The four stages
Design
Chip designers write a description of the circuit in a hardware description language, simulate it, and turn it into a physical layout of billions of transistors. They use specialised electronic design automation (EDA) software and often license ready-made building blocks, called IP cores, from other companies. A common example is a processor core licensed from Arm.
Fabrication
Fabrication happens in a fab, a factory with extremely clean air. Circuits are built on round silicon wafers through hundreds of steps: depositing thin films, patterning them with light through a photomask (lithography), etching away material and adding impurities to change how the silicon conducts. The most advanced fabs use extreme ultraviolet (EUV) lithography machines, which come from a very small number of suppliers.
A single wafer holds many chips. The share that work correctly is called the yield. Improving yield on a new process is one of the hardest and most valuable things a fab does.
Testing and packaging
After fabrication, wafers are tested, cut into individual dies and packaged. The package protects the die and connects it to the circuit board. Advanced packaging now places several dies side by side or stacked, linked by very fine connections. That lets a company combine a processor with high-bandwidth memory in one package, and it has become a bottleneck of its own. Some packaging is done by foundries; much is done by specialist assembly and test companies.
Fabless, foundry and IDM
| Model | Designs chips | Manufactures chips | Examples |
|---|---|---|---|
| Fabless | Yes | No, uses a foundry | NVIDIA, and Apple for its own chips |
| Pure-play foundry | No (builds customers' designs) | Yes | TSMC |
| Integrated device manufacturer (IDM) | Yes | Yes, mostly in its own fabs | Intel, Samsung Electronics |
The lines blur. Some IDMs also offer foundry services to outside customers, and some also use outside foundries for part of their range.
Samsung Electronics shows how one company can sit in several boxes at once: it designs and builds its own memory chips, makes chips for outside customers as a foundry, and buys some components from rivals for its phones.
Why this matters when you read the news
- A shortage of fab capacity or packaging can hold back chip designers who have plenty of demand.
- New fabs take years to build and equip, so supply responds slowly.
- Export rules can target design software, manufacturing equipment or finished chips separately.
Terms used here are defined in the glossary.