Electronic Components & Semiconductor Manufacture
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Industry Overview
The US electronic components and semiconductor manufacturing industry consists of about 5,000 companies with combined annual revenue of about $150 billion. Large companies include Intel, Texas Instruments, Micron Technology, and Advanced Micro Devices (AMD). The industry is highly concentrated: the 50 largest companies generate about 70 percent of revenue.
Competitive Landscape
The industry depends highly on demand from the computer industry and makers of telecommunications products such as cell phones, which can vary sharply from year to year. Companies can be successful producing standard parts at low cost or by producing highly specialized components. Small companies can compete effectively with large ones by producing specialized products or developing new applications. Technological expertise is extremely important. The industry is highly automated: average annual revenue per employee is about $300,000.
Products, Operations & Technology
Major products include semiconductors (computer chips); printed circuit boards; and various components like electron tubes and electronic connectors. Semiconductors account for almost 60 percent of industry revenue, circuit boards for 25 percent.
The manufacture of computer chips starts with long cylinders of pure silicon (or other semi-conducting materials, such as gallium arsenide) cut into thin "wafers." In photolithography, various layers of conducting and insulating materials are deposited on a wafer and etched away after exposure to light or other beams in patterns that trace the various elements of the integrated circuits. Hundreds of chips can be produced on one wafer. The thickness of the integrated circuit lines determines how many elements can be packed into one chip. After fabrication, chips are extensively tested to weed out those with defects. The yield is the percentage of chips that pass the testing process.
Microprocessors, memory, and image sensors are the three main types of computer chips. Major memory chips are dynamic random access memory (DRAM) and flash memory, which doesn't lose information if power is turned off. Image sensors currently used in digital cameras are charge-coupled devices (CCD) or complementary metal-oxide semiconductors (CMOS). Chipsets are groups of chips designed to work together for a particular application.
Even big chip makers specialize: Intel is the leading manufacturer of microprocessors, the brains of computers, while Texas Instruments concentrates on chips that translate analog signals, such as light, touch, and voice, into digital signals, and chips for digital signal processing. Micron is a large producer of memory chips. Most chip design companies are fabless, meaning they don't manufacture their own products because of the huge cost associated with advanced facilities. Fabless companies instead farm the process out to contract manufacturers (chip-making "foundries"). A chip manufacturing facility can cost more than $1 billion.
Computer chips are valuable because of their technological capabilities; cost is often a secondary consideration. The production of circuit boards and other electronic components and accessories, on the other hand, focuses on cost reduction. To a large extent, circuit boards and other electronic components and accessories are commodity items, whose technical features can easily be duplicated by other manufacturers.
