Introduction to Semiconductor Materials Knowledge

Semiconductor materials are the cornerstone of the semiconductor industry and serve as the foundation for manufacturing electronic and computer chips. There are many different types of semiconductor materials, each with unique properties and applications. This article will introduce the semiconductor materials commonly used in today’s semiconductor industry.

I. Silicon (Si)

Silicon is the most common semiconductor material, boasting advantages such as excellent stability, low cost, and well-established processing techniques. Silicon materials can be produced in various forms, including single-crystal silicon, polycrystalline silicon, and amorphous silicon; among these, single-crystal silicon is the most widely used in the manufacture of integrated circuits. The primary drawback of silicon is its relatively poor conductivity, which necessitates the doping of other elements to enhance its electrical conductivity.

II. Gallium Nitride (GaN)

Gallium nitride is an emerging semiconductor material characterized by high electron mobility, high electrical conductivity, and excellent thermal stability. It can be used to manufacture high-efficiency LEDs and high-power semiconductor devices. Moreover, gallium nitride finds applications in fields such as aerospace, defense, and telecommunications.

III. Silicon Carbide (SiC)

Silicon carbide is an emerging semiconductor material that boasts advantages such as high-temperature stability, high-frequency performance, and high voltage resistance. Silicon carbide can be used to manufacture high-power, high-frequency, and high-temperature semiconductor devices, such as power amplifiers, high-speed switches, and radio-frequency components.

4. Gallium Phosphide (GaP)

Gallium phosphide is a commonly used semiconductor material characterized by high electrical conductivity and high photoelectric conversion efficiency. It can be applied in the fabrication of devices such as solar cells, photodetectors, photoconductors, and LEDs.

V. Aluminum oxide (Al2O3)

Aluminum oxide is a commonly used insulating material characterized by high dielectric constant, high resistivity, and excellent thermal stability. It can be used to fabricate insulating layers in devices such as MOSFETs and DRMs.

6. Gallium Arsenide (GaAs)

Gallium arsenide is a semiconductor material characterized by high electron mobility and high operating speeds. It can be used to fabricate high-speed electronic devices, such as high-speed transistors, high-speed photodetectors, and high-speed logic circuits.

7. Silicon Nitride (Si3N4)

Silicon nitride is an insulating material characterized by a high dielectric constant and excellent thermal resistance. It can be used to fabricate insulating layers in devices such as MOSFETs and DRMs.

1. Industry Positioning

The integrated circuit industry chain includes key stages such as design, manufacturing, and packaging & testing. Among these, semiconductor materials are crucial upstream raw materials for integrated circuits, and can be categorized by application into wafer fabrication materials and packaging materials.

2. Classification Status

Semiconductor materials include both wafer fabrication materials and packaging materials. Wafer fabrication materials encompass silicon wafers, photomasks, electronic gases, photoresists, CMP polishing materials, wet electronic chemicals, target materials, and more. Packaging materials include packaging substrates, lead frames, bonding wires, encapsulating materials, ceramic substrates, die attach materials, and other packaging materials.

The domestic semiconductor industry—from upstream equipment and materials to integrated circuit products—remains highly dependent on foreign sources, particularly in the area of high-end wafer manufacturing materials. Currently, Chinese companies have made some breakthroughs in fields such as electronic gases, silicon wafers, wet electronic chemicals, and CMP polishing slurries; however, progress has been relatively slow in areas like high-end photoresists and CMP polishing pads. The semiconductor materials industry comprises numerous sub-sectors, each characterized by significant technological differences, which result in vastly different competitive landscapes across these sub-industries. Consequently, domestic companies face varying market environments, competitors, and downstream customers.

II. Current Semiconductor Supply and Demand Situation

1. Industrial silicon

In terms of the supply of semiconductor raw materials, China is one of the world’s largest suppliers of metallurgical-grade silicon. As domestic efforts to optimize production capacity continue to advance, global industrial silicon production capacity has shown a gradual downward trend since 2019, reaching only 6.32 million tons in 2021. Notably, despite the ongoing optimization of production capacity, industrial silicon output has experienced significant growth, driven by the surge in demand for automotive chips.

2. Demand Side

Overall semiconductor demand determines the scale of semiconductor materials. As both the global and Chinese semiconductor markets continue to expand steadily, demand for semiconductor materials is also growing steadily. Data shows that in 2021, the global semiconductor market reached US$555.9 billion, representing a year-on-year increase of 26.2% compared to 2020. In China, integrated circuit sales exceeded one trillion yuan, reaching 1,045.83 billion yuan—a year-on-year increase of 18.2% compared to 2020.

III. Current Status of the Global Semiconductor Industry

1. Market Size

Regarding the current state of the global semiconductor materials market, as demand for semiconductors continues to grow, the overall size of the global semiconductor materials market is steadily expanding. Data shows that in 2021, the global semiconductor materials market reached a value of 64.273 billion yuan, representing a 16% increase compared to 2020.

2. Regional Structure

In terms of the global regional distribution of semiconductor materials, Taiwan, China, and mainland China rank first and second, accounting for 22.9% and 18.6% respectively. Although China currently holds the second-largest market share, its overall product lineup remains concentrated in mid- to low-end semiconductor materials. High-end photoresists and CMP polishing pads, in particular, are still developing relatively slowly, leaving ample room for domestic substitution.

3. Market Structure

In 2021, total materials sales reached US$64.3 billion. Of this amount, materials used in the front-end wafer fabrication process accounted for US$40.4 billion (representing 15% to 20% of manufacturing costs), while materials used in the back-end packaging and testing process totaled US$23.9 billion. The key materials used in wafer fabrication include silicon wafers, photomasks, photoresists and auxiliary materials, CMP polishing materials, process chemicals, sputtering targets, and specialty electronic gases. By segment within wafer fabrication, statistical data show that in 2020, silicon wafers held the largest market share—37%—of the global wafer fabrication materials market.

1. Silicon wafer

Semiconductor silicon wafers are critical, foundational raw materials for integrated circuits and other semiconductor products. Currently, more than 90% of semiconductor products are manufactured using silicon-based materials. At present, the global semiconductor silicon wafer industry is largely monopolized by U.S. and Japanese companies. However, as the industrial chain shifts, China’s domestic silicon wafer market is experiencing rapid growth. According to data from IC Insights, in 2022, mainland China’s wafer fabrication capacity will reach 4.1 million wafers per month, accounting for 17.15% of global capacity.

Currently, China’s total production capacity for 8-inch and 12-inch silicon wafers stands at only 1.16 million pieces per month, leaving a significant gap compared to demand. Given that both silicon wafer production lines and silicon ingot production lines have manufacturing cycles of approximately two years, according to current production plans, it will not be until around 2022 that supply and demand are expected to reach equilibrium. At present, domestic companies such as Shanghai Silicon Industry and Zhonghuan Semiconductor have already achieved mass production of 12-inch silicon wafers, with their technology reaching globally advanced levels.

Zhonghuan Shares: Its core businesses include new energy materials, semiconductor materials, power generation, and semiconductor equipment. In 2018, the company’s total operating revenue was RMB 13.756 billion, with operating costs of RMB 11.369 billion, resulting in a gross profit of RMB 2.387 billion and a gross profit margin of 17.35%. Among these, the semiconductor materials business generated total revenue of RMB 1.013 billion, with costs of RMB 708 million, yielding a gross profit of RMB 305 million and a gross profit margin of 30.08%.

The company’s operating revenue has shown an overall upward trend, with a stable gross profit margin. The growth in revenue has driven an increase in the company’s net profit attributable to shareholders. Similarly, both the net profit margin and return on equity (ROE) have been on the rise. From 2016 to 2018, the company’s net profit attributable to shareholders was RMB 402 million, RMB 585 million, and RMB 632 million, respectively.

2. Photoresist

Photoresist, also known as "photoresistive material," is one of the key foundational materials used in integrated circuit manufacturing. “With supply disruptions from Japan and South Korea, now is the perfect time for domestic substitution—how much room remains for the leading photoresist manufacturers?”

Jingrui Shares: The company’s core business includes ultra-pure, high-purity reagents, photoresists, functional materials, lithium-battery materials, and basic chemical materials. In 2018, the revenue contributions from these segments were 28%, 10%, 9%, 33%, and 14%, respectively. The company’s ultra-pure, high-purity reagent technology ranks among the industry leaders, and its electronic-grade hydrogen peroxide has reached the world’s top-tier technical quality, thereby establishing strong technological barriers for the company.

3. Specialty Electronic Gases

Specialty electronic gases refer to certain chemical gases used in semiconductor manufacturing processes, such as epitaxy, ion implantation, doping, cleaning, and photoresist patterning. In 2018, the global market for specialty electronic gases reached US$4.27 billion, representing a year-on-year growth of 10.3%. In 2015, the Chinese market for specialty electronic gases used in integrated circuits had already reached RMB 3.28 billion. By 2020, the domestic market for specialty electronic gases used in integrated circuits is expected to reach RMB 8.1 billion.

Nanjing University Optoelectronics: The company’s core business includes MO source products, high-purity specialty electronic gases, photoresist and related products, and ALD precursor products. By establishing a subsidiary—Quan Jiao Nanjing University Optoelectronics Materials Co., Ltd.—the company has entered the field of specialty gases (such as arsine and phosphine). Among these, arsine and phosphine have already been successfully mass-produced and are being supplied to multiple customers.

4. CMP

CMP is a key technology in the manufacturing process of integrated circuits (ICs). It involves using chemical etching and mechanical forces to achieve planarization of single-crystal silicon wafers and metal interconnect layers during processing. In 2018, the global polishing materials market reached US$2.17 billion, representing a year-on-year growth of 17.3%. The Chinese polishing materials market stood at US$270 million. Currently, the global markets for polishing liquids and polishing pads remain largely dominated by U.S. and Japanese companies.

In terms of polishing pads, China still relies primarily on imports at present; only Dinglong Co., Ltd. is capable of small-scale production of CMP polishing pad products. As for polishing liquids, Anji Technology has taken the lead in breaking through technological barriers and achieving domestic production of polishing liquids. In 2018, Anji Technology achieved a 22% market share in the Chinese market and approximately a 2% global market share.

Anji Technology: The company’s business focuses on CMP polishing slurries and photoresist strippers. In 2018, the revenue from its polishing slurry business accounted for 82.8%. Currently, mainstream process products have entered mass production, and its polishing slurry products have achieved large-scale sales in the 130-28nm technology nodes. Products for the 14nm technology node have entered the customer certification phase, while products for the 10-7nm nodes are under development. The company has successfully broken the monopoly of foreign manufacturers in the field of chemical-mechanical polishing slurries for integrated circuits, achieving import substitution and accumulating a strong client base that includes industry-leading IC manufacturers such as SMIC and TSMC.

In 2018, the company’s gross profit margin was 51.1%, compared to an industry average of 46%. The company’s profitability was primarily driven by polishing liquids, which contributed a gross profit of 110 million yuan in 2018, accounting for 85.57%. By contrast, photoresist strippers contributed only 15 million yuan in gross profit, representing 12.12%.

Dinglong Co., Ltd.: The company’s core businesses include printing and copying consumables, CMP polishing pads, functional chemicals, chips, and basic chemicals. In 2018, the company’s total operating revenue was RMB 1.337 billion, with operating costs totaling RMB 817 million. Gross profit amounted to RMB 520 million, yielding a gross margin of 38.89%. Among these, printing and copying consumables accounted for 99% of revenue, while CMP polishing pads accounted for 0.24%. The total revenue from the CMP polishing pad business was RMB 31.5 million, with total costs of RMB 26.4 million, resulting in a gross profit of RMB 510,000 and a gross margin of 16.19%.

In 2018, the company successively launched the DH9000 series of pads, which are designed for fine polishing and barrier layer polishing. These products have already been certified by customers in eight-inch wafer fabs. However, since customers require a relatively long time to verify product stability after making small-batch purchases, the ramp-up period for product sales has been rather lengthy.

5. Photomask

A photomask, also commonly referred to as a reticle or mask plate, is the master template used in the photolithography process of microelectronics manufacturing. From a supply-chain perspective, the mask plate serves as a core tool in the production and manufacturing processes of downstream electronic component manufacturers—such as those in the flat-panel display, semiconductor chip, touch-screen, and printed circuit board industries—and acts as a crucial bridge and link. In addition to its application in the semiconductor chip sector, mask plates are also widely used in the flat-panel display industry.

According to SEMI data, the global semiconductor mask market reached US$4.51 billion in 2018, representing a year-on-year increase of 15.9%. The market size is projected to exceed US$5.5 billion by 2020. The mask industry has relatively high barriers to entry, and its major players are primarily well-known domestic and international companies, resulting in a high degree of market concentration. In 2018, China’s optical mask market accounted for 40% of the global market, and this share is expected to rise to 56% by 2020. In 2018, domestic production of optical masks totaled 21,900 square meters, meaning that the current rate of domestic production of optical masks in China is only about 20%, leaving substantial room for import substitution.

6. Sputtering targets

For details on sputtering targets, see “Breaking the U.S.-Japan Monopoly: With Policies Continuously Stepping Up, Is the Leading Player in Core Semiconductor Materials About to Surge?”

7. Quartz material

Thanks to its excellent properties—such as high purity, high-temperature resistance, low thermal expansion, and corrosion resistance—quartz glass is widely used in industries including electric lighting, semiconductors, photovoltaics, optical communications, aerospace technology, and military technology. In 2019, the global quartz materials market was valued at approximately US$2.055 billion. According to IBISWorld statistics, Heraeus, Momentive, and Tokuyama together hold a combined global market share exceeding 60%, effectively monopolizing the market.

In June 2018, Shiying Shares issued an announcement stating that the company had successfully developed a new high-quality quartz sleeve for optical fiber preforms using the continuous melting process. The product’s various performance parameters meet the requirements of downstream optical fiber customers and have already secured the first batch of orders from domestic optical fiber manufacturers. This product has the potential to replace imported alternatives.

Shiying Shares: The company is an internationally renowned supplier of quartz materials. Its series of quartz products used in the semiconductor industry have been officially certified by Tokyo Electron Ltd. (TEL) of Japan. In 2018, TEL’s global market share for thin-film equipment reached as high as 88%, placing it in an undisputed leading position. These products now meet the market准入 requirements for inclusion in TEL’s international supply chain, which will help expand the company’s scope for market cooperation with TEL and its downstream users.

In 2018, the company’s total revenue reached 633 million yuan, with operating costs of 356 million yuan, resulting in a gross profit of 277 million yuan and a gross margin of 43.74%. From an industry perspective, the revenue growth rate of the traditional lighting business has slowed down, and its share has declined year by year—from 63% in 2015 to 42% in 2018. The primary driver of performance growth came from the fiber-optic semiconductor sector, whose share rose from 19% in 2015 to 43% in 2018.

8. Wet chemicals

Wet electronic chemicals can be broadly categorized into buffer etchants, stripping solutions, etching solutions, developer solutions for semiconductors, developer solutions for panels, and polar solvents. They are used in fields such as semiconductors, photovoltaic solar cells, LEDs, and flat-panel displays. In 2018, the global market size for wet electronic chemicals was approximately US$5.265 billion. By 2020, the global market size for wet electronic chemicals is projected to reach US$5.850 billion. China's output of wet electronic chemicals increased from 187,000 tons in 2012 to 4.95 million tons in 2018, with an average annual compound growth rate of 17.61%.

Currently, domestically produced wet chemical products can meet the demands of the solar photovoltaic and panel industries; however, the localization rate in the semiconductor sector remains relatively low. For wet electronic chemicals used in the processing of 6-inch and smaller wafers, the domestic localization rate is 80%. In contrast, for the market involving the processing of 12-inch and larger wafers, the domestic localization rate is only around 10%. Overall, the domestic localization rate for wet electronic chemicals used in semiconductor wafer fabrication stands at approximately 20%.