IC Fabrication Cost Breakdown

The manufacture of integrated circuits (ICs) is a highly complex, capital-intensive process that places considerable demands on technical precision, material quality and infrastructural conditions. For cost engineers, it is essential to understand the individual cost components of IC production in detail in order to enable transparent calculations and make well-founded decisions in strategic purchasing and cost management.

IC production is divided into three main processes: Wafer production, front-end and back-end processing. Front-end processing in particular, in which the circuit layout is applied to the silicon, accounts for the largest share of total costs. According to the bottom-up calculation documented in the white paper provided, front-end processes account for around 80% of production costs. The lithography process alone accounts for around 25 % of the total costs - a significant cost driver that places high demands both technologically and financially.

The production of a wafer begins with the Czochralski process, in which high-purity silicon is melted and pulled into single crystals. The ingots are then cut into thin wafers and processed chemically and mechanically. Even at this stage, costs are influenced by material quality, machine investments and process parameters. This requires high-precision systems that can cost several million dollars to purchase.

Lithography plays a central role in the front-end process. The resolution of the structure patterns depends largely on the light source used. While DUV (deep ultraviolet) lithography is sufficient for many standard ICs, the manufacture of modern high-performance chips increasingly requires the use of EUV (extreme ultraviolet) technology. EUV systems, which are produced exclusively by ASML, cost up to USD 300 million per unit and therefore contribute significantly to the high investment costs.

Another key cost factor is the cost of materials, particularly wafers, chemicals, gases and photomasks. Photomasks become significantly more expensive with advanced structure sizes, as they have a higher number of layers and tighter tolerances. The total cost of a set of masks can be several million dollars. It is challenging to determine the exact material costs per die, as these depend heavily on the yield, the defect density and the process parameters used.

Overhead costs are an often underestimated but hugely significant cost item. These include cleanroom maintenance, energy supply, IT infrastructure, indirect labor and general administrative costs. Overhead costs increase significantly, especially with advanced manufacturing technologies, as additional quality and process controls become necessary. Benchmarks for regional location evaluation (e.g. USA vs. Taiwan) are essential for a realistic calculation.

The back-end processes, such as die separation, electrical contacting and housing design, account for around 20% of the total IC production costs. Despite the lower complexity compared to the front-end, these processes require specific materials, precise machine guidance and sometimes manual work steps, which in turn influence the costs.

In summary, it can be seen that a complete bottom-up analysis is required for a reliable IC fabrication cost breakdown. This should include investment costs, material costs, process parameters as well as regional and technical characteristics. For cost engineers, this methodology forms the basis for identifying cost drivers and incorporating them into benchmarks, price negotiations or make-or-buy decisions (without explicitly naming them).

📄 You can view the full white paper here:

WhitePaper: Cost Calculation of Integrated Circuits (PDF)

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