The term semiconductor is used, slightly inaccurately, to mean electronic components such as integrated circuits (“chips”) and transistors. Strictly speaking, it refers to the materials out of which these components are made. This is most commonly silicon, although other materials (including germanium, gallium arsenide and indium arsenide) are used for when necessary. Components, such as transistors, are created by adding tiny amounts of impurities which change the electrical properties of the semiconductor.

The market for semiconductors is global and demand is cyclical. The actual manufacturing of semi-conductors is dominated by a fairly small number of large companies. These include fabless semiconductor companies that do everything other than manufacturing. There are many smaller companies involved in the design and marketing of semiconductors.

Progress in semiconductor manufacturing has been extremely rapid over the last few decades. It has followed Moore's Law: that the density with which components can be packed onto an integrated circuit doubles every two years.

If you follow technology news sources you will every frequently see references to manufacturing processes with sizes given in nanometres (nm). This refers to the size of components that can be made. It is essential for semiconductor manufacturers to keep in this race.

The high barriers to entry into semi-conductor manufacturing have lead many, especially smaller, companies to specialise in the design and marketing of semiconductors and outsource manufacturing. These are called fabless semiconductor companies.

A step further along than the fabless manufacturers are pure design companies. These design semiconductors and license their designs to the actual manufacturers. This is a pure R & D business, and one that can benefit from strong network effects. This can lead to companies that can achieve spectacular success from small beginnings, such as ARM and CSR.

The semiconductor manufacturing process itself can be broken down into many stages. Again, some companies specialise in only certain stages of the process. There are suppliers of materials (such as highly purified silicon) and machinery. There are also companies that process materials. Examples of this include the production of silicon wafers and epitaxy (the creation of thin layers of semiconductor on a wafer).

The Semiconductor Industry Association publishes useful numbers for following recent trends. Predicting them is another matter.