The semiconductor industry is best understood as a layered ecosystem comprising tightly interdependent players, each specializing in critical stages of chip creation, enablement, and deployment. To grasp how this ecosystem functions—and why it matters—you need to move beyond just “chip makers” and visualize the entire stack of entities involved. Below is a structured breakdown of the ecosystem into 10 interlinked layers, progressing from upstream raw inputs to downstream usage in data centers and networks. Each section explores four representative companies and explains how these layers interact in real-world supply chains, technologies, and strategies.
Representative Companies:
- Shin-Etsu Chemical (4063.T)
- SUMCO (3436.T)
- Air Liquide (AI.PA)
- Linde (LIN)
This layer supplies the raw materials necessary for chip manufacturing: ultrapure silicon wafers, specialty gases, and advanced chemicals. Shin-Etsu and SUMCO dominate the global market for 300mm silicon wafers used in leading-edge chipmaking. Air Liquide and Linde provide ultra-pure process gases like nitrogen, argon, and hydrogen fluoride used throughout fabrication.
How it connects:
Materials are the literal substrate upon which the industry is built. If there's a disruption—like neon gas shortages from geopolitical events—it ripples across all subsequent layers, delaying or degrading chip quality.
Representative Companies:
- ASML (ASML)
- Applied Materials (AMAT)
- Lam Research (LRCX)
- Tokyo Electron (8035.T)
Without these firms, chips can’t be made. ASML is the sole global supplier of EUV (extreme ultraviolet) lithography tools—vital for patterning sub-5nm features. Applied Materials, Lam, and Tokyo Electron make deposition, etching, and inspection systems. These tools are so advanced that a single EUV machine can cost over $200 million.
How it connects:
These tools are installed inside fabs operated by foundries and IDMs. Any delay in equipment shipments (due to export controls, for example) delays fab ramp-ups. Without them, even companies like TSMC or Intel can’t move forward technologically.
Representative Companies:
- TSMC (TSM)
- GlobalFoundries (GFS)
- UMC (UMC)
- SMIC (0981.HK)
Foundries are companies that fabricate chips designed by others. TSMC leads with >50% market share and is the go-to for Apple, AMD, and NVIDIA. GlobalFoundries handles specialty nodes for automotive and RF applications. UMC serves mid-range clients, while SMIC focuses on the Chinese market and legacy nodes.
How it connects:
Foundries are the backbone of global chip manufacturing. They receive designs from fabless companies and process them using materials and equipment from earlier layers. These fabs operate 24/7, pushing wafer throughput under strict environmental conditions.
Representative Companies:
- Intel (INTC)
- Samsung Electronics (005930.KS)
- Texas Instruments (TXN)
- STMicroelectronics (STM)
IDMs design and manufacture their own chips. Intel is rebooting its foundry and design arms under IDM 2.0. Samsung is unique in mastering logic, memory, and foundry work. TI and STMicro focus on analog, MCUs, and automotive chips. Their vertical integration allows tighter control of cost, IP, and fab usage.
How it connects:
IDMs blur the lines by spanning multiple layers. They buy equipment, design their own architectures, and operate internal fabs. They often compete with fabless players but also rely on external foundries to diversify risk.
Representative Companies:
- NVIDIA (NVDA)
- AMD (AMD)
- Qualcomm (QCOM)
- MediaTek (2454.TW)
Fabless firms outsource all fabrication but specialize in high-performance design. NVIDIA dominates AI and GPU markets. AMD focuses on x86 CPUs and GPUs. Qualcomm leads in 5G SoCs, while MediaTek serves mid-range smartphones globally.
How it connects:
These companies design chips using EDA tools (next layer) and send their tapeouts to foundries for fabrication. Their demand dictates the technology nodes that TSMC or Samsung develop. Fabless firms push design complexity and performance envelopes.
Representative Companies:
- Synopsys (SNPS)
- Cadence (CDNS)
- Siemens EDA (SIE.DE)
- ARM Holdings (ARM)
Electronic Design Automation (EDA) tools are the software backbone for designing, simulating, and validating modern chips. Synopsys and Cadence dominate toolchains; Siemens EDA supports complex logic synthesis; ARM licenses widely-used CPU IP.
How it connects:
Every fabless and IDM firm uses EDA software for RTL simulation, layout, power analysis, and tapeout verification. No advanced chip can be built without passing through this software layer. Moreover, IP from ARM or Synopsys is embedded in most chips, further entrenching their value.
Representative Companies:
- Micron (MU)
- SK hynix (000660.KQ)
- Samsung Electronics (005930.KS)
- Kioxia (Private, JV with WDC)
Memory chips include DRAM, NAND, and emerging technologies like HBM (High Bandwidth Memory). Micron leads in U.S.-based DRAM/NAND. SK hynix is strong in HBM, and Kioxia powers large portions of global NAND alongside Western Digital.
How it connects:
Memory is essential for all computing systems. AI accelerators, smartphones, and servers all rely on DRAM and NAND. These memory chips are often packaged alongside processors in data centers, meaning demand from cloud hyperscalers affects upstream fabrication planning.
Representative Companies:
- Amkor Technology (AMKR)
- ASE Technology (ASX)
- Unimicron (3037.TW)
- Ibiden (4062.T)
These companies handle advanced packaging and PCB substrate production. Amkor and ASE are leaders in outsourced assembly and test (OSAT). Unimicron and Ibiden supply high-density interconnect (HDI) substrates, crucial for high-performance chips like GPUs.
How it connects:
Once chips are fabricated, they’re packaged and tested by OSATs or in-house (e.g. TSMC’s CoWoS). High-end substrates are critical to ensuring signal integrity and thermal performance. Bottlenecks here can delay entire GPU launches (as seen with substrate shortages during the AI boom).
Representative Companies:
- Amazon (AMZN)
- Microsoft (MSFT)
- Google (GOOGL)
- Alibaba (9988.HK)
These firms are the primary demand engines for cutting-edge chips. Amazon's AWS, Microsoft Azure, Google Cloud, and Alibaba Cloud buy massive quantities of AI accelerators, CPUs, and networking ICs for training large AI models and serving billions of users.
How it connects:
Hyperscalers influence semiconductor roadmaps. They work directly with fabless firms (e.g. custom chips), foundries (reserving capacity), and packaging vendors (for HBM integration). Their demand shapes fab buildouts and chip architecture trends, especially for AI and networking loads.
Representative Companies:
- Cisco (CSCO)
- Ericsson (ERIC)
- Nokia (NOK)
- Huawei (Private)
These companies integrate semiconductors into wireless infrastructure and enterprise networks. Cisco makes networking gear; Ericsson and Nokia build 5G infrastructure; Huawei—despite sanctions—remains a powerful player in Asia.
How it connects:
Telecom integrators deploy chips in the real world. They source from fabless firms (Qualcomm, Marvell), IDMs, and OSATs. They feed demand for RF chips, FPGAs, and photonics. They also shape standards (e.g. for 5G or 6G), which ripple upstream to chip design.
This value chain functions not as a linear pipeline, but as a dynamic mesh of interdependent layers. For instance:
Every dollar of value in this chain relies on dozens of invisible transactions between these entities. From raw sand to silicon to AI workloads, the system is only as strong as its weakest link.
Resilience: Any disruption in one layer (like substrate shortages or export bans) impacts all others. Firms increasingly focus on multi-sourcing and regional redundancy.
Vertical Integration: Companies like Samsung or Intel control multiple layers, giving them strategic agility—but also capital risk.
Specialization vs. Dependency: Firms like ASML or Synopsys are monopolists in their niches. Their pricing power and geopolitical leverage are immense.
Investment Insight: Understanding these interrelations helps investors evaluate which segments are cyclically vulnerable versus structurally indispensable.
Policy Leverage: Governments realize control of one layer (e.g. ASML for lithography, TSMC for advanced logic) equates to leverage over global tech. Hence the race for onshoring and decoupling.
By seeing the semiconductor industry as a layered, interdependent value chain, you unlock a much clearer picture of where innovation, capital, and risk truly reside.