overview of the entire manufacturing process and the companies involved. Even if many of you have a vague idea that the production of modern chips is complex, you will certainly be surprised by how complex it really is in reality.

2) BASIC

The starting point for every chip are so-called wafers [1] - i.e. thin wafers, which usually consist of so-called high-purity monocrystalline silicon. In the field of power semiconductors, which primarily comprises chips for applications with higher currents and voltages, silicon carbide (SiC) or galium nitride (GaN) has recently also been used as the base material for the wafers.

In the so-called front end the actual core components of the chips - the so-called dies - are created and applied to the wafers. The dies are rectangular structures that contain the actual functionality of the later chip. The finished dies are then tested for their functionality and electrical properties. Each die that is found to be good is then integrated into the so-called backend where the individual dies are separated on the wafer. This is followed by the so-called packaging. The individual dies from the front end are then electrically contacted and integrated into a protective housing. In the end, this housing with the contacted die is what is usually called a chip chip.

Now that we have a rough overview of the overall process, let's take a closer look at the individual processes involved in producing the dies on the wafer. This is the area in which most highly complex machines are used and which is usually the most sensitive.

3) FROM SAND TO WAFER

Before wafers made of high-purity silicon can even be produced and the actual process for manufacturing dies can begin, the actual wafer must first be manufactured in almost perfect quality. To do this, quartz sand, which consists largely of silicon dioxide, is reduced with carbon at high temperatures. This produces so-called raw siliconwhich, with a purity of around 96%, is not yet anywhere near the quality required for the production of wafers.

In several chemical processes, which are carried out by Wacker Chemie
$WCH (+1,9%) or Siltronic
$WAF (-3,21%) are used to turn the "impure" silicon into so-called polycrystalline silicon with a purity of 99.9999999%. For every billion silicon atoms, there is then only one foreign atom in the silicon. However, this pure polycrystalline silicon is still not suitable for the production of wafers, as the crystal structure in the silicon is not uniform enough. In order to create the right crystal structure, the polycrystalline silicon is then melted again and a so-called ingotwhich is made from monocrystalline silicon is produced. A comparison between raw silicon and the ingot can be found in the following image [3]:

This ingot is then sawn into thin slices, which are then the final wafers for semiconductor production. The best-known wafer producers are Shin Etsu
$4063, (-1,14%)
Siltronic or GlobalWafers
$6488.

4) FROM THE WAFER TO THE DIE

The wafers described in the previous section can now be used to produce dies. The overall process for producing dies basically consists of applying a large number of layers using various chemical, mechanical and physical processes. The overall process (depending on the product) takes approx. 80 different layers on the wafer, requiring almost 1000 different process steps and 3 months
non-stop production are required [4].

A macroscopic analogy is useful here, which I have also taken from [4]. You can compare the overall process for producing dies with baking a large multi-layer cake. This cake has 80 layers and the recipe for baking consists of 1000 steps. It takes 3 months to make the cake and if even one layer of the cake deviates from the recipe by more than 1%, the whole cake collapses and has to be thrown away.

In the first process steps, the wafer is covered with billions tiny little transistors are created on the wafer, which are then all individually electrically contacted in the following steps. The final steps consist of electrically connecting the transistors to each other, resulting in a complete electrical circuit [4]:

Each individual layer of the approximately 80 layers in the die requires highly specialized processes, which can be roughly summarized as:

• Applying masks: Photolithography, photoresist coating (applying photoresist)
• Apply material: Chemical Vapor Deposition (CVD), Physical Vapor Deposition (PVD), Atomic Layer Deposition
• Remove material: Plasma annealing, Wet annealing, Chemical Mechanical Planarization (CMP)
• Modify material: Ion Implanting, Annealing
• Material cleaning
• Inspecting the layers: Optical, Microscopical, Focused Ion Beam, Defect Inspection

Apply masks

Ultimately, a mask can be thought of as an enlarged copy of the structure of a special layer in the die. These so-called photomasks are then scanned using so-called scanners or steppers "copied" in reduced size onto the wafer. The best-known manufacturer of such lithography systems is ASML
$ASML (-1,59%). It is currently the only producer of lithography systems that make it possible to produce structures smaller than 10 nanometers on the wafer. In today's powerful and modern chips, such as those found in smartphones, AI chips and processors, the smallest structures are around 3 nanometers in size. Other manufacturers of lithography systems for larger structures (10nm and larger) are Canon Electronics
$7739 or Nikon $7731 (+1,29%) .

The photomasks - i.e. the enlarged "copies" of the structures - are produced by companies such as Toppan $7911 (-7,06%) , Dai Nippon Printing
$7912 (-1,09%) or Hoya $7741 (-3,54%) manufactured. Systems for cleaning the photomasks or for applying the photoresist are produced, for example, by Suss Microtec
$SMHN (+0,76%) for example.

Apply/remove/modify/clean material

As can be seen in the overview above, there are a variety of methods and processes for modifying the material of a particular layer. As a result, there is a lot of different equipment that can handle a process very well with incredible specialization. The best-known and most successful equipment manufacturers include Applied Materials $AMAT (+0,53%), LAM Research
$LRCX (+0,38%), Tokyo Electron (TEL)
$8035, (-0,76%)
Suss Mictrotec, Entegris
$ENTG (-0,55%) and Axcelis $ACLS (-0,8%).

The material - for example, highly specialized chemicals - is of course also required for production. Companies such as Linde
$LIN (+0,54%), Air Liquide
$AI (-0,22%), Air Products
$APD (+0,04%) and Nippon Sanso
$4091 (+0,26%) are major manufacturers of process gases such as nitrogen, hydrogen and argon.

Inspect

As mentioned, every single layer in the manufacturing process of a die must be perfect in order to obtain a functional die at the end. Any small deviation or foreign particles can impair the functionality of the die. As the function of the die can only be checked precisely on the finished die, it is advantageous to inspect the individual layers for defects and deviations during production. Special machines are required for this, which must be able to do different things depending on the layer. Manufacturers of such machines include KLA
$KLAC (+0,46%) or Onto Innovation
$ONTO (-0,62%).

The following applies to almost all of the companies mentioned in this section: the companies are highly specialized and have quasi-monopolies on the machines for certain process steps. quasi-monopolies. Suitable equipment therefore usually costs several million dollars. In addition, some of the systems are so complex that they can only be serviced by the manufacturer's own service staff, which results in recurring service revenues for every machine sold. As a rule, each machine requires several highly specialized engineers to ensure long-term stable operation.

5) FROM THE DIE TO THE FINISHED CHIP

Once the wafer has been processed, the dies on the wafer are checked for functionality. There is highly specialized equipment for this, so-called probers. These probers test each individual chip several times, if necessary, to check the functionality implemented in the design. Manufacturers of such probers include Teradyne $TER (-0,02%), Keysight Technologies
$KEYS (+1,5%), Onto Innovation or Tokyo Electron. These probers have to control each individual die, some of which are only a few square millimetres in size, and contact the corresponding much smaller test structures with tiny needles. The testing process is sometimes outsourced to entire companies that offer die testing as a complete package. One example of such providers is Amkor Technology
$AMKR (-0,58%).

The processed and tested wafer is now sawn to obtain individual dies. The dies that are found to be good are then integrated into a protective housing in the backend. The dies that have not passed the functionality test are either sorted out or (depending on the error pattern) processed as a variant with reduced functionality similar to those with full functionality. After a final functional test in the package, the chip is ready for use.

6) FOUNDRIES, FABLESS & SOFTWARE

Now that we have an overview of the complex process of manufacturing a chip, let's zoom out a little further to understand which companies perform which tasks in the semiconductor industry.

It's funny that not once in the manufacturing process has the name Nvidia $NVDA (+2,01%) or Apple $AAPL (+1,34%) has been mentioned? Yet they have the most advanced chips, don't they?

The pure production of the chips is done by other companies - so-called foundries. Companies like Nvidia and even AMD $AMD (-0,35%) are in fact fablessThis means that they do not have their own production facilities but only supply the chip design and let the foundries manufacture the actual chip according to their design.

The design of a chip is like the blueprint for production - the foundries then take over the recipe creation and the actual production. There is special software for designing chips. Companies known for this software include Cadance Design
$CDNS (+0,16%) and Synopsys $SNPS (-1,06%). But also the industrial giant Siemens
$SIE (-0,29%) now also supplies software for designing integrated circuits. Synopsys also offers other software for data analysis within foundry production.

Speaking of foundries; the best known foundry is probably TSMC
$TSM, (+0,43%) which is the global market leader in foundries. TSMC designs itself no chips itself and specializes exclusively in the production of the most advanced generations of chips. Another major player that also masters the most advanced structure sizes is Samsung $005930. In contrast to TSMC manufactures Samsung also produces its own designs. Other large foundries are Global Foundries
$GFS, (+0,33%) which was originally a spin-off from AMD and the Taiwanese company United Micro Electronics
$UMC. (-0,79%)

The best-known fabless companies - i.e. companies without their own chip production - are Nvidia, Apple, AMD, ARM Holdings
$ARM, (-2,66%)
Broadcom $AVGO (+0,31%), MediaTek $2454 and Qualcomm $QCOM. (+2,48%) In the meantime Alphabet $GOOGL, (+0,94%)
Microsoft $MSFT, (-1,05%)
Amazon $AMZN (+0,26%) and Meta $META (-2,23%) have designed their own chips for certain functionalities and then have them manufactured in foundries.

In addition to foundries and fabless companies, there are of course also hybrid models, i.e. companies that take on both production and design. The best-known examples of this are, of course, companies such as Intel
$INTC (+1,8%) and Samsung. There is also a whole range of so-called Integrated Device Manufacturer (IDM)which for the most part only manufacture their own designed chips and do not accept customer orders for production. Well-known companies such as Texas Instruments
$TXN, (-0,01%)
SK Hynix
$000660,
STMicroelectronics
$STMPA, (-0,02%)
NXP Semiconductors
$NXPI, (+0,87%)
Infineon $IFX (-1,35%) and Renesas $6723 (+2,12%) are among the IDMs.

FINAL WORD

The aim of this article was to provide an overview of the complexity of the semiconductor industry. I do not, of course no claim to be complete, as there are of course many other companies that are part of this value chain. As Getquin thrives on active exchange, I'll give you some food for thought to discuss in the comments below the article:

• feel free to link any other companies in the comments if you think I've forgotten any relevant ones
• what was the most surprising new information for you from the article?
• which companies from the article have you never heard of?
• before reading the article, did you know approximately how a modern chip is produced and what steps are necessary for this?

In general, I can recommend the 20-minute YouTube video at [4] to any interested reader. It provides an excellent animated overview of the manufacturing process of modern chips.

Stay tuned,

Yours Nico Uhlig (aka RealMichaelScott)

SOURCES:

[1] Wikipedia: https://de.wikipedia.org/wiki/Wafer

[2] https://www.halbleiter.org/waferherstellung/einkristall/

[3] https://solarmuseum.org/wp-content/uploads/2019/05/solarmuseum_org-07917.jpg

[4] Branch Education on YouTube: "How are Microchips Made?" https://youtu.be/dX9CGRZwD-w?si=xeV0TYgJ2iwNOKyO

Apple's 5G modem is said to be worse than Qualcomm's.

It remains exciting with the eternal rivals $AAPL (+1,34%) and $QCOM (+2,48%)

Perhaps Qualcom should launch its own cell phone and notebook on the market. What is your opinion on this?

Also $1810 (+2,98%) Xiaomi is focusing more and more on its own products, is Qualcomm still interesting for you?

Apple is to replace Qualcomm's 5G modems with its own from 2025. According to a report, Apple's modem will be slower, among other things.

According to a media report, Apple's self-developed 5G modem with the internal name Sinope will be less powerful in many functions than current top modems from Qualcomm. As the usually well-informed journalist Mark Gurman from Bloomberg reports, Sinope is said to achieve a downlink of 4 Gbps in laboratory tests.

For comparison: Qualcomm's X80 modem, which is installed in the new Snapdragon 8 Elite SoC, achieves a maximum downlink value of 10 Gbps.

Unlike Qualcomm's X80 modem, Sinope will also not support mmWave, but only the Sub-6 standard. This could lead to problems, especially in the USA, one of Apple's most important markets, as mmWave is often used in large cities there.

According to Gurman, Sinope will only use 4-carrier aggregation, as opposed to the 6- or 8-carrier aggregation used by Qualcomm. The higher the carrier aggregation, the higher the network capacity and correspondingly the higher the speed for users. In return, Apple's modem should achieve better radiation values and facilitate satellite communication. Dual SIM standby is also to be made possible.

Apple's modem development is said to be plagued by problems

Apple has been trying for years to develop its own 5G modem in order to become less dependent on Qualcomm. With its own SoCs, Apple has been setting standards in the smartphone market for years (and now also in the PC market), but the company is still dependent on its long-standing partner Qualcomm for modems.

There are said to have been numerous problems in the development of the modem. Among other things, the prototypes developed so far are said to have been too slow or too inefficient.

However, Apple does not appear to be deviating from its plan to install its own modem in its devices. The first version is to appear in the iPhone SE 4, a smartphone that is not one of the top iPhones.

https://www.golem.de/news/sinope-apples-5g-modem-soll-schlechter-sein-als-qualcomms-2412-191515.html

$INTC (+1,8%) There is no end to Intel's misery, because shortly after CEO Pat Gelsinger left the company, reports point to an enormously high defect rate in the Intel 18A process, in which Panther Lake will actually be manufactured next year.

Intel wanted to invest a total of more than 100 billion US dollars in advanced chip factories in order to seriously compete with TSMC $2330 serious competition with TSMC and to produce chips for giants such as $NVDA (+2,01%) Apple $AAPL (+1,34%) and Qualcomm $QCOM (+2,48%) in the future. These plans have already come to a standstill due to the company's financial difficulties, as the group has already put its plans for a chip factory in Magdeburg on hold. Mass production using the Intel 18A process (1.8 nm) was nevertheless due to start at the beginning of 2025, and the first processors manufactured using this process are said to have been ready for production as early as August.

Finding customers could prove difficult, however, as Reuters reports that a test run with Broadcom $AVGO (+0,31%) failed. Broadcom engineers are said to have examined an initial wafer manufactured using the Intel 18A process and concluded that the process was not yet ready for mass production. This is mainly due to the enormously high defect rate - according to information from Chosun the production yield is currently less than 10 percent, which means that more than 9 out of 10 chips produced have defects. This not only reduces production capacity by the same factor, a high defect rate also has a huge impact on costs.

Officially, Intel maintains that Intel 18A is ready for production and achieves a "good" yield; mass production is scheduled to start next year as planned. As Intel currently has most of its own products, such as Lunar Lake, manufactured by TSMC, it is unclear whether the company will be able to find enough customers to fill all its factories. Not least because it takes a lot of capital to port a chip from production at TSMC to another process at Intel and, according to Reuters, it takes around three months before the first wafer can roll off the assembly line - too long to risk coming to the conclusion, like Broadcom, that the process is not (yet) suitable for its own purposes.

Sources Reuters, Notebookcheck

Indians launch e-car at a bargain price: with a huge battery and a long range. $MHID (-4,09%)

The fact that a new e-SUV costs less than 22,000 euros, but scores with a WLTP range of more than 500 kilometers and a lot of comfort, is likely to cause disbelief in Europe. In India, car manufacturer Mahindra is making this dream come true with the BE 6e.

Two 12.3-inch screens, augmented reality head-up display, dual-zone automatic air conditioning, Harman Kardon sound system,

The new BE 6e e-SUV, which Indian car manufacturer Mahindra plans to launch at the beginning of 2025, has nothing to hide from its international competitors. Depending on the engine, the car delivers between 228 and 281 hp. The WLTP range is up to 535 kilometers. The batteries can be charged from 20 to 80 percent in 20 minutes at a fast charger.

With all these performance data, experts immediately assume that this car cannot be a bargain. But that is a mistake. In India, the Mahindra BE 6e will be available for the equivalent of less than 22,000 euros. At the same time, comfort is not neglected in this car, reports autocarindia.com. Interested parties can get a first impression of the electric car in a video on YouTube.

E-SUV with all the bells and whistles

The interior features two 12.3-inch screens, among other things. Software called MAIA is installed in the on-board computer, which offers access to 30 different apps. The system is powered by a Qualcomm Snapdragon 8295 processor - according to Mahindra, the fastest chipset in this class of car. $QCOM (+2,48%)

Even though the display naturally provides information about the most important driving data, the driver does not necessarily have to take their eyes off the road. They can also use the augmented reality head-up display, which shows the information on the windshield, so to speak. The dual-zone automatic air conditioning takes account of the high Indian temperatures. The Harman Kardon sound system with 16 Dolby Atmos speakers ensures the best sound while driving. The driver's seat is of course electrically adjustable. 5G connectivity with integrated Wi-Fi is also on board - after all, India is at the forefront when it comes to the internet.

Two battery packs on offer

The car with a length of 4.3 meters, a width of 1.9 meters and a height of 1.6 meters is available with two battery packs. The 59 kWh battery feeds an electric motor with 228 hp. The 79 kWh battery is responsible for the more powerful motor with 281 hp. The torque of both motors is 380 Nm. The more powerful of the two motors accelerates the car from 0 to 100 km/h in 6.7 seconds. With the BE 6e, Mahindra shows what can be achieved for less than 22,000 euros. If the car ever comes to Europe, it will still be a real buy recommendation even with a hefty price premium.

https://efahrer.chip.de/news/inder-bringen-e-auto-zum-spottpreis-mit-riesigem-akku-und-fetter-reichweite_1024109

$QCOM (+2,48%)

Was there any bad news? After the good earnings there was +10% and now -15% again.

Really volatile here 😅

Qualcomm
$QCOM (+2,48%) has announced that within the next five years it will generate sales of 12 billion US dollars in chips for cars and PCs over the next five years. The company emphasizes that the increasing demand for advanced semiconductor solutions for connected vehicles, driver assistance systems and high-performance PC chips forms the basis for this growth forecast. The automotive sector alone is expected to contribute USD 9 billion to sales, while the remaining USD 3 billion will come from the PC business.

The forecast underlines Qualcomm's strategy of diversifying away from its dependence on the smartphone market and tapping into new growth areas. The company is increasingly investing in technologies such as AI-powered vehicle systems and Arm-based PC chips to remain a leader in these segments.

Personal opinion:

I also hold Qualcomm myself and am a firm believer in the company and its management.

You can find more information in the article on MarketScreener.

The news is based on what I personally consider to be reputable sources. However, I do not guarantee their accuracy. No advice.