$3,000,000,000,000,000. This number is no typographical error. It is $3 trillion and represents the kind of investment that the global chip industry says it needs by 2030.Companies are racing to invest bucket loads of cash to build more high-performance chips. Intel this week announced an $85 billion investment in new chip-making plants in Europe, on top of the facilities it already has in Ireland. The Biden administration in April announced $50 billion in semiconductor plants in America but this bill has not yet passed the House of Representatives and awaits Biden’s signature.
The Wall Street Journal reported that Taiwan Semiconductor Manufacturing Co (TSM), the world’s largest contract chipmaker, would spend a record $100 billion over the next three years to increase production capacity. South Korean rival Samsung plans to invest $205 billion over the next three years, in part to pursue leadership in chip manufacturing. India’s gigantic and venerable IT industry is a dwarf by comparison — with annual spending of only about $85 billion in 2020 — and this includes every Nasscom player.
The modern Central Processing Unit (CPU) that powers all our devices is made up of tiny transistors that switch electric signals from 0 to 1 and vice versa. During rapid switching and amplification, transistors generate heat which negatively impacts the device’s performance. The goal of the industry has been to miniaturise the transistor as much as possible to limit heat generation.
Today transistors of 10-nanometer lengths are the standard. (A nanometer is one-billionth of a meter). TSM’s technology, which Apple uses for its A-12 bionic chip, allows it to make 7-nanometer transistors. And IBM in May revealed that it has designed a 2-nanometer transistor. No matter the length, millions of these transistors are etched onto a round silicon wafer using a lithography machine in a fab. Lasers then cut up the wafers into the CPUs that power our devices. Eun-Young Jeong, a Journal reporter says that the majority of the chip-making capacity is located in East Asian countries — Taiwan (63 per cent), Korea (18 per cent), China (6 per cent), with other facilities scattered in Singapore and Europe.
Increased demand
On a microeconomic scale, Tan Yew Kong, the VP and General Manager of Global Foundries Fab 7, the Singapore plant of the giant American contract chip manufacturer, tells Jeong that it takes up to $15 billion to set up and operate a high-tech fab. A lithography machine, the most important piece of equipment in a fab that adds layers of complex circuitry to make these nanometer chips, alone can cost nearly $100 million.
So what is driving the frantic race to build up supply? It is Economics 101 again. The demand for chips is growing at a 12-15 per cent clip each year. Every imaginable device that we touch today — smartphones, TV remotes, web cameras, computers, kitchen appliances, cars, even chip-based credit cards — requires semiconductor chips. If geopolitical tensions between China and Taiwan escalate, and just a fraction of the 70 per cent worldwide chip production in these two countries suffers, it can create havoc in supply chains everywhere. Plant shutdowns due to rising Covid cases, including because of the Delta variant, are also not helping.
So acute is the chip shortage that General Motors recently announced a two-week shutdown of auto plants. It is hard to ship cars when chips are essential ingredients of a modern automobile. Toyota said it would cut production by nearly 40 per cent globally. As I noted in a recent article, the prices of everyday electronics, including mundane kitchen appliances, have shot through the roof, by as much as 50 per cent.
New opportunities
Adding to the macroeconomic conditions are technological complexities in building and successfully producing these chips in large numbers. It takes several years to build a state-of-the-art fabrication facility. Fabs facilities are up to 100 times cleaner than a surgery room in a hospital. Once built and operational, it takes 12-18 months to get the production line of a high-performance wafer going.
The value chain of the chip-making industry provides numerous opportunities for students considering a career other than traditional computer science that most Indian students seek. Armed with the right degrees and on-the-job training, graduates can play crucial roles in either developing and producing the chips, or in integrating standard off-the-shelf nanometer chips into devices. Regardless of the industry, engineers have to test that the devices work as designed, and when approved, oversee procurement, assembly processes, and the quality control of the manufactured devices.
Chip engineers provide technical support to field engineers who install devices at customer locations. Similar opportunities exist at the chip makers or fabs themselves. Students with other degrees, especially MBAs, have opportunities in support roles, such as Finance, HR, marketing, and legal. As consumers demand more devices that are faster and smaller, the nanometer chip industry is virtually recession-proof. A career in Electronics and Communications Engineering is increasingly becoming attractive.