Are semiconductor chips really this salty?
Chips Are the New Oil and America Is Spending Billions to Safeguard Its Supply
Talk of Chips being the new Oil is afoot - pick your favorite podcast or pundit.
Oil has made nations, started wars, messed with nature … because the world needs more and more Energy to do all the things. How is that like Chips?!
Chips are from Merica
Whether you are talking about the ones made of slices of Potatoes or slices of Silicon - both were invented and made in the USA - at least at first. Potato chips are still mostly made in Pennsylvania. Chips are salty snacks, a breakfast food adjacent category that I wrote about before. Waffles 🧇!
Engraved Silicon Wafers look like those same waffles, and that’s what we’re talking about today - semiconductor chips. Intel shipped the first Pentium chip 30 years ago and I was all in. The Personal Computer industry was blowing up and I was on for the ride. Every new chip release was a nerd headline. PCs got ever faster, and the Pentium enabled the server class computers that now power today’s cloud data centers. Intel's Pentium line lasted another 10+ years and other than their rivalry with fellow US chipmaker AMD, they were on top of the world. Intel cranked out Pentiums in fabrication plants or 'fabs' primarily in the US including Oregon, Arizona, California and New Mexico.
Few years back, I visited Intel's HQ in Santa Clara and got a tour of their old 'model fab.' It was completely abandoned. Walked through the locker room where technicians would don full body jumpers or ‘bunny suits’ to not introduce a speck of dust lest it crush the tiny circuitry engraved in the silicon. The factory itself was largely stripped of machinery and around 1/3 of it had been repurposed as a server farm where they were experimenting with air cooling the server racks rather than water cooled. It's the chips - processors - that create all the heat in computers. Huge fans pushed air continuously from above across racks of blinky boxes. It was incredibly loud. The engineer giving the tour took us to a corner where there was a rack for a supercomputer science project he was working on.
Nothing was being built.
Today, Intel is #3 worldwide in manufacturing capabilities of the latest chips. 10,000 of these chips (from a company called NVIDIA) were used to develop or train OpenAI’s ChatGPT. TSMC or Taiwan Semiconductor Manufacturing Company is the company that manufactured those chips and they are undeniably #1 in this market, building over 90% of today’s super fancy chips. South Korea's Samsung is #2. Intel is playing catchup - way behind both TSMC and Samsung after decades of outsourcing chip production. Intel is now building two new fabs in the US but even if they are wildly successful, it will take years for them to catch up.
Chip making is hecka complicated
The Pentium was a marvel but to keep Intel founder Gordon Moore from telling a lie you have to double the number of transistors on a chip every couple of years. Transistors are zero/one gates that form the core compute capabilities etched into the silicon. The original Pentium had around 3 million transistors. For comparison, the latest H100 GPU from NVIDIA (the same kind OpenAI trained on) has 80 billion transistors. To get that many transistors onto little chips you take super thin slices of silicone and then you use Lithography machines spitting ultraviolet light to burn in or 'print' the chip architecture patterns. Then you assemble the layers together into sandwiches and finally cut them up into the saltiest chips.
Nowadays you have to use UV light to get that transistor density. UV light has a shorter wavelength than visible light to carve the silicon up into ever teenier transistors. Violet is the shortest wavelength visible light at 400 nanometers (nm). Remember ROY G BIV? UV light sits after Violet and before X-rays with a wavelength as small as ~15 nm. For comparison, the smallest visible thing on your body - a hair - is around 100,000 nm.
To make the latest chips with the teeniest transistors coming in at ~10 nm you need EXTREME UV. There is only one company in the world capable of EXTREME UV feats - ASML. ASML is a Dutch company based out of the Netherlands and they make these ridiculously sophisticated and complicated machines. It took ASML over 20 years to develop EUV. Each machine is the size of a camper van with 100,000 coordinated mechanisms including a laser burning as hot as the sun that spits out molten drops of tin at 70 meters a second creating plasma that emits UV wavelength in the 10 nanometer range which is then further focused by mirrors before hitting a photomask to be printed on a silicon wafer. It's nuts.
In December ASML celebrated shipping their latest EUV with a catchy name: the TWINSCAN EXE:5000. Here it is wrapped in a bow leaving the factory in the Netherlands for delivery to its first customer.
This article shows what the TWINSCAN EXE:5000 looks like on the inside as well as more of the ridiculous things it does.
5 things you should know about High NA EUV lithography (asml.com)
Salty Chips versus the Saltiest Chip
I know how to make potato chips. I've done it (thank you child #1) and we dutifully documented it using the scientific method. The neighborhood picked the best flavor - Ketchup!
To make potato chips you need potatoes and oil and salt. Ketchup or somesuch for flavoring. In Letterkenny’s chipoff last season the favorite flavors were dill pickle, salt and vinegar (also JFran’s) and ‘all dressed’ which is a Canadian thing that includes ketchup.
Making potato chips is not hard. I'm sure those chip plants in Pennsylvania have fancy ways to make Lays at scale but still, it's gotta be slice, fry, season.
Making semiconductors is hard and takes more and more exotic materials. Silicon of course, but also metals like Gallium, Boron and Germanium. The US doesn't have all these raw materials; some like Neon gas and Tungsten are sourced from Russia and China ruh roh 🙄 Creating these complex little guys has taken decades of globalization and specialization.
Things were all going fine until a Pandemic introduced unexpected demand spikes and supply shortages and that exposed the fragility of an exceedingly complex supply chain. Remember a couple of years ago when you couldn’t get the stuff you wanted, like cars? That was a problem.
Here's another problem - the semiconductor manufacturing process is crazy complex. It's not a stretch to say computer chips are the most complicated things human beings have ever created.
Clumsy human hands even tiny ones aren't coming anywhere near the EUV machines or anything in a fab for that matter; everything is automated. A modern fab factory floor is about the size of two football fields, organized by stations that batches of chips progress through. Imagine around 500 machines/stations like the EUV and over 1,000 steps. Raw silicon wafers come in one side and when they come out the other end they are sandwiched and stamped out ready to be chopped up into individual component chips. Everything is white and bathed in a yellowish light that has all UV rays filtered out so as not to affect the chips. A maze of rails crosses overhead tracking from station to station, traveled by suitcase sized cassettes filled with stacks of wafers progressing stage by stage. Techs in white bunny suits man each station to make sure the machines are running ok.
Problems #1 and #2 combine to make problem #3 - building fabs is super expensive. One ASML TWINSCAN EXE:5000 alone is nearly $500 million. That's why the entry point to build one of these factories is $20B. That's why there are only 3 companies in the world that can pull it off at scale.
TSMC is unique in that it doesn’t do design/build - only build. For example, if you have an iPhone, that chip was designed by Apple but TSMC built it. What about those GPUs from NVIDIA - TSMC. TSMC struck an early deal with ASML so they've already got all the EUV goods.
China wants more of the saltiest chips
I did some research - China also loves salty snacks. I believe this to be a universal human thing. It may be dried squid versus sliced potatoes, but it’s comforting that all humans like the salty snacks in the face of all this geo-political war talk.
Here is where the story gets super salty and the geo-political comparisons to Oil come in. All the new stuff (AI!) shaping modern societies needs Chips. More and more chips, fancier and fancier chips. Modern warfare is being built with chips/AI as well; see killer drones. China wants all this too and they are amorphous and hence scary and different than us so we must stop them. But are they really so scary? They also like salty snacks!
A notable kerfuffle was Micron V Fujian Jinjua over memory chip trade secret theft. Micron, based down in San Jose makes memory chips. When the Chinese court sided with Jinjua the US called foul and imposed sanctions on US memory tech Jinhua needed to run their factories, effectively putting them out of business. This Trump era decision was the first US chip sanctions against China.
The Biden Administration continues to add additional semiconductor sanctions against China. Biden’s team even worked out a deal with the Netherlands and ASML so they wouldn't sell their Extreme UV machines to China. TSMC would be a yummy salty snack for China - they are the #1 advanced chip manufacturer by a wide margin, and they are right next door!
In tandem with sanctions, Biden’s administration passed the cheerily named CHIPs act to get chip manufacturing spinning back in the US again. The Creating Helpful Incentives to Produce Semiconductors … and Science act allocates $50 Billion to build new fabs in the US along with a raft of other incentives.
Here’s how it’s going:
I love to see the new plants Intel is building in Arizona and Ohio. I have a good friend who is working on getting those built. I think it’s amazing that #1 TSMC is building a fab in Arizona and #2 Samsung one in Texas. Top 3 represented 🙌🏽 Can we reverse the cost/resource dynamics that drove manufacturing overseas the past 30 years?
Guess where that first ASML TWINSCAN EXE:5000 went!? To Intel … in Oregon. Took two weeks to get all the pieces there - it was shipped in 250 crates filling up 13 cargo containers over the seas and 13 trucks over the lands to get from Veldhoven, the Netherlands to Hillsboro, Oregon. Is that the same bow?
Why Oregon instead one of Intel’s new plants in Arizona or Ohio? Because Intel has to figure out how to use EUV and incorporate it into their manufacturing process - so first it goes to R&D. EUV is planned to go into production in one of Intel’s new fabs in 2025.
Real men have fabs
That’s a quote from chipmaker AMD’s CEO/Founder Jerry Sanders.
Intel's prior CEO Bob Swan got the axe after he tried to cut a deal with TSMC to outsource more of Intel's manufacturing. New CEO Pat Genslinger is leaning in, so here's hoping Intel gets its mojo back because no one wants to be #3. I'd love to see more US upstarts join the fray with new chip designs - Nvidia sure is good with the happy coincidence that GPUs work for LLMs and that's great for them. Will Quantum computing spur new chip designs? In theory quantum computing uses three states rather than the binary 0/1 so it could exponentially increase compute.
Regardless, there is more tech/chip coolness ahead of us and I like that future of more chips, less oil.
Now I have to find me a bag of Kettle Backyard BBQ Chips because they are my favorite salty snack and also, I need to try dried squid!
best, Andrew
Last weeks post, ICYMI!
