Project: Semiconductor Manufacturing Costs

Stakeholders have costs associated with running their business and internal and externalities to contend with.One of those is stakeholders in the manufacturing, for example: suppliers, vendors, governments, and consumers. Operations consist of procurement, assembly, test, quality assurance and manufacturing. Foundries (aka integrated device manufacturers (IDMs)) simply produce the semiconductors and do not perform any designing services. (Miller, 2018). These stakeholder variables and other variables affect the cost of manufacturing chips in their part of the supply chain. The semiconductor processing equipment industry creates the tools for semiconductor product manufacturers, who sell to consumers.Semiconductors (also known as chips) are built on silicon wafers - Lithography equipment is used to transfer the circuit designs. Layer of silicon dioxide on a wafer (etching, whereby additional materials are removed to create a pattern) (Miller, 2018). In order for chip creators to make semiconductors they need tools. Semiconductor processing equipment costs and technology have a large impact sales and revenue. For example switching from an 8 inch wafer to a 12 inch wafer can create switching costs in the 100 millions. Semiconductors are used in more places than ever before. Industry demand creates the need for innovation for automation in area like appliances, telecommunications, cars, and computers. Thus, the demand is dependent on trends and innovation in the electronics manufacturing sector. (i.e. growth in demand for certain consumer electronics, such as tablets and smartphones). (Miller, 2018). Demand is created through users wants and expectations of new gadgets and tools to make their life better. In the industry and market competitive pressures to manufacture increasingly complex machinery, improve yields per wafer and reduce manufacturing costs. (Miller, 2018). Moore’s law of transistors per circuit doubling every year has held true for generations. This requires purchase of new manufacturing equipment often. Costs have been driven by high volume. To sell in high volume creates a barrier to entry. The market has expected lower price and faster (Uhl, 2018) for quite some time because of high volume and technology improvements consistently being made with Moore’s law. Choosing a partner is important to success of a corporation. Once a manufacturer chooses a particular vendor’s capital equipment, it will generally rely upon that equipment for the useful life (Miller, 2018). So in order to maintain products and supply choosing the right partner is essential. Patent and trademark protection are very important to competitive success. (Miller, 2018). So being able to trust a partner is also crucial. The alternative is outsourcing. Outsourcing reduces cost and improves efficiency but there are legal, economic and political risks associated with dealing in foreign countries. (Miller, 2018). So success is dependent on many things