Semiconductors and other things.
I have been wanting to write about this topic for some months now. The topic is semiconductors, their market, supply chain issues and applications. I think semiconductors are interesting because I do not think about my chemistry or physics class when I hear the word semiconductor. I think of this abstract product that almost seems closed off to the average person, you know? In reality, we are talking about metals that have certain properties that are valuable to companies that produce valuable products.
Semiconductors are made from pure elements and what companies will do is add other impurities to help cultivate the desired conductivity (Semiconductors Industry Association, 2021). Our iPhones and televisions have these semiconductors in them. Based on my research, it looks like we would not have much of our technologies without semiconductors. What have we defined so far? This commentary has defined what a semiconductor is and that there is a market for them.
“Since the late 1990s, the U.S. semiconductor industry has been the global sales market share leader with almost 50 percent annual global market share.” (SIA State of the Industry, 2020). The Semiconductors Industry Association put out this report titled the SIA State of the Industry. It states that Korea has the second largest market share with 19% followed by Japan and Europe with 10% each (SIA State of the Industry, 2020). This means to me that even though Libra Technologies can operate in the U.S. and start to grow in the semiconductor space; it also means that with the strength of the U.S. dollar Libra Tech can operate outside of the U.S.. To me this is significant from a business perspective because it widens the opportunities on how Libra Tech can operate.
Before we dive deeper in the market and supply chain of semiconductors, I find it prudent to develop a growing comprehension of the chemistry of the semiconductors. “Semiconductor devices effectively act as the brains of the mechanisms they control and coordinate. A semiconductor essentially is a material that conducts electricity at room temperatures better than an insulator. When treated or "doped," a semiconductor, such as silicon, can be made to act as an insulator under some conditions and a conductor under others. Besides managing communication, financial, and information systems, semiconductors are used in planes, tractors, toys, medical equipment, and other goods.” (Semiconductors: Encyclopedia of Global Industries, 2021). So, what companies will do is literally play chemist with examples like silicon, to get a desired conductivity and then sell these materials to Apple or a toy company. This develops our understanding of the supply chain too. Whereas you have company A developing these raw materials and then selling them to company B. As an entrepreneur that is profound information.
It looks like to me there is substantial area of opportunity for entrepreneurs in the semiconductor space. You have plenty of companies that want these products in their products. Yet, do these companies have the desire to invest capital into certain areas along the supply chain? “Citing data from the June 2020 World Semiconductor Trade Statistics Semiconductor Market Forecast, the organization indicated that sales were expected to reach $426.0 billion in 2020. This reflected disruption caused by the coronavirus (COVID-19) outbreak and its impact on global markets and supply chains. Sales were expected to rise at a stronger pace in 2021, reaching $452.0 billion.” (Semiconductors: Encyclopedia of Global Industries, 2021). $452 BILLION dollars sounds to me like a space that has a lot to offer in terms of opportunity.
Naturally, the next question to ask is what about the barriers of entry for this space. “High entry barriers skewed the competitive environment and favored established networking semiconductor vendors to control profit margins and influence the product roadmaps of the end users. However, during the last couple of years, several startups, backed by prominent venture funding, have entered the market with differentiated products focused on functionalities beyond mere bandwidth capabilities” (Verma et al., 2020). Okay so there are high barriers to entry but are there high barriers in every country? Or just the U.S.?
Now I would like to introduce a brief case study just on a major player in the semiconductor and microprocessor space, Intel. But first let us define what a microprocessor is. “When looked at according to functionality, the four main categories of semiconductors are memory chips, microprocessors, standard chips and complex systems-on-a-chip (SoCs).” (Investopedia, 2020). A microprocessor is a semiconductor but not all semiconductors are microprocessors. “Several of Intel’s major customers have started investing in the development of their own processors as an alternative to x86 CPUs. This includes Apple, which has announced it will transition its x86-based MacBooks and to its own internally designed Arm-based processors.” (Priestley et al., 2021). This goes back to our supply chain conversation with company A and company B. Here we have Apple deciding that it is better for business to start making their own microprocessors instead of buying them from Intel, for example. I think it is imperative for a company to mitigate cost while improving revenue at a steady place at every single place in the supply chain. Priestley et al. provides us this recent real-life example from the big tech giant Apple.
References
2021. What is a semiconductor? https://www.semiconductors.org/semiconductors-101/what-is-a-semiconductor/
2020. State of the U.S. Semiconductor Industry. https://www.semiconductors.org/wp-content/uploads/2020/06/2020-SIA-State-of-the-Industry-Report.pdf
"Semiconductors." Encyclopedia of Global Industries. Farmington Hills, MI: Gale, 2021. Business Insights: Global. Web. 18 May 2021. http://bi.gale.com.ezproxy.snhu.edu/global/article/GALE%7CFODZFH973617165/0a0b23a3daadd78ee99082f9e8f300aa?u=nhc_main
Verma, Teng, Ray. 2020. Cool Vendors in Networking Semiconductors. Retrieved on 5/19/2021. https://www.gartner.com/document/3984061?ref=solrAll&refval=287800847
2021. The Main Types of Chips Produced by Semiconductor Companies. https://www.investopedia.com/ask/answers/042115/what-are-main-types-chips-produced-semiconductor-companies.asp
Priestley, Mahon, Davenport, Kleynhans, Dekate, Wang. Vendor Rating: Intel. Retrieved on 5/19/2021. https://www.gartner.com/document/3999432?ref=solrAll&refval=287922747