IC Procurement Insights: Technical and economic perspectives for cost engineers

Modern semiconductor production increasingly presents cost engineers with the challenge of creating profound transparency in the cost structure of integrated circuits (ICs). Despite their central role in almost all electronic devices, the cost breakdown of these components often remains opaque. This is precisely where IC Procurement Insights comes in - with the aim of providing a fact-based decision-making basis for procurement and cost calculation.

A key to understanding IC costs lies in a detailed insight into the manufacturing process. Starting with wafer production, through the complex front-end process to the final back-end packaging, numerous factors influence the overall cost structure. Wafer production is based on the Czochralski process, in which monocrystalline rods are drawn from molten silicon and then sawn into thin wafers. These wafers form the starting material for the subsequent process steps.

In the front-end process, complex circuits are transferred to the wafer using elaborate lithography and etching processes. DUV and increasingly also EUV technologies dominate here, with the latter being essential for highly developed nodes - but associated with enormous investment costs. Lithography alone accounts for around 25% of the total manufacturing costs of an IC, making it the most capital-intensive stage of production. The remaining front-end portion, including lithography, adds up to around 80 % of the total costs.

In the back-end area, the manufactured die is separated from the wafer, contacted and packaged. Although this process is less complex, it is material and labor intensive. Packaging costs account for around 20 % of IC manufacturing costs. This section should therefore not be neglected either, especially in terms of global production capacities and supply chain stability.

A particularly relevant aspect of IC Procurement Insights is the differentiated consideration of overheads. These include not only personnel and energy costs, but also expenses for infrastructure, IT and quality management. The more advanced the process node, the higher these indirect costs rise - in total, they account for around 35% of total costs. A precise regional benchmarking analysis is essential here, as the cost structures between production facilities in the USA and Asia, for example, can differ significantly.

A well-founded cost model also takes machine investments into account, especially for lithography systems. While DUV systems cost between 50 and 100 million US dollars, the price for an EUV system is up to 300 million US dollars. These enormous sums require long-term planning and strategic allocation of resources. This is compounded by material costs comprising silicon wafers, photoresists, process chemicals and mask sets - the latter can cost several million dollars for advanced nodes.

The bottom-up calculation presented for a 32-bit automotive microcontroller shows how production volume, technology nodes, packaging form and quantities affect the final IC costs. For cost engineers, such models provide a valid basis for evaluating offers and deriving strategic procurement decisions, for example with regard to location selection, technology paths or price negotiations with foundries and OSAT partners.

In summary, the IC Procurement Insights provide an in-depth, technical and economic view of all relevant cost factors along the IC value chain. They are an indispensable tool for procurement teams and cost analysts to make informed decisions, minimize risks and secure competitive advantages - especially in a market environment that is characterized by technological dynamics and geopolitical uncertainties in equal measure.

🔗 You can download the full white paper here:

White Paper - Cost Calculation Integrated Circuits (PDF)

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