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How Chips worth $1 created a Global Economic Crisis?

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We have heard how the $450 billion semiconductor industry has hit a huge global crisis in this lockdown. Due to lack of production and strain in transportation and availability, the semiconductor industry is going through a big turmoil. But, the question is what exactly sparked this crisis affecting semiconductor companies across the world? The answer to this question is a $1 dollar chip called a display driver.

Due to the shortage of chips, the business didn’t go down for semiconductor companies alone but also for big computer and smartphone companies. These small chips designed by the semiconductor industry powers the super fast and efficient computers or smartphones that make our life better. Though the range of chips designed by any company varies greatly with price, this display driver is the one that is putting the entire silicon industry in jeopardy.

Shortage of Display Drivers

A display driver is one of the many chips used in electronic gadgets. The sole purpose of this driver is to send necessary information or a set of instructions required for illuminating your mobile screen or laptop or any navigation device. Now, the main problem that has arisen in the semiconductor industry and beyond is that there aren’t enough display drivers to suffice the demand. The production units are overwhelming as the firms cannot meet the demand which on the other hand is causing the hike of price.

Chips
Image Source: in.finance.yahoo.com

The shortage of display drivers in the market has also increased the cost for liquid crystal display panels as those drivers are essential to building the same. And, spiking prices of these display panels are affecting the manufacturer of laptops, cars, televisions, airplanes, and high-end refrigerators. Even if a company has all the other necessary parts for building a product it will remain incomplete without the display driver. So, the company’s relying on a source of display drivers has its hands tight.

Situation getting Worse

Along with the global shortage of display drivers, power management chips are also lagging in production. Many automobile industries like Ford, Nissan, and Volkswagen have started scaling back their production but it is very tough to make up for the lost revenue during the pandemic. And, keeping aside the consequences of the pandemic that has caused the shortage of supply in the first place, many other unfortunate incidents are also taking place. For example, a rare winter storm in Texas has caused damage to US productions and a fire in Japan led to the shutting down of a facility for a month.

The imbalance that has been caused by one thing has led to a series of harsh events and it is a tough job to establish balance. Taiwan Semiconductor Manufacturing Co has said that though they are running the plants at full capacity still they cannot meet the demand. Jordan Wu, co-founder, and CEO of Himax Technologies said that “every application is short of chips” and he hasn’t witnessed anything like this in the past 20 years.

The Origin of the Crisis

The main origin of the crisis and how the situation eventually evolved is explained by Jordan Wu in a very elaborate manner. First of all, when the pandemic started with people stuck inside the house an understandable miscalculation took place. Major industries tried to predict consumer behavior on the basis of the financial crisis model. But what we witnessed was the demand for good laptops, mobiles, game consoles, and other gadgets started increasing as the lockdown started extending.

The main reason was people started working remotely and education was also shifted to an online platform. At this time the display drivers didn’t face any shortage as the automobile industries got into a long pause as people didn’t step out of their house. So, the suppliers stopped shipping chips to the automobile industry. A few months back when people again started stepping out and resuming normal life they preferred traveling in personal cars rather than public transport. This led to the sudden demand for display drivers as the demand for other electronic gadgets didn’t go down.

So, now even if the company’s push all their employees and production units to their fullest, demands cannot be met. Since the demand has hiked and there is a shortage in supply prices of many electronics are increasing. For example, the price of 50-inch LCD television doubled between January and March. With this ongoing situation, Jordan said, “We have not reached a position where we can see the light at the end of the tunnel.”

Infineon Technologies AG

Infineon Technologies AG: A Spin-Off Company Making Big in the Semiconductor Industry

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The founding of semiconductors provided opportunities to many creative minds, and as a result, we have some big names in the industry who are the major contributors to the growth of the IT industry. Infineon Technologies AG is one of the largest semiconductor producers and suppliers in the world and is known to serve three main divisions: Automotive, Industrial Electronics, and Chip Card and Security Applications. The company has a history as old as the birth of the telegraph, but it officially started its operations as an independent company on 1 April 1999.

History and Formation of Infineon

Infineon Technologies AG is the result of the spin-off of its parent company Siemens Semiconductor. Werner von Siemens and Johann Georg Halske founded Semiconductor as Siemens & Halske on 1 October 1847 in Germany, and the company was a mere workshop in the beginning. Siemens & Halske was a telegraph manufacturing company and built the first long-distance telegraph line in Europe in 1848. By 1850, the company also started to provide its services in Russia, and in 1867, Siemens built the monumental Indo-European telegraph line stretching from London to Calcutta, over 11,000 km. Siemens is also credited for 1881’s first electric street lighting in the town of Godalming using AC Alternator driven by a watermill.

The company was experimenting in almost every field, from the light bulb to electric train, and at the same time, it was expanding overseas. During the beginning of 1900, it had become the seventh-largest company in the German empire. In the 1920s, Siemens & Halske started to manufacture radios, television sets, and electron microscopes.

Infineon Technologies AG
Image Source: en.wikipedia.org

It was the 1950s when the arrival of computers and the discovery of semiconductors encouraged Siemens & Halske to try their hands in the production of computers and semiconductor devices. Along with that, the company also invested in washing machines and pacemakers production. It also launched its first digital exchange in 1980.

In 1977, the company partnered with Advanced Micro Devices (AMD) to enter the American market and also established the Advanced Micro Computers (AMC), in Silicon Valley and in Germany to start the development of microcomputers. In the 90s, the company acquired several companies with different expertise and had a spun off in 1999, which resulted in the formation of Infineon Technologies, a legally independent company, dedicated to semiconductor manufacturing.

With the formation of Infineon Technologies AG, there was an erosion in the prices of DRAMs (Dynamic Random Access Memory), and now, the company was free to engage new customers other than Siemens. The very first year of its inception, the company produced and supplied the chips for chip cards. Though it was the first year of its operations, Infineon Technologies AG performed exceptionally well, with a recorded profit of US$70 million in its first fiscal year.

In the year 2000, Infineon started to focus on mobile communications, Internet access, electronic banking, electronic and mobile commerce along with innovative security and authentication systems. During the same time, it also introduced its first Bluetooth chipset.

Acquisitions

In 2007, Infineon partnered with Golden Gate Capital Wireline Communications for €250 million. This partnership led to the formation of Lantiq. The company sold its business segment of wireless solutions to Intel in 2011 for a sum of US$1.4 billion. In January 2011, it went on to acquire International Rectifier Corporation (IR) paying around $3 billion. Infineon bought the MEMS and LiDAR systems producers Innoluce in 2016. It also acquired Cypress Semiconductors in 2020.

The CEO                                       

Reinhard Ploss is currently serving as the CEO of Infineon AG and was appointed to the post on 1 October 2012. He has done a doctorate in process engineering from the Technical University of Munich. He has been working with Siemens since 1986 and started as a process engineer for ion implantation at the company. In 1993, he was appointed to take over the technical management in the Villach (Austria) of the company. With the spun-off of Simens, he became the head of the Infineon Industrial Power division. At the same time, he also served as the managing director of the Infineon subsidiary. In 2007, he became a member of Infineon Management Board for Manufacturing, and finally, in 2012, he was promoted to the post of CEO of Infineon Technologies AG.

ASML

ASML: The Semiconductor Industry Leader from the Netherlands

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Integrated circuits and semiconductors have not only reduced the size of computers but have also revolutionized the IT field. With time, the two got even more advanced technology, and still, there has been no other equipment found to replace them. There are few companies that are constantly engaged in making this equipment more and more advanced, but the top position is occupied by the Netherlands-based ASML. To be precise, ASML is the sole manufacturer of the most critical equipment that is used for chip-making for computers and other devices.

About The Company

ASML is the largest supplier of Photolithography systems for the semiconductor industry across the globe. The company’s headquarter is located in Veldhoven, Netherlands, and it was founded in 1984. ASML was a joint venture between two Dutch companies, i.e., the chip-machine manufacturer, Advanced Semiconductor Materials International (ASMI), and the electronics giant Philips. With its founding, the company got the name ASM Lithography, and now it trades with the name ASML. ASML is the manufacturers of photolithography machines for the production of integrated circuits. Photolithography is a process of drawing complex patterns in the smallest size on silicon substrate known as a wafer using ultra-high-performance lenses.  

ASML
Image Source: twitter.com

The Foundational Story of ASML

Though the company was founded in 1984, the R&D for the company had already begun 14 years before that. The ideation and R&D for ASML and its products started back in 1970. The two tech giants, ASMI and Phillips, founded ASML in a leaky shed near the Philips office in Eindhoven, Netherlands. ASML’s first product was the PAS 2000 stepper, launched in 1984. The success of its first product made ASML hire more than 100 employees within one year of its founding. It also moved to a new office in Veldhoven, the same place it has its headquarter located, in 1985.

In 1986, the company came up with another new product, PAS 2500, boasting the new alignment technology, the basis for many future innovations. By 1988, the company had started to work in foreign countries, having its first joint-venture foundry established in Taiwan. The company also began to expand in the USA, starting its first five offices in various locations, with more than 80 employees. Despite the expansion, the company was unable to make a mark in the rapidly growing competition and had to ask for financial help from Philips’ board member Henk Bodt.

Since ASML was continuously working on its R&D, the raised money was used well, and the company brought its pathbreaking product, the PAS 5500, in the early 90s. The launch of PAS 5500 provided ASML all the attention, and the biggest investors wanted to support the company financially. In 1995, ASML had its first IPO and went public on the Amsterdam and New York stock exchanges. With the IPO, Philips sold most of its shares in the company and slowly parted its way from ASML in the later years.

In 2001, ASML released its another revolutionary product, the TWINSCAN system, followed by the launch of TWINSCAN AT:1150i (first immersion machine) in 2003 and TWINSCAN XT:1700i (first volume production machine for immersion) in 2006. All these innovative launches by ASML helped the companies to reduce the size of the chip to an even smaller size. ASML then acquired the semiconductor and optimization solution manufacturing company BRION, such that now ASML independently could optimize the chip manufacturing process and apply real-time measurements and corrections to the chip.

In 2010, ASML introduced its first prototype Extreme Ultraviolet (EUV) lithography tool, which could help to manufacture smaller but more powerful chips by making smaller chip features using the shorter wavelength light. To get better at EUV manufacturing and speed up the production, ASML then acquired the San Diego-based lithography light sources manufacturer, Cymer, in 2013. The company brought the NXE:3300 (second generation EUV) in the next year, and the NXE:3350 (third-generation EUV) came in 2015.

To solely rule the world of Photolithography systems, ASML then acquired the leading e-beam metrology tools supplier, Hermes Microvision (HMI), in 2016. In 2017, with this acquisition, ASML came up with the e-beam pattern fidelity metrology system (ePfm5).  According to 2019 data, ASML has registered more than 12000 patents to its name.

The CEO

ASML CEO
Image Source: asml.com

Peter Wennink is the President and Chief Executive Officer (CEO) of ASML. He has been working with ASML since the year 1999. He started as the Executive Vice President and was appointed the CEO of the company in 2013. He is also a member of the Board of Management at ASML. Before ASML, Wennink has also worked with companies like Deloitte Accountants.