360° Coverage : Why Are Chips So Expensive?

2 Updates

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...

Filed under: news

 
 
 

19 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
2

2 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

2 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the doubl ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

First comet landing site to be revealed
Paris, Sep 15 (IANS/EFE) The European Space Agency (ESA) has planned to reveal the site selected for the first landing of a comet this week.
 
 
Israeli PM eyes big increase in defence spending
Jerusalem, Sep 15 (IANS) Israeli Prime Minister Benjamin Netanyahu Sunday said he was supporting an increase in defence spending in the upcoming 2015 budget in opposition to the stance of the finance minister, which may lead to the collapse of his political coalition.
 
 
President reaches Vietnam
Hanoi, Sep 14 (IANS) Indian President Pranab Mukherjee Sunday arrived here on a four-day state visit to Vietnam during which an agreement will be signed on scouting for oil and gas in the South China Sea.
 
 
President reaches Vietnam on state visit
Hanoi, Sep 14 (IANS) Indian President Pranab Mukherjee arrived here Sunday on a four-day state visit to Vietnam during which an agreement will be signed on scouting for oil and gas in the South China Sea.
 
 
 

Latest from the Network

First comet landing site to be revealed
Paris, Sep 15 (IANS/EFE) The European Space Agency (ESA) has planned to reveal the site selected for the first landing of a comet this week. Philae, a landing module weighing about 100 kg that is part of Rosetta (...
Read more on Apple Balla
 
China issues typhoon alert
Beijing, Sep 15 (IANS) China Monday issued an emergency alert for typhoon Kalmaegi. The alert was orange colour coded which stands for the second most severe according to China's weather warning system, Xinhua...
Read more on Politics Balla
 
Delhi marathoner Ashis Roy, 82, takes his tally to 138
Washington, Sep 15 (IANS) India's marathon man Ashis Roy has added another half marathon to his bag to take his overall tally to 138 as he completed his 23rd 13.1-mile run in the Navy-Air Force Half Marathon here....
Read more on Sport Balla
 
Brazilian soccer standings
Rio de Janeiro, Sep 15 (IANS) Following are the standings of the Brazilian Serie A championship after the latest round of matches Saturday and Sunday (tabulated under games played, won, drawn, lost, goals for, goals...
Read more on Sport Balla
 
Post Winfrey's show, Lohan was forced to leave NY
London, Sep 15 (IANS) Troubled actress Lindsay Lohan claims her controversial stint on Oprah Winfrey's reality show left her little choice but to relocate overseas. Lohan, who is currently staying here, talked about...
Read more on Celebrity Balla
 
Singapore air quality reaches unhealthy range
Singapore, Sep 15 (IANS) Air quality in Singapore crossed the "unhealthy" line Monday morning, as the three-hour pollutant standards index (PSI) reached 113 at around 6 a.m. And by 7 a.m. fell slightly to 111. A PSI...
Read more on Politics Balla
 
Hamburg lose, Augsburg win in German Bundesliga
Berlin, Sep 15 (IANS) Hamburg suffer their second straight loss while Augsburg grab their first victory to close the third round of Bundesliga Sunday, Xinhua reports. Hannover upset Hamburg 2-0 at the Northern derby,...
Read more on Sport Balla
 
How Kate Hudson keeps romance alive?
Los Angeles, Sep 15 (IANS) Actress Kate Hudson has devised a formula for long-lasting relationship - she refuses to spend more than two weeks away from her beau, Muse frontman Matt Bellamy. She also plans regular date...
Read more on Celebrity Balla
 
US win Basketball World Cup
Madrid, Sep 15 (IANS) The US retained their title as world basketball champions Sunday with a crushing 129-92 win over Serbia in the final held in Madrid's Palacio de Deportes, Xinhua reported. The Americans may have...
Read more on Sport Balla
 
Egypt urges global support to curb floods in Sinai
Cairo, Sep 15 (IANS) Egypt Sunday called for global support and cooperation to address the seasonal flash floods that cause great losses in the mountainous Sinai Peninsula. The appeal was made during the second Arab...
Read more on Politics Balla