Just four companies will produce the microchips on which the global economy depends

President Obama speaks in front of Intel’s Fab 42, where its next-generation microchips will be made.
President Obama speaks in front of Intel’s Fab 42, where its next-generation microchips will be made.
Image: AP/Ross D. Franklin
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Making advanced microchips has always been hard. But it’s now so difficult that the number of companies with the knowledge and cash to do it is about to shrink to precisely four.

The factories in which microchips are made, called fabs, can cost billions of dollars. They’re like rocket launch sites or nuclear power plants: Everyone knows where they are and how many are in the works. And they make the microchips on which all nearly all advanced smartphones, PCs, servers, and other critical pieces of IT infrastructure depend.

The smallest elements on the most advanced microchips, currently in testing, are down to 14 nanometers, on the scale of atoms and molecules. Fifty water molecules in a row would just reach 14 nanometers.

The companies that can manage this feat of nano-scale manufacturing for a variety of microchips are Intel, Samsung, Taiwan Semiconductor Manufacturing (TSMC), and GlobalFoundries, the last of which announced today that it aims to be the world’s leading contract chip manufacturer by both volume and revenue.

Intel is currently building a high-volume fab for its most advanced processors, and outfitting two others with the same technology. This is typical: These structures are so expensive and complicated that companies start with a few, or sometimes even just one, and wait for the volume to justify the enormous capital expenditures required to build more.

By 2014, most new electronics that think with silicon will be using chips built in these factories, which means we will be more dependent than ever on just a handful of manufacturers. These facilities are spread across the globe, which is good in terms of the overall system’s susceptibility to natural disasters. But there’s not much spare capacity at these facilities. As the world—and Apple—discovered after the earthquake in Japan, supply chains are long and full of unexpected vulnerabilities.