The Race for Process Leadership: A historical Snapshot of Semiconductor Technology and Manufacturing

The past decade has seen dramatic shifts in the global semiconductor landscape driven by rapid technological innovation. What was once a stable hierarchy is now in constant flux as new lithography solutions emerge and companies jockey for position at the frontier of Moore’s Law.

Here we examine the developments reshaping the industry through an analysis of three themes: key semiconductor technologies, transitions in sector leadership, and geopolitical implications. By tracing the leadership swings between Intel, TSMC and others, we can identify the strategies most likely to succeed in this high-stakes industry—and how governments are responding to concentration risks.

The Lithography Revolution

For over 15 years, Intel dominated chip production using deep ultraviolet (DUV) lithography, achieving gradual improvements through incremental “cookie cutter” adjustments. However, the process required manual machine tuning for each new design, limiting efficiencies.

The solution was extreme ultraviolet (EUV) lithography, developed by Dutch firm ASML. Capable of digital manipulations, EUV promised faster development cycles through standardized tools. Tests in 2016 indicated EUV could enable mass production of even smaller microchips, yet Intel remained doubtful—a choice that altered the industry’s course.

Instead, Taiwanese company TSMC partnered with ASML, rapidly incorporating EUV to reach 3nm scale years ahead of competitors. This demonstrated both EUV’s viability and the benefits of disruptive adoption, thrusting TSMC to the top of the industry.

Now ASML has revealed High Numerical Aperture (HNA) lithography, supposedly allowing the design and manufacturing of 2nm nodes. Learning from past missteps, Intel secured the inaugural HNA tools, hoping this “secret weapon” will restore its primacy by the end of 2024.

Shifting Alliances Reshaped Sector Domination

Intel retained leadership for 15+ years with DUV. However, its conservative dismissal of “unproven” EUV ceded ground to TSMC, which then established itself as the dominant player through bold adoption of ASML’s innovations.

When disruptions emerge, flexible firms that are willing to accept uncertainty gain positions others resist. Now TSMC leads while Intel plays catch up, showing fortune favors the bold.

With HNA, roles may flip again. But if difficulties arise, TSMC’s head start with EUV means it will remain ahead minimally another two years.

Concentration Risks Prompt Geopolitical Action

Currently over 90% of advanced chips originate from a lone source: TSMC’s Taiwan operations. While economically invaluable, this brings very concerning single-point-of-failure risks especially in a politically uncertain environment.

Both foreign chip consumers and governments now recognize the importance of diversification.

In response, Intel plans new fab investments in the American Southwest and Midwest utilizing its new lithography leadership quest. Success will diminish sole reliance on East Asia for this vital resource, securing economies yet political tensions endure as concentrations adjust gradually.

Overall, the semiconductor industry's ongoing story illustrates that no leader rests easily as technologies continue to emerge disruptively. Both public and private strategies must balance stability and flexibility against an uncertain yet crucial future.

Those anticipating rather than reacting to change will guide the next generation of chips—and alongside them, entire digital economies.