360° Coverage : Why Are Chips So Expensive?

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Why Are Chips So Expensive?

Apr 30 2014, 7:12pm CDT | by

From time to time people ask me why chips cost so much, and can’t anything be done to make them cheaper.  The argument goes like this: Silicon is the second most abundant element on the earth’s...

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13 weeks ago

Why Are Chips So Expensive?

Apr 30 2014, 7:12pm CDT | by

From time to time people ask me why chips cost so much, and can’t anything be done to make them cheaper.  The argument goes like this:

Silicon is the second most abundant element on the earth’s crust, making up about 28% of its mass.  It’s the basis for most of our rocks, clay, and sand.  This implies that it should be extremely cheap to make a chip.  After all a 300mm silicon wafer that is used to make dozens to tens of thousands of chips weighs only about 100 grams and a 50-pound bag of sand at the Home Depot weighs more than 200 of these wafers and sells for under $5.  Why, then, can Intel charge $100 for a processor chip that uses only a fraction of one of these wafers?

This sounds like a big rip-off.

This same question surrounded photovoltaics and the polysilicon shortage that industry experienced in 2007-8.  Yes, silicon is one of the earth’s most abundant elements, but that doesn’t automatically make chips cheap.  That silicon must be refined to a purity that was not thought possible a few decades ago.

These refining steps are costly.  The bulk of the cost of a raw wafer (~$500) is in this process, and the capital equipment and energy used to produce it.

This is a pretty elaborate process.  You can read about it in detail in a 46-page slideshow pdf from Simon Fraser University, but if you’re less patient you might want to look at the lighthearted ’80s-era rendition from Humphrey Products on the Objective Analysis website.  It might be old, but it’s still accurate and is actually fun to read.  That’s where this post’s image comes from.

But $500/wafer is a far cry from the $1,600 or so that a finished memory chip wafer costs, or the $5,000-odd cost of a finished high-end processor wafer.  Of that cost half or more is capital depreciation on the equipment that converts the raw wafer to finished chips.

The lion’s share of the capital depreciation is lithography equipment, basically cameras on steroids.  These cameras have lenses that are about 5-10 feet long and around a foot in diameter, and project features onto the wafer with a resolution as fine as 38 nanometers.

How big is 38 nanometers?  I’m glad you asked.  It’s 38 billionths of a meter, or the length of about 190 silicon atoms.

Another big chunk goes to the materials processing equipment, which consists of exotic tools like plasma etchers that very precisely burn things off the wafer, deposition equipment that puts atoms-thick layers of new materials onto the wafer, furnaces that are used to coax foreign atoms into the crystal structure of the silicon, and ion implanters which are like baby atom smashers.

All this equipment is extraordinarily pricey, costing millions or even tens of millions of dollars per tool.  That’s why a modern wafer fabrication plant can cost as much as $10 billion to build and equip.

The odd thing is that if you were to reduce that capital depreciation by using lower-tolerance (cheaper) equipment then you would get fewer transistors on a wafer, and that would push the chip’s cost per function higher.

A blog post called: Why Facebook Can’t Get its Dream Memory Chip details this for flash memoryFacebook and Google have asked the semiconductor industry to design a flash memory chip that has most of the performance of flash at a per-byte price that approaches that of a hard disk drive.  There’s no harm in asking!

In brief, though, that’s not going to happen.  The processes in use today are the most cost-effective available, and even if specifications were compromised chip prices would barely budge.

Making cheaper transistors is not at all simple, and (believe it or not) today’s methods are the cheapest anyone can do.

 
Update
10

7 weeks ago

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KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan R ...
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Update
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Update
7

7 weeks ago

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KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammu ...
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Update
6

7 weeks ago

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Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern states last month ...
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Update
5

8 weeks ago

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Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 mi ...
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Update
4

8 weeks ago

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Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Mus ...
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Update
3

8 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allocati ...
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Update
2

8 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Schem ...
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1

8 weeks ago

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Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway (Kidex) today. ...
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