Semiconductors for dummies (but avoiding being a dummy investor)
comentada em 27/05/2025 14:50

There is a lot being talked about semiconductor and its industry but this segment seems to be a niche where only electric engineers or physics would understand each one of business involved and could be risky for an inattentive investor.

Nevertheless, most of people that invested on banks and oil companies during last decades weren´t exactly specialist, but those industries where little by little unveiled by commom people and would be a nice learning to classify all the companies available at US stock market (I believe mainly at NASDAQ)

Firstly, I get some basic information at the website A beginner’s guide to semiconductors | Martin Currie

There, semiconductors are described as a material where the conduction or insulation state could be controled and this is the raw material for the cente of this industry, the "microchips"

This modern tool is crucial for almost all electrionic devices, and that is one of the splits that investor must be attentive, we are talking about not only the AI, but also simpler equipments such as air-conditioned, lamps or cars. Digitalization is a possibility not only for the cloud processing but also how those tools will communicate within networks

Said that, it is interesting for investors to split the companies on manufacturing process to understand its strenghts and risks. Basically, the chip must follow these steps:

- Making the raw wafer - From a ingot of silicon, discs are sliced;
- Making the circuit on the wafer - The wafer is printed and multiple chips could be on those discs;
- Chips are completed, assembled on integraded circuit and packaged.

For my surprise, not exactly the big business is concentrated at this process!

Much of the value came from companies that "design" the chips, those companies are called "Fabless" companies that hires three maind business for their chips:

- Foundry - Companies to produce chips (Wafer fabrication)
- OSAT (Outsourced Semiconductor Assembly and Test) - Companies that packs and test those chips individually
- ATMP (Assembly, Testing, Marking, and Packaging) - Companies that focus on final assembly of chips at printed circuit boards

Building a chip manufacturing company is a hard task, could took around 03 years, but is more easily relicable despite having the knowledge of designing.

The foundry-fabless business domains the industry but other companies can decide to control both sides of industry and those are called integrated device manufacturers (IDMs). Verticallity has its odds and sods, higher asset but less suffering on a dependancy at this suppy chain.

Last but not least, we also need to consider the companies that provides the most modern machines and production controls for the IDMs or Foundry companies, each one with its own specialized technology but with the risk of selling an equipment with a longer cycle of production, such like big planes or a hydroelectric turbine

Based on that, and using the Bastter phylosophy, I gather all the blue or green dogs companies that are linked to this industry and reached a list of 25 companies. My next task is to separate each one of these companies at the above mentioned segments. I believe that this split would avoid investors to concentrate its welth on only one industry stage and also could be a initial guide to analyse the involved risks at each company. Here are the companies (with a short initial classification):
Ticker
Name
Business

ADI
Analog Devices
IDM

AMAT
Applied Materials
Capital Equipment

AMKR
Amkor
OSAT/ATMP

ASML
ASML
Capital Equipment

ASX
ASE Technology
OSAT/ATMP

AVGO
Broadcom
Fabless

ENTG
Entegris
Capital Equipment

FLEX
Flex
OSAT/ATMP

KLAC
KLA Corp
Capital Equipment

LRCX
Lam Research
Capital Equipment

MCHP
Microchip
IDM

MPWR
Monolitch Power
Fabless

NVDA
NVIDIA
Fabless

NVEC
NVE Corp
Fabless

PLAB
Photronics
Capital Equipment

PLXS
Plexus
Fabless

ROG
Rogers
Fabless

SIMO
Silicon Motion
Fabless

SNPS
Synopsys 
Capital Equipment

SWKS
Skyworks
IDM

TER
Teradyne 
Fabless

TSM
TSM
Foundry

TXN
Texas Instruments
IDM

UMC
UMC
Foundry
It is indisputable that semiconductors took a very important place at our modern society, but I opened this discussion bringing the mates to a more rational analysis and avoiding any FOMO that would bring investors make mistakes like duplicating its investments on similiar business or to business that are not very diverse on its technologies nor markets

Please, feel free to add more information or suggestions. I will take a deeper look at each company, to understand where their chips are being applied or, for the captial equipment ones, the benefit for this industry.