The Technology Giants Behind Our Tiniest Computers

From smartphones and laptops to medical devices and advanced automotive systems, semiconductors have become one of the most critical resources in the digital economy. However, the journey of creating these intricate chips is far from straightforward. Behind each semiconductor lies a complex supply chain heavily dependent on a handful of technology giants, including ASML, Nvidia, and TSMC.

ASML: Building The Machines That Build it All

Touted as Europe’s most valuable technology firm, yet known to very few by name, ASML is a Dutch company that holds a quiet monopoly over the world’s most high-tech printers, which are responsible for making semiconductors.

Modern microchips such as CPUs (Central Processing Units) or GPUs (Graphics Processing Units) are made by etching intricate transistor patterns onto multiple layers of silicon wafers. The concept may sound relatively simple, but conventional means fall short when you’re working with measurements in the range of 3-14 nanometres (about 10 atoms wide or 1/10000th of a human hair).¹ Instead, ASML creates machines that use UV light, a process called photolithography, to carve out the thinnest of margins, allowing for maximal density in each circuit board.

Finally, what makes this technology truly incredible is the fact that no other company has yet to come close to realising the degree of precision that ASML prides itself on delivering. As the only company currently capable of making the specific machines required for the most advanced chips in the world, ASML is one of the most important players in the semiconductor supply chain.

Nvidia: The Visionary Behind Our Graphics

Nvidia, often hailed as the pioneer of GPUs, established its status in 1999 when it introduced the groundbreaking GeForce 256, a graphics card that revolutionised 3D graphics in PC gaming. Since then, they have continuously pushed the boundaries of graphics computing, creating 18 generations of GPUs.

Nvidia’s modern GPUs, while also excelling in producing beautiful graphics, are powerful data processors, enabling complex simulations and expedited artificial intelligence training. In 2006, Nvidia decided to invest in what is now known across the industry as CUDA (Compute Unified Device Architecture). This software framework was a game changer, massively expanding the possible applications of Nvidia’s graphics cards and allowing developers unlimited access to the raw computing power of the specialised GPU chip.

This adaptability propelled them to the forefront of AI development, particularly in handling large datasets essential to AI training. So much so that analysts predict AI data centre applications may reap up to $90 billion in revenue for Nvidia in 2024, marking a remarkable quadrupling of their 2023 earnings.²

TSMC: From Ideas to Reality

Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s most prolific semiconductor manufacturer. Also known as chip fabricators (fabs), specialists such as TSMC are key facilitators in the semiconductor ecosystem. Amidst the intricate process of semiconductor development, fab operators take on production responsibility, enabling fab-less firms such as Apple, Nvidia, and AMD to concentrate solely on design without the burden of developing an entire hardware production line. Being the leading producer of semiconductors, TSMC accounts for nearly 60% of the world’s semiconductor supply.³

Manufacturers such as TSMC are often overshadowed in discussions centred on the semiconductor industry – after all, design firms such as Nvidia tend to get all the credit for being innovative. Each of TSMC’s 18 state-of-the-art fabrication plants represents a multi-billion-dollar investment, boasting sterile environments, lab-coated engineers, and cutting-edge machinery from ASML. It is only by harnessing the capabilities of these highly sophisticated production houses that simple wafers of raw silicon can be transformed at scale into high-functioning circuit boards filled with billions of transistors.⁴

Gaining Exposure to the Semiconductor Value Chain

For investors looking for exposure to the companies above or the semiconductor industry overall, Global X Semiconductor ETF (ASX: SEMI) may be of interest.

SEMI provides a low-cost way to invest in companies, including ASML, TSMC and Nvidia, from across the entire semiconductor supply chain, reducing single-stock risk and providing exposure to the totality of the industry. Find out more about SEMI by clicking the fund name above.

Editor’s Note: This does not constitute financial product advice nor a recommendation to invest in the securities listed. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking appropriate financial advice before investing.