Fabrication

CHAPTER 03

One island. 71% of the world\u2019s advanced chips.

What is Chip Fabrication?

Fabrication (or "fab") is the actual manufacturing of chips in specialized factories called foundries. A chip begins as a blank silicon wafer — a thin, circular disc of ultra-pure silicon. Through hundreds of steps over several months, layers of circuits are built up on the wafer: depositing materials, etching patterns, implanting atoms, and testing. A single speck of dust can ruin a chip, so fabs operate in "cleanrooms" thousands of times cleaner than hospital operating rooms.

Chip design and manufacturing diverged decades ago. Companies like Nvidia and Apple design chips but depend entirely on foundries to produce them. The foundry market has consolidated into the most lopsided oligopoly in industrial history.

Foundry Revenue Share (Q3 2025)

🇹🇼TSMC (Taiwan)71%

🇰🇷Samsung (South Korea)7%

🇨🇳SMIC (China)5%

🇹🇼UMC (Taiwan)4%

🇺🇸GlobalFoundries (US)4%

Others9%

TSMC sits on an island 100 miles from mainland China. Both the U.S. and China have recognized this vulnerability — the U.S. through its CHIPS Act and China through investment in SMIC, currently limited to ~7nm without EUV access.

Advanced Chip Manufacturing

🇺🇸 US & Allies🇨🇳 China

Key Relationships

TSMC → Nvidia / Apple / AMD

All three are fabless designers entirely dependent on TSMC.

TSMC ← ASML

Mutual dependency. TSMC can’t produce without ASML’s EUV machines.

SMIC (China)

Largest Chinese foundry, investing heavily. Currently a generation+ behind TSMC.