Microchips & semiconductors

A microchip is a fingernail-sized piece of silicon with billions of microscopic switches etched into it. Those switches are what make computers compute. Every phone, laptop, car, washing machine, and AI data center is full of them.

Without chips, almost nothing modern works. That's why this is one of the most strategic industries in the world.

The industry splits into three big jobs. Design (drawing the chip's layout). Fabrication (the trillion-dollar factories that physically make it). And packaging + testing.

Almost no company does all three. NVIDIA, Apple, and AMD design chips but don't make them. TSMC in Taiwan makes most of the cutting-edge ones. ASML in the Netherlands builds the machines that make the machines.

Chip companies sell to other companies, not to consumers. A car maker buys chips to put inside its cars; a cloud company buys chips to put inside its data centers.

The most valuable chips today are made for AI training (NVIDIA, AMD) and phones (TSMC's customers like Apple and Qualcomm). Memory chips are a separate cycle — they swing between huge profits and big losses based on supply.

A leading-edge chip factory costs $20 billion or more to build. The machine that prints chip patterns onto silicon, made only by ASML, costs about $200 million each.

This is why so few companies compete at the cutting edge. TSMC, Samsung, and Intel are essentially the only three trying to make the smallest chips, and Intel has been slipping.

Chip demand swings hard with the economy and with tech cycles. When the world buys lots of phones and cars, chips boom. When demand cools, factories that took years to build sit half-empty.

This is the industry's reputation: huge upside in good years, real pain in bad ones. Picking when to buy matters more here than in most sectors.

Geopolitics is the big one. Most leading-edge chips are made in Taiwan, a few hundred miles from China. Any conflict over Taiwan would shake the whole global economy.

Other risks: export controls (the US restricts what advanced chips can be sold to China), the cyclical demand swings above, and the constant race to make smaller, faster chips — a company that misses one generation can fall years behind.