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The silicon chip industry has several peculiar economic traits uncommon in most other sectors. In most industries, increasing product sales necessitates increasing raw material purchases. In silicon manufacturing, your material expenses are less than different materials in the market. If you want to learn more about this material, here's an inside look at what the silicon industry is all about.
Silicon, copper, aluminum, and possibly a trace amount of gold or other elements are all components found in microprocessors, DRAMs, and other chips, but they aren't the most expensive. In contrast to most other physically manufactured commodities, Chip's raw materials are practically free. Not significantly more money must be spent on raw materials to produce more chips.
The depreciation of the machinery and the facility where a silicon chip is manufactured makes it the most expensive component. An expensive semiconductor fabrication facility, or fab, costs between $2 and $3 billion to develop and run, with annual maintenance expenses in the tens of millions of dollars. And in three to five years, the entire building will be outdated.
As a result, each chip that leaves the fab bears a portion of the overhead expense associated with that depreciation. Depreciation is the most significant expense for many chips, costing even more than the raw materials used to make the chip. It's as if manufacturers of chips were required to glue a $5 bill to every new CPU.
The cost of producing more chips doesn't significantly increase for the producer. In reality, expenses are reduced because more chips can now share that crippling depreciation. In a way, the first chip that leaves the production line costs $2 billion, and all chips that follow are free.
While space on the silicon wafer is complimentary, transistors themselves are not. You pay for the acreage, not the dirt, much like real estate. Chip manufacturers are, therefore, obsessively focused on making high-volume goods. They need to spread their overhead expenses across as many units as possible.
At Wafer World, our team can provide you with silicon and semiconductor wafer services. Give us a call today to learn more about the services we offer!
