Just In Time & Semiconductor Chips

Inside the ASML NXE-3400

About the picture: The purple cone is the ultraviolet light being used to transfer the mask pattern to the chip, or it would be if you could see invisible light. Note that the light is coming down from above. The white square boxes are mechanical stages that shift to bring successive chips into view of the light beam. The round black thing on top of the stage holds the wafer. You can see the columns and rows of individual chips laid out on the wafer. Ten second video of machine in action here.

Just In Time is strategy for manufacturers to reduce inventory costs. The more materials you keep in inventory, the more those materials cost you. Not in their purchase price so much, you were going to buy them anyway because you need them to make your finished product. But the money you used to purchase them is now tied up can't be used for anything else. You could probably borrow some money, banks love to lend money to going concerns, but borrowing money entails paying interest. It might not be much, maybe one percent per month, but it's not going to stop, it just goes on month after month and those costs mount up. And then there is the additional storage space you need to hold those materials and that costs more money.

If you can get your suppliers to reliably deliver just what you need, when you need it, you can cut those expenses. It may not be much, but in the cutthroat world of commodity manufacturing, every penny counts.

If everything works smoothly, the system is great, but if anything goes wrong the whole system is thrown out of whack, products don't get made, which means they don't get sold, and everybody is unhappy. Donut Media has a video up on YouTube that explains how all this affected the automobile makers.

Then we have The Great Computer Chip Shortage of 2021 is Just Heating Up, an article by MN Gordon on  The Economic Prism

Some excerpts:

The world’s top two leading chip companies are Taiwan’s TSMC and South Korea’s Samsung Electronics.  These two Asian firms, combined, control more than 70 percent of the semiconductor manufacturing market.

Over the last 15 years, U.S. and European companies shifted to this fabless model. 

"In 2001, 30 companies manufactured at the leading edge however as semi manufacturing grew in cost and difficulty, this number has fallen to just 3 firms."

These three firms are TSMC, Samsung, and Intel. 

While TSMC and Samsung are the dominant manufacturers of semiconductors, they still rely heavily on equipment and machinery from the U.S., Europe and Japan.  The companies that make the tools required by foundries are known as semiconductor capital equipment vendors or “semicap” for short.

The top five semicap equipment vendors make up nearly 70 percent of the market.  Three of the five are U.S. companies, one is European and one is Japanese.

However, Netherlands-based ASML is the only company in the world that can make extreme ultraviolet (EUV), which is required to make the most advanced chips, including those manufactured by TSMC and Samsung.

You don't hear much about the semicap business. Well, I don't. Maybe you do. Making complex microprocessors is very much a black art, so making the machines that make the chips must be pretty much like witchcraft. I know there is high vacuum and insanely precise alignment, but I suspect the total is very much larger than the sum of the parts.

Via ZeroHedge