Published: March 25, 2026
I’ve been talking about horizontal specialization in the semiconductor industry. This time, the topic is that horizontal specialization has not necessarily advanced across all product fields and countries.
There are many things I would like to talk about, so I will divide my discussion into two parts. This time (Part 1), I will discuss “horizontal specialization has not necessarily advanced across all product fields.” Next time (Part 2), I will discuss “horizontal specialization has not necessarily advanced across all countries.”
Horizontal Specialization Has Not Necessarily Advanced across All Product Fields
(1) Advanced Logic Semiconductors
(2) Memory Semiconductors
(3) Analog and Discrete Semiconductors
Supplementary Information
Volume 17: Horizontal Specialization in the Semiconductor Industry—Horizontal Specialization by Product and Country (Part 1)
First, let’s discuss that horizontal specialization has not necessarily advanced across all product fields. Let’s take a look at each of these products below.
In terms of horizontal specialization, the most advanced product category is advanced logic semiconductors. Typical products include CPUs, which are the brains of PCs; GPUs, which are used in recently popular AI servers; and SoCs, which are used in smartphones.
Note: Please refer to the Supplementary Information at the end of this document for more information on advanced logic semiconductors.
As discussed in “Volume 5: Semiconductor Miniaturization and Semiconductor Business (Part 2) - State-of-the-Art Miniaturization Costs a Lot -,” it is technically difficult and requires substantial investment to continue the development and production of advanced wafer processes for advanced logic semiconductors such as processors. Currently, only three companies are capable of doing so: Intel and Samsung, which are IDMs, and TSMC, which is a pure-play foundry.
Therefore, if companies other than Intel and Samsung want to manufacture advanced logic semiconductors using advanced wafer processes, they only have the option of using foundries, i.e., horizontal specialization.
TSMC and Samsung already offer advanced wafer processes as foundries, and Intel has also decided to enter this field in earnest. Using any of these three companies as foundries allows IDMs and fabless companies other than Intel and Samsung to manufacture advanced logic semiconductors.
As I mentioned in Volume 13, five fabless companies ranked among the top 10 semiconductor companies in terms of revenue in 2021. The products of these five companies are advanced logic semiconductors. As I also wrote in Volume 13, while Apple and other GAFAM companies are semiconductor users, they are manufacturing their own exclusive logic semiconductors as fabless companies. These semiconductors are fabricated through advanced wafer processes. Several IDMs among the top 20 companies manufacture microcontrollers and use foundries for advanced wafer processes that they cannot handle in-house.
Note: In 2021, as well as in 2022 and 2023, five fabless companies were ranked in the top 10 of the semiconductor company revenue ranking. Furthermore, six fabless companies were ranked in 2024, and Apple was also ranked in the top 10 from 2022 (based mainly on Gartner data).
However, even though Intel and Samsung are IDMs, these companies also use foundries. They do not necessarily manufacture everything in-house. Samsung’s System LSI Division is positioned as a fabless business unit. Its Foundry Division was separated from the System LSI Division in 2017. In October 2022, Intel announced that it would adopt an internal foundry business model. Then, in June 2023, the company revealed that it would separate its foundry division from the others in reality, effective in 2024. In September 2024, the company announced plans to spin off its foundry business into an independent subsidiary. (This has not yet been implemented as of the end of April 2025.) Both companies will have an internal fabless business model and foundries, meaning it may no longer be accurate to call them pure IDMs. In other words, the world of advanced logic semiconductors is moving toward complete horizontal specialization.
Note: Samsung Electronics website stated that the System LSI Division was the only fabless division in Samsung Electronics (as of November 1, 2023). However, I could not find this description in May 2025.
Note: Samsung Electronics website stated that the System LSI Division was the only fabless division in Samsung Electronics (as of November 1, 2023). However, I could not find this description in May 2025.
Because the performance improvements of CPUs, GPUs, and other PC and server processors are supported by advancements in wafer process technology, I think IDMs had an advantage as long as they maintained a lead in wafer processes. It can be said that this is why Intel has advanced miniaturization of the process and pursued Moore’s Law. However, Intel struggled to launch cutting-edge wafer processes. In 2020, the CEO at the time acknowledged the delay in wafer process development and indicated that Intel would not stick to its own processes. This created a sense of uncertainty about the future. In March 2021, however, new CEO Pat Gelsinger announced in his policy briefing that Intel would continue developing and producing cutting-edge wafer processes in its own factories to regain its leadership position.
The 3D models below depict transistors used in an advanced wafer process. As miniaturization progresses, shown from left to right in the figure, it becomes more three-dimensional and complex.
The pink color indicates the gate electrode, the blue color indicates the insulating layer (SiO2), and the silver color indicates the silicon (Si).
|
Planar FET |
FinFET |
GAAFET（Gate-All-Around FET） |
As described above, horizontal specialization has advanced in the case of advanced logic semiconductors. However, the situation is different for other products.
All of the top-selling companies for major memory semiconductors, such as DRAM and NAND flash, are IDMs. Previously, major IDMs around the world, including those in the U.S., Europe, and Japan, manufactured DRAM. However, they withdrew one after another, leaving Samsung, SK Hynix, and Micron to account for over 90% of the market and creating an oligopoly. In the NAND flash market, these three companies, along with Kioxia and Western Digital, make up five companies that account for over 90% of the market. Unlike the advanced logic semiconductor market, the memory semiconductor market is dominated by a small number of IDMs.
Note: DRAM stands for dynamic random-access memory, while NAND flash refers to NAND flash memory. Both are types of semiconductor memory (storage elements).
As I mentioned in Volume 5, both DRAM and NAND flash are devices that pursue higher capacities through miniaturization and three-dimensional processing. These are front-end process technologies. Since front-end processes are more important than circuit and system design, I think that IDMs that own these processes play a leading role.
The following are examples of applications that use memory semiconductors.
SSD (solid state drive) equipped with NAND flash |
Computer memory modules equipped with DRAM |
Extreme miniaturization is generally not required for analog and discrete semiconductors. Therefore, unlike advanced logic semiconductors, I think IDMs that have been operating since before horizontal specialization have generally been able to continue production in their own factories, and as a result, they have maintained a strong presence in the market. In fact, the leading companies in terms of revenue for both analog and discrete semiconductors are IDMs. TI, the leader in the analog semiconductor industry by revenue share, is continuously building their own factories to increase their in-house production ratio. Major IDMs that manufacture power semiconductors, a type of discrete semiconductor, in and outside of Japan are investing to increase their manufacturing capacity. Some companies in the silicon carbide (SiC) power semiconductor industry are trying to achieve vertical integration by bringing wafer fabrication in-house. This is the opposite of horizontal specialization, a strategy aimed at strengthening vertical integration.
As mentioned above, although there is a movement toward strengthening vertical integration, particularly in the case of analog semiconductors, it is common for IDMs to use foundries when processes require miniaturization technology that exceeds the capabilities of their own factories, or to supplement production capacity. Additionally, there are leading fabless analog semiconductor companies. This differs from the DRAM and NAND flash industries, which manufacture their products in their own factories. IDM (vertical integration) and horizontal specialization appear to coexist in practice. Foundries offer wafer processing for analog semiconductors, making use of older processes in older factories. Some foundries specialize exclusively in analog semiconductors.
Note: Discrete Semiconductor: A product consisting of one element (one device), such as a transistor or diode.
Note: Analog Semiconductor: A semiconductor that processes continuous electrical signals. Typical products include operational amplifiers, which amplify electrical signals, and power management integrated circuits (ICs), which supply a tailored power supply voltage to each electronic circuit.
Operational amplifiers and power management ICs are also among our core products. Please see the following links for specific products.
As shown above, when viewed by product, it can be said that horizontal specialization has not advanced across all product fields; rather, it has only advanced in the field of advanced logic semiconductors, while IDMs still play a significant role in other fields. We often group various devices under the term “semiconductor,” but they only share materials, basic manufacturing processes, and fundamental principles; each product is a different kind of device and belongs to a different world. It is not surprising that the degree of horizontal specialization differs. Sometimes I can’t help but think that fabless companies making SoCs (System on a Chip, or System on Chip) are actually more system-oriented than semiconductor-oriented.
However, it is possible to start a fabless business since foundries are well-established, even for niche products that would not fill a factory. Therefore, while the above is true for larger companies, fabless companies exist in almost all product fields. In fact, there are fabless companies in both DRAM and discrete semiconductors. In this sense, one could argue that horizontal specialization is spreading to all product fields to varying degrees.
In recent years, silicon carbide (SiC) and gallium nitride (GaN) have attracted attention in the field of power semiconductors, a type of discrete semiconductor. Since there are foundries that provide processes for these semiconductors, fabless companies are also entering this field.
This concludes the discussion on the idea that horizontal specialization has not necessarily advanced across all product fields. The next volume will discuss the idea that horizontal specialization has not necessarily advanced in all countries.
About Advanced Logic Semiconductors
Although there is no clear definition, in this case, it refers to logic semiconductors that use advanced wafer processes. There is likewise no fixed definition of advanced wafer processes. For the purposes of this discussion, I assume the 28 nm process and beyond. Although the 28 nm process has been in mass production for more than ten years and is often regarded as a mature process, many major IDMs do not manufacture products with their own 28 nm and below processes because developing and mass-producing processes around the 28 nm process is difficult. For this reason, I refer to it as an advanced process here.
Specific products include processors and products that integrate a processor and other functions into a single chip. These products also include field-programmable gate arrays (FPGAs), which are discussed in Volume 5. Specialized semiconductors (ASICs) for mining virtual currencies (cryptographic assets) are also advanced logic semiconductors.
Examples of processors that integrate other functions into a single chip include CPUs, GPUs, and MPUs, which are used in computers such as PCs and servers. Another example is SoCs, which are mainly used in smartphones. MCUs are used in cars and home appliances. However, many MCUs do not use advanced microprocesses.
Explanation of Abbreviation
FPGA: Field-Programmable Gate Array
ASIC: Application Specific Integrated Circuit
CPU: Central Processing Unit
GPU: Graphics Processing Unit
MPU: Microprocessing Unit
SoC: System on a Chip or System on Chip
MCU: Microcontroller Unit
Click below to read this series.
Semiconductor Miniaturization:
Volume 1: Semiconductor Miniaturization: What is Moore’s Law?
Volume 2: Semiconductor Miniaturization and Manufacturing Process
Volume 3: Semiconductor Miniaturization and International Technology Roadmap
Volume 4: Semiconductor Miniaturization and Semiconductor Business
Volume 5: Semiconductor Miniaturization and Semiconductor Business (Part 2)
Volume 6: Semiconductor Miniaturization and Semiconductor Devices
Volume 7: Semiconductor Miniaturization: What is MOSFET Scaling?
Volume 8: Semiconductor Miniaturization: Limitations of MOSFET Scaling
Volume 9: Semiconductor Miniaturization and Analog Circuits
Shift to Larger Diameter Silicon Wafers:
Volume 10: Shift to Larger Diameter Silicon Wafers: How a Common Material, Silicon, Became a Main Player
Volume 11: Shift to Larger Diameter Silicon Wafers (Part 2): How Silicon Wafers Are Made
Volume 12: Shift to Larger Diameter Silicon Wafers (Part 3): Reasons and History
Horizontal Specialization in the Semiconductor Industry
Volume 13: Horizontal Specialization in the Semiconductor Industry and the Rise of Fabless Companies
Volume 14: History of Horizontal Specialization in the Semiconductor Industry–Emergence of Fabless Semiconductor Companies
Volume 15: History of Horizontal Specialization in the Semiconductor Industry–Emergence of Foundries
Volume 16: Horizontal Specialization in the Semiconductor Industry—Is a Foundry Just a Subcontractor?
Volume 17: Horizontal Specialization in the Semiconductor Industry—Horizontal Specialization by Product and Country (Part 1)