By Paolo Gatto

Chips, also called Integrated Circuits, are at the core of every electronic device we use. From cars, to smartphones and satellites, nearly every device we use bears a microprocessor.

“A microchip, also called a chip, a computer chip, an integrated circuit or IC is a set of electronic circuits on a small flat piece of silicon. On the chip, transistors act as miniature electrical switches that can turn a current on or off. The pattern of tiny switches is created on the silicon wafer by adding and removing materials to form a multilayered latticework of interconnected shapes.” (ASML, 2024)

However, it’s too easy to stop here. In 2024, the Semiconductor Industry reached $627 billion dollars in sale (+19% YoY), and it did by selling countless different chips, to any industry you can think of. Fortunately, there are four types of chips that, alone, make the market: Logic, Memory, ICs, and DAO chips (Deloitte, 2025).

2022 – gLOBAL MARKET SCENARIO

This image, taken by the SIA (Semiconductor Industry Association) 2024 Factbook, shows the Distribution of Worldwide Semiconductors sales by segment.

Logic, Memory and DAOs (Discrete, Analog, and Other) take over 90% of the market, with Logic as an absolute leader.

Logic Chips dominate the market due to their core function: being the “brains” of electronic devices. They process information, perform calculation, and thus are the hearth of many items used in our everyday life. They are used for complex (mathematical) calculations. Microprocessors (which serve to manage the data processing logic of an entire device-a pc for example) can be divided in:

CPUs

Central Processing Units (CPUs) that execute instructions for computers, mobile devices, and embedded systems (a smartphone for instance may have between 2-4 CPUs).

GPUs

GPUs are specialized processors designed to handle parallel computations, primarily for rendering graphics but increasingly used in AI, finance, and scientific simulations.

Companies such as Intel with its Intel Core i7/i9 or Qualcomm with its Snapdragon series are battling to gain the highest market share in this multi-billion dollar market.

Memory Chips store data of all kinds and sizes. Memory chips work closely with Logic Chips as the process must access data in seconds. The two main groups on which Memory Chips can be divided are:

ROM

Stores firmware or permanent instructions. (store data permanently)

Random Access Memory (RAM)

It’s used for short-term memory storage. DRAM (Dynamic Random Access Memory) is a type of volatile memory used primarily as system RAM in computers, gaming consoles, and embedded systems. It stores data temporarily and requires constant refreshing to maintain the stored information. It can be used in PC, AI (: GDDR6/HBM in GPUs for high-speed rendering) and Data Centers (HBM for massive parallel computing workloads.)

DAO chips are essential for interfacing between digital and analog signals. They are used for ONE SINGLE TASK, not like integrated circuits (like GPUs). They are divided in:

Analog-to-Digital Converters (ADC)

Convert analog signals (e.g., sound, temperature) into digital data. Used in sensors, medical devices, and audio processing.

Digital-to-Analog Converters (DAC)

Convert digital data into analog signals, crucial for audio output and signal modulation.

The growth potential in all three industries is considerable. The CAGR for the industry will be an average of 14.9% in the next 8 years (Fortune, 2024), and each segment of the industry has its own growth prospects. The DAO’s market growth, for instance, will inevitably grow thanks to the space economy (and its need for advanced sensories) or growth in consumer electronics in Emerging Markets. However, this is not the Prospect Section, so you will need to hang for a moment.

The next section will answer a few questions regarding the Structure of the Market and the Key Players that dominate it.

The semiconductor supply chain involves a complex network of companies, organizations, and individuals involved in a wide variety of functions (Investopedia, 2024). Thankfully, we can divide the supply chain structure in four main segments:

Design And Development

This is the first step in the production process. Here, the conceptual, creative, and functional aspects of the chip are finely created (from its architecture to the necessary software). The key components are: circuit design, logic design, and layout. The design process is complex and often iterative, requiring collaboration between hardware and software teams. As chips become more advanced (e.g., adding more transistors), the design process must account for issues like heat dissipation, power consumption, and signal integrity (EW, 2024).

wAFER fABRICATION

Once the design has been finalized, the wafer has to be created. Here, he actual semiconductor material (silicon, gallium nitride, and silicon carbide) is processed into the desired pattern. Below the image of a wafer:

To produce a wafer, however, the complexity is quite elevated. The process starts with Photolitography (a pattern is imprinted on the chip using light and mask), then Etching and Doping (Layers are added, and unwanted material is etched away to create the circuits. Dopants are used to alter the semiconductor’s properties, allowing the creation of transistors) and then Deposition (Thin layers of various materials (e.g., metals, insulators) are deposited to build the chip’s components) (ASML, 2024).

Assembly and Testing

After wafer fabrication, the chips need to be assembled and tested. This involves cutting the wafer into individual chips (often called die), attaching them to packaging, and testing them for functionality and quality. Then the wafer goes through two specific processes before testing: Dicing (The wafer is sliced into individual chips, and each chip is then bonded to a package) and Packaging (The die is enclosed in a protective package that allows it to be connected to a device’s circuit board).

For the Testing part, the individual chips are rigorously tested for any type of scenario they might encounter (functional tests, stress tests, and tests for defects). This process is critical to understand if any of the chips is malfunctioning, and thus it cannot be sold (TS, 2024).

Distribution

The final phase in the semiconductor process is the distribution of the finished chips. This involves shipping the packaged chips (the packaging could be done by the foundry or it can be outsourced) to original equipment manufacturers (OEMs) or other customers who integrate the chips into their products (e.g., smartphones, computers, automotive systems).

One of the key parts of the overall supply chain is the time at delivery. Ensuring timely delivery while maintaining product integrity (avoiding damage during transport or storage) is crucial.

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Each segment is fundamental in the creation of the final product. Each day millions of chips are shipped and sold in every corner of the planet, but which are the industry segments that lead the market?

Computing

This segment includes various types of semiconductors, from CPUs and GPUs to memory chips (RAMs) and other components essential for computing systems.

The segment has been growing exponentially in the past 10 years. Bloomberg Intelligence data (Bloomberg, 2024) shows that the segment was worth $109.86 billion in 2014, while in 2024, the segment was worth nearly $240.17 billion. The industry’s segment has grown with a CAGR of 8.13% in the past ten years (2014 – 2024).

In 2024, the Computing segment has continued its growth pattern pushed by several growth drivers:

• Artificial Intelligence (AI): AI is driving the demand for specialized chips like GPUs, TPUs, and FPGAs that power machine learning and data processing.

• Cloud Computing and Data Centers: The exponential growth of cloud infrastructure and data centers requires powerful processors, memory, and storage solutions to manage big data, high-performance computing (HPC), and virtualized environments.

• Consumer and Gaming Electronics: The growing gaming industry and advancements in high-performance computing systems (like gaming PCs and servers) are fueling demand for more powerful CPUs, GPUs, and other computing components.

In the computing segment, the three biggest companies are:

• Apple: the biggest company in the world (nearly $2.7 trillion of Market Cap, as of today), it operates in Consumer electronics (iPhones, Macs, iPads), custom silicon (M1, M2 chips), software (macOS, iOS), and services (App Store, iCloud).

• Microsoft: around $2.4 trillion of Market Cap, Microsoft operates in Software (Windows, Office Suite), cloud computing (Azure), AI & Quantum Computing (Majorana 1), Gaming (Xbox), and enterprise solutions.

• Nvidia: around $1 trillion of Market Cap, it operates in Graphics processing units (GPUs), AI hardware, data centers, automotive computing.

Wireless communication

This specific industry segment focuses on the development and manufacturing of semiconductor components used in wireless technologies. These technologies enable communication over the air, without the need for physical cables.

As the Computing segment, this part of the industry has seen a steady growth in the past 10 year, with a CAGR of 6.69% (Value in 2024: $174.9 billions – Value in 2014: $9.6 billions).

The biggest driver in the sector is the growth of smartphones and devices which are higly reliant on wireless technology. However, to be more precise, below you will find the three biggest drivers per device application (Bloomberg, 2024)

• 5G devices: From $0M before 2019 to $135,013.19M in 2024, showing explosive adoption. They are the biggest device application of Wireless communication technologies. These are a few applications: High-speed connectivity, IoT integration, smart cities, autonomous vehicles, and enhanced mobile broadband.

• WLAN Access Points: Grew steadily from $755.43M in 2018 to $10,401.3M in 2024. WLAN (Wireless Local Area Network Access Points) applications span from Enterprise & Business Networks (schools or industrial buildings rely on WLAN to provide high speed WIFI) to Smart Homes & IoT Connectivity (smart home ecosystems require stronger Wi-Fi coverage)

• 4G devices: Peaked in 2018 at $116,815.82M, then declined to $24,489.45M in 2024. As you can see, the demand peaked exactly the year before the initial relase of 5G devices. Still relevant, especially in Emerging Countries, but significantly shrinking as consumers transition to 5G.

In the Wireless Communication segment, among the biggest companies, we can find:

• T-Mobile US – Mobile network operator, leading in 5G deployment and expanding into fiber.
• Verizon Communications – Major telecom provider, focusing on 5G and fiber expansion.
• Ericsson – Telecom equipment manufacturer, specializing in 5G infrastructure.
• Broadcom Inc. – Semiconductor company, producing Wi-Fi and wireless communication chipsets.
• Huawei Technologies – Global telecom giant, providing 5G networks and mobile infrastructure.

Wired Infrastructures

“Wired communications is any type movement of data between or among devices using a wired connection. Wired connections include Ethernet, fiber-optic cable for phone and other uses, cable for television and Internet systems, public switched telephone network (PSTN), CAN and MOST systems in automotive. ” (S.E., 2024)

These technologies enable data transmission through physical cables, ensuring high-speed, reliable connectivity for various applications.

Similar to the Wireless Communication segment, Wired Infrastructure has experienced outstanding growth over the past 10 years, with a CAGR of 11% (Value in 2024: $77.3 billions – Value in 2014: $26.4 billions).

The biggest driver in the sector is the increasing demand for high-speed internet, data centers, and enterprise networking solutions. However, to be more precise, below you will find the four biggest device applications (Bloomberg, 2024):

• Other Networking: Explosive growth from $3.03B (2014) → $32.87B (2024), it is, without a doubt, the fastest-growing segment. It covers hardware beyond traditional routers/switches, including enterprise connectivity and emerging wired solutions.

• Enterprise Switch & Router – Consistent increase from $5.11B (2014) → $8.95B (2024), reflecting stable demand. A foundational segment for corporate networking and data centers. Used to manage internal traffic and internet access in businesses and IT infrastructure.

• SP (Service Provider) Switch & Router – Strong growth from $3.29B (2014) → $8.89B (2024), driven by telecom expansion. A crucial element for ISPs and telecom providers, supporting large-scale internet traffic. Handles data flow between core, edge, and customer connections in telecom networks.

In the Wired Infrastructure segment, among the biggest companies, we can find:

• Cisco Systems – Leading provider of networking hardware, specializing in enterprise and service provider switches, routers, and security solutions.

• Huawei Technologies – Major player in wired and optical networking, offering enterprise switches, routers, and fiber-optic transport solutions.

• Juniper Networks – Focuses on high-performance networking solutions, including service provider and enterprise routers, switches, and security products.

• Nokia (Alcatel-Lucent Division) – Provides wired networking solutions, including optical transport equipment and IP routing for telecom operators.

• Ciena Corporation – Specializes in optical networking and transport solutions, supporting high-speed data transmission for telecom and enterprise networks.

In the image above, you will be able to grasp what are the top applications driving the seminconductor market (Infosys, 2024).

According to several industry reports, the semiconductor market is projected to reach a valuation of $1 trillion by 2030. This remarkable growth will be driven by the rapid proliferation of new devices and applications, as well as sustained demand in the consumer electronics sector—particularly in emerging markets. Additionally, national investments in artificial intelligence, such as the U.S. CHIPS and Science Act of 2022, will further fuel expansion.

From a geographical perspective, China is expected to hold one of the largest market shares globally, supported by substantial investments in semiconductor fabrication plants (fabs) and manufacturers (FortuneBusiness, 2024). The country’s abundant supply of critical raw materials, combined with U.S. restrictions on high-end chip exports to China, will further solidify its dominance in the Asia-Pacific region.

Meanwhile, the United States is striving to cement its leadership in the industry, allocating hundreds of billions of dollars to AI research and semiconductor production. Through the CHIPS and Science Act, the U.S. has committed over $280 billion to advancing fields such as artificial intelligence and quantum computing.

Below, you will see 3 graphs that are quite relevant for the present and future of the U.S. Semiconductor Industry

• R&D Expenditure in Billions (2001 – 2023)

• 2023 Demand by Use in US

• U.S. Exports in 2023

The semiconductor industry’s growth trajectory is underpinned by a convergence of powerful market drivers. The rapid expansion of AI, the increasing complexity of consumer electronics, and sustained governmental investments have positioned semiconductors at the core of technological advancement. As global demand accelerates, competition between key players—most notably the United States and China—will shape the industry’s future landscape.

As the industry enters its next phase of growth, it is clear that semiconductors will remain the foundation of global digital transformation, driving progress across virtually every sector of the economy.

To fully understand an industry, it is essential to identify the events and factors that can disrupt its stability. The semiconductor industry is uniquely complex, integrating multiple sectors across its supply and demand chain. However, it faces several challenges that could threaten key aspects of the market.

For instance, semiconductor production relies on critical raw materials such as silicon for wafer fabrication. A shortage of essential materials like silicon or gallium can significantly disrupt the supply chain. Such shortages may stem from geopolitical tensions and trade disputes, particularly when these materials are of strategic importance. A notable example is China’s recent export restrictions on gallium and germanium in response to escalating trade conflicts with the United States.

Beyond raw material constraints, the semiconductor industry is vulnerable to various other challenges that can directly impact its stability. Below is a list of key risks and disruptions:

• Geopolitical Tensions: especially between key players in the industry. Geopolitical turmoil can cause supply disruptions, lack of resources, and trade barriers between companies.

• Lack of skilled talent: Forbes (2024) states that by 2030, the year in which the industry should touch the $1 trillion dollar valuation treshold, the industry will need to hire approximately 1 million additional skilled workers, while retaining all of its current workforce. Many companies in the industry are investing heavily in young talent, especially in China and the U.S.

• Regulatory compliance:  trade barriers, negative externalities, and supply chain problems can also arise due to friction between regulatory entities.

However, we have some solutions that can be implemented to enhance market productivity and resolve some of the issues presented.

• Generative AI could help in increasing production efficiency while also helping to enhance the quality of the overall product. Young talents should be highly trained to work with AI, as it will optimize processes and possibly increase margins.

• Increasing Public Awareness regarding the importance of semiconductors. By doing so, many more people will want to enter the industry, both on the investment and working side. Moreover, universities and leading institutions should implement courses specifically on these topics.

• International Cooperation among significant stakeholders is a critical factor. Despite its simplicity in concept, achieving such cooperation presents substantial challenges. Increased international cooperation is likely to result in greater international investments and enhanced technological advancement across the sector; however, the influences of power dynamics and self-interest often prevail.