The Hindu Business Line : Three sub-segments

For the uninitiated, semiconductors is all about etching infinitesimally thin lines of circuits on extremely thin wafers of silicon and packing layers of such wafers into tiny, black cuboids — chips. Open any electronic device, say, a mobile phone, you’ll see plenty of them.

Thus, the industry cleaves into three parts — designing the circuits, making wafers and etching the circuits on the wafers, and testing and packing the individual circuits.

Only a few companies, such as Intel, are present in all the three segments of business. They are called IDMs, or integrated device manufacturers.

Some companies only provide the design work. ‘Design’ is a knowledge industry and there are plenty of units in India that provide these services to foreign outsourcers.

Some companies only make wafers and etch the circuits on them. They are the fabricators and their plants are called ‘foundries’. Fabrication is a highly capital-intensive business.

Yet other companies provide only the assembly, testing, marking and packaging services. These are the ATMP companies. There are a few of them in India — SPEL Semiconductor, Tessolve. An ATMP unit is relatively less expensive to put up.

ATMP usually provide another service — of testing prototypes before fabrication and testing samples of the final product before they are mass produced.

These three segments of the industry, together with equipment suppliers and training institutions, form the ‘ecosystem’ of the semiconductor industry, which is the building block of the electronics industry.

The demand for semiconductors is enormous because just about any modern gadget needs chips. You see the chips in television sets, iPods, computers, mobile phones, cars, aeroplanes, rockets….

But due to a quirk of economics, globally, most of the fabrication units are losing money — because of over capacities.

M. Ramesh