Shrinking Semiconductor Nodes: Unlocking Innovation While Tackling Availability & Obsolescence
An Interview with Global Commodity Director, Mike Gately
As the semiconductor industry continues to push the boundaries of miniaturization, the concept of “node size” has become a critical factor influencing chip performance, availability, and obsolescence. To better understand these dynamics, we sat down with Mike Gately, Global Commodity Director, to discuss the impacts of node size on the semiconductor industry and the challenges it presents for long-term product lifecycles and obsolescence management.
Q: What is node size, and why is it so important in semiconductor manufacturing?
A: Node size refers to the smallest feature that can be etched onto a semiconductor chip during the manufacturing process. It’s typically measured in nanometers (nm). Smaller node sizes allow manufacturers to pack more transistors onto a chip, which improves performance, reduces power consumption, and enables more functionality. For example, a chip manufactured at 5nm is more advanced than one at 28nm, offering better speed and efficiency. However, smaller nodes also come with increased manufacturing complexity and cost, which can have ripple effects across the industry.
Q: What is the current market demand for these different semiconductor technologies?
A: Well, let’s look at how this year started. Evaluating the revenue that was generated by these different node sizes is a good indicator of how the market is driving demand for more advanced technologies. In Q1, 5nm chips saw an increase in revenue share, rising to 36% from 34% quarter over quarter. This growth emphasizes the strong demand for this node, which is widely used in flagship devices like smartphones and high-performance computing systems.
What’s equally noteworthy, though, is the continued relevance of larger node sizes—defined as 7nm or greater—which still accounted for 27% of revenue in Q1. This demonstrates that while the industry is pushing toward smaller, cutting-edge nodes, there remains a significant and sustained demand for legacy nodes.
Q: How does the push toward smaller node sizes impact semiconductor availability?
A: The drive to smaller nodes has created both opportunities and challenges. On one hand, it enables innovative technologies like AI, 5G, and advanced computing. On the other hand, manufacturing at smaller nodes requires specialized equipment, such as extreme ultraviolet (EUV) lithography machines, which are incredibly expensive and limited in supply. This can lead to production bottlenecks, especially during periods of high demand, as we saw during the global chip shortage.
Additionally, the high cost of developing and manufacturing at smaller nodes means that only a few companies can afford to operate at the forefront. This leaves smaller players and industries that rely on older nodes struggling to access the chips they need.
Q: How does accelerating demand for advanced nodes compound these challenges?
A: The demand for advanced nodes is growing rapidly, driven by applications like AI, machine learning, and high-performance computing. As fabs push toward 2nm and beyond, the challenges become even more complex. Material innovation becomes non-negotiable at these scales. Lithography materials, deposition precursors, and ultra-pure process chemicals must not only be available domestically but also co-developed alongside evolving process nodes.
This requires an ecosystem-level approach involving close collaboration between material science firms, fab operators, and EDA (electronic design automation) tool vendors. Unfortunately, this level of integration has yet to fully take hold in the U.S., which puts domestic semiconductor manufacturing at a disadvantage compared to regions like Asia, where these ecosystems are more mature. Addressing this gap will be critical for ensuring the availability of advanced nodes in the future.
Q: What about industries that rely on legacy nodes? How are they affected by this trend?
A: That’s a great question. While the tech world often focuses on the latest and greatest, there’s still significant demand for chips manufactured at larger nodes, such as 90nm or 130nm. These chips are used in applications where innovative performance isn’t necessary, like microcontrollers, sensors, and power management ICs. However, as foundries prioritize advanced nodes, the availability of legacy node capacity is declining. This creates challenges for industries like automotive and A&D equipment, where products often have long lifecycles and require reliable access to older chips. A&D revenue increased by 15% YoY alone; led by new program ramps and the growing robust defense demand.
Q: So, from those numbers demand for these older / larger nodes isn’t going away?
A: Not at all. In fact, the technology is still needed. The major semiconductor shortage a few years back was heavily based on these larger nodes. So, while many new investments are being put into smaller / advanced nodes, concerns still exist on the legacy product. China, for example, sees the ongoing demand for this older technology and they are investing heavily into it.
Q: Does the shift to smaller nodes accelerate obsolescence in the semiconductor industry?
A: It absolutely can. As the industry moves toward smaller nodes, older manufacturing processes become less economically viable. Foundries may phase out production lines for larger nodes, making it harder to source legacy chips. This can be particularly problematic for high-reliability applications, such as aerospace or medical devices, where systems need to operate for decades. When replacement parts are no longer available, companies may be forced to redesign products or stockpile components, both of which are costly and time-consuming.
Q: Are there unique reliability challenges associated with smaller node sizes?
A: Yes, smaller nodes introduce new reliability concerns. As transistors shrink, they become more susceptible to defects, wear, and environmental factors like radiation. This is especially critical for high-reliability applications, where even a single failure can have dire consequences. To address this, at Converge, we conduct rigorous testing and validation to ensure that chips meet stringent quality standards.
Q: How does regional concentration of advanced node manufacturing affect the industry?
A: The concentration of advanced node manufacturing in regions like Taiwan and South Korea poses significant risks. Any disruption—whether due to natural disasters, geopolitical tensions, or supply chain issues—can have a global impact. To mitigate these risks, governments and companies are investing in diversifying semiconductor production. Initiatives like the U.S. CHIPS Act aim to build domestic manufacturing capacity, but these efforts will take time to bear fruit.
Q: What strategies can the industry adopt to balance innovation with long-term availability?
A: Balancing innovation and availability requires a multi-faceted approach. First, foundries need to continue investing in legacy nodes to support industries that rely on older technologies. Second, diversifying supply chains is critical to reducing reliance on specific regions or manufacturers. Third, promoting circular economy practices like recycling and reusing electronic components can help address the environmental impact of obsolescence. Finally, fostering an ecosystem-level approach to material innovation is essential. This means closer collaboration between material science firms, fab operators, and EDA tool vendors to ensure that the materials and processes required for advanced nodes are developed in tandem.
Q: Looking ahead, what trends do you see shaping the future of the semiconductor industry?
A: I think we’ll continue to see a dual focus on innovation and sustainability. On one hand, the push toward smaller nodes will drive advancements in AI, quantum computing, and other emerging technologies. On the other hand, there will be growing recognition of the importance of legacy nodes, especially for industries with long product lifecycles.
Managing obsolescence for these high-reliability industries is one of the most pressing challenges I see. It’s a challenge I hear about every day, and it requires a proactive and strategic approach to ensure supply chain continuity.
One layer of any resilient supply chain is to work closely with an independent distributor, like Converge. These partners are invaluable because they have the networks, expertise, and agility to locate hard-to-find and end-of-life parts. I’ve seen firsthand how these relationships can make the difference between keeping production lines running and facing costly delays. For me, building strong, trusted relationships like this isn’t just a tactical decision, it’s a cornerstone of a strong obsolescence management strategy.
Q: Thank you, Mike, for speaking to us today and sharing your expertise. It’s exciting to see the industry becoming more advanced in its technology, but it’s important to understand it can come with its own set of challenges.
A: That’s right, it is exciting, but there are extremely important sectors that need to not be forgotten through this growth. A lot of the planes we fly on and the defense equipment in use still rely heavily on older technology and we need to support their supply chains. Thank you for having me, it’s always a pleasure.
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