Today we'll analyse the Semiconductor industry fully.

Nothing in the modern world is possible without Semiconductors.

We'll conduct a value analysis of the profit pool of the entire ind. i.e most profitability—.

Why are we now talking about Semiconductor ind. in India?

GOI is pushing for the Semiconductor ind.

We'll see the kind of players in operating in the value chain - packaging, foundry etc.

Eg. Post sleep alarm clock, washroom light switch, electric toothbrush, toaster for breakfast, coffee machine for coffee-

Office travel vehicle either EV or SUV, laptop in the office, phone for calls—.

Chips inside phones or appliances — (On Screen)

Since the ban is active on Russia, they've been using old style dumb b*mbs.

Semiconductors are required for target by a missile.

If they're using old or no chips they can't use precision missiles.

How can an electronic device be programmed to target a specific building or make coffee by pressing a button?

Only ASML holdings make these machines.

EUV machine uses 1 lakh parts & the laser used for mfg. has 4L 37k parts.

Only by understanding the complexity will you be able to gauge the profitability pool toppers.

We'll discuss TSMC in the value chain analysis.

—This is a crucial geopolitical issue —

1st key principles for understanding the ind.- Moore’s law - Founder of Fairchild Semiconductor & Intel (On Screen)

Computing power ↑ when transistors are closely packed.

There's a reason for AI tools like GPT being used—

Semiconductors are mfgd. in diff. sizes.

The smaller the nodes, ↑ the computing power.

Interesting fact- When we cover Semiconductor mfg. in India - 28nm mfg. plants are being set up.

28nm is used for daily accessories.

We'll move to Ind. value chain (On Screen)

Chip mfg. are called foundries - they must procure machinery, modules etc from somewhere—

We'll break them down further for clarity.

So far we learnt that any Co. which requires architecture licenses through ARM.

We'll analyse ARM’s profitability as well.

Apple etc designing semiconductor chips need to take licence from ARM.

Apple products don't hang as much as Windows prod.

Fabless Co.s - Co.s which don't fabricate chips themselves.

Intel designs and mfgs. it's own chips. The biz. model for self RND on design and mfg. is high —.

1 new machine for EUV is $380 mil.

Anyone who's watched our Pharma videos would know these are CDMO biz.

TSMC doesn't design chips, it mfgs. them on a contract basis.

US govt. is providing subsidies to Intel to set up foundries for contract mfg.

— biz. conflict - if apple asks Intel to mfg. chips while Intel is mfg. it's own chips = ↑ conflict of interest.

Packaging Co.s aka OSAT—.

India has more OSAT atm.

When taking foundries like TSMC, micron needs to be taken into account.

28nm can satisfy much of the country's needs in normal appliances.

Another thing to note - Nodes table. Foundries not investing in advanced tech. — (On Screen)

ASML has been RND on EUV machines since 20-25yrs. 1 new machine for EUV costs $380 mil.

We'll cover each Co. & their Mkt share going forward.

We'll cover TAM now (On Screen)

Hopefully value chain is clear now so that profitability analysis is easier to understand.

As seen in the video the US president was talking about China.

ZTE & Huawei were levied a ban in 2018-19 by the US - ban was widespread on Huawei - not to export or sell any semicon by US Co.s.

TSMC was banned from selling equipment to Huawei.

Important point to consider - modern day cold war due to chips.

Japan also has semicon mfg. firms. Important to note amongst all these is Semicon tech. came through US defence RND.

China's homegrown semicon Co.s are short on machines.

Due to all ind. choke points US levies bans on any Co. to not work with China.

Movement in India —. COVID disrupted the supply chain globally - 1st impact was on semicon ind.

Basic semicon mfg. fulfils most needs.

TSMC is going to mfg. advanced semicon.

Remembering Assembly & Testing is necessary —. Leaders in OSAT= Malaysia & China.

Yields matter a lot in a Semicon mfg. process. Yields = amt. of loss during a process & the efficiency of process (On Screen)

Mkt share for Global Foundries (On Screen)

OSAT = process of Assembling and packaging. Majority of the OSAT is done in Malaysia.

There are several Fabless chip designers in the USA. — (On Screen)

Who are the different players, their profitability & margins. — ( On Screen)

In Geopolitics, an irrational CAPEX boom is taking place in the Semicon ind. in the world.

ASML is the only co. that produces EUV machines —

Even the Semicon industry faces booms & busts.

Currently it is going through a boom period due to govt. mandated investments for the next 3-4 yrs. (On Screen)

— Intel : An integrated chip mfg. & designing Co. (On Screen)

— all the GPU cards of NVIDIA were highly used in the gaming industry bc by using their chips we can carry out multiple processes---

— diff AI models can be used to carry out diff sets of tasks.

This is how their original use of prod. GPU cards for gaming, the Co. saw an unexpected boom in its AI computing.

80% of GEN AI around the world is running on the chips produced by NVIDIA. — (On Screen)

Its MOAT could also be disrupted later bc the founder of chat GPT —. (On Screen)

— & the growth rates for the co. is at 100-150%. This is why today the co. forward P/E ratio is ~35-36 times.

— Over a period of time it becomes a virtual cycle — (On Screen)

Hopefully you have understood the value chain for the entire industry-

Geopolitics Aspect in India and the Co. that are operating under the Chips. (On Screen)

We'll see how our IT Minister explains the entire industry & how diff Co. in diff parts of the Value Chain are announcing their CapEx (On Screen video)

Semicon mfg.requires ultra high purity of water for their semicon plants. —