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What is the semiconductor supply chain from raw materials to chips?

AlphaOS investment intelligence · Research and education only — not investment advice · Updated Sep 27, 2026

About semiconductors

Direct answer

The semiconductor supply chain spans six critical stages: raw material extraction, wafer production, chip design, fabrication, packaging/assembly, and distribution. It begins with silicon (derived from quartz sand), specialty gases, and rare earth elements, then progresses through wafer manufacturing (dominated by Shin-Etsu and Sumco with ~60% combined global share), chip design (led by NVIDIA, AMD, Qualcomm, Apple), photolithography equipment (ASML holds a monopoly on EUV machines), fabrication at foundries (TSMC commands ~60% of global foundry revenue), advanced packaging (ASE Group, Amkor), and finally distribution through global electronics supply chains. Each stage is highly concentrated geographically and among a handful of companies, creating systemic chokepoints.

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Key Takeaways

  • Silicon wafers are the foundational substrate — Shin-Etsu Chemical and Sumco together supply approximately 60% of the global market
  • ASML is the sole manufacturer of Extreme Ultraviolet (EUV) lithography machines, which are required to produce chips at 7nm and below; each machine costs $150–$380 million
  • TSMC fabricates chips for Apple, NVIDIA, AMD, and Qualcomm, controlling ~60% of global foundry revenue and over 90% of leading-edge (sub-5nm) production
  • Chemical suppliers including Air Products, Linde, and Shin-Etsu provide specialty gases and photoresists critical to the etching and deposition process
  • Advanced packaging — including TSMC's CoWoS and Intel's EMIB technologies — has become a key competitive differentiator for AI chip performance, with CoWoS capacity a known bottleneck for NVIDIA's H100/H200 supply
  • Geographic concentration is extreme: ~90% of leading-edge fabrication is in Taiwan, ~70% of OSAT (outsourced semiconductor assembly and test) capacity is in Asia (Taiwan, South Korea, Malaysia)
  • The U.S. CHIPS Act ($52.8 billion) and EU Chips Act (€43 billion) represent government efforts to reshore fabrication and reduce supply chain concentration risk
  • Rare and specialty materials — including neon gas (70%+ historically sourced from Ukraine before diversification), cobalt, and tantalum — represent upstream vulnerabilities that are difficult to substitute quickly

Evidence & Analysis

  • TSMC reported 2023 revenue of approximately $69.3 billion USD, with advanced nodes (7nm and below) accounting for over 50% of wafer revenue
  • ASML shipped 20 EUV systems in Q1 2024 and has a backlog exceeding €40 billion, reflecting multi-year demand visibility from leading foundries
  • Shin-Etsu Chemical and Sumco jointly control approximately 57–62% of global silicon wafer shipments by area (SEMI data)
  • The global semiconductor equipment market reached approximately $100 billion in 2023, with Applied Materials, Lam Research, and KLA comprising the top three U.S. suppliers
  • Advanced packaging capacity — specifically TSMC's CoWoS — was cited by NVIDIA CEO Jensen Huang as the primary constraint on H100 GPU supply through 2023
  • South Korea (Samsung, SK Hynix) controls approximately 70% of global DRAM production and over 50% of NAND flash memory output

Key Companies

ASML

ASML Holding N.V.

Sole global supplier of EUV lithography equipment — critical chokepoint for all leading-edge chip production

TSM

Taiwan Semiconductor Manufacturing Company

World's largest contract chip manufacturer — ~60% global foundry revenue share and >90% of sub-5nm production

NVDA

NVIDIA Corporation

Fabless chip designer — relies entirely on TSMC for leading-edge GPU fabrication; ~80% data center GPU market share

AMAT

Applied Materials, Inc.

Largest semiconductor equipment company by revenue — supplies deposition, etch, and inspection tools to fabs globally

LRCX

Lam Research Corporation

Leading supplier of wafer fabrication equipment, particularly etch and deposition systems essential to advanced node production

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