The Semiconductor Primer

Objective: Understand the "Oil of the 21st Century." This is the most complex supply chain in human history, powering everything from toasters to LLMs.

The Investment Thesis (The Why)

• The Silicon Cycle: We are entering a new "Super Cycle" driven by AI, distinct from the traditional PC/Smartphone cycles.
• Digital Sovereignty: Nations are subsidizing domestic production (CHIPS Act, EU Chips Act) to de-risk supply chains, creating a CapEx boom.
• Complexity Moats: Moore's Law is slowing, making advanced packaging and specialized architecture (GPUs, ASICs) the new drivers of performance.

The Vertical Map

```mermaid graph TD A[ASML<br>Lithography] -->|Machines| B[TSMC<br>Foundry] C[NVIDIA<br>Design] -->|Designs| B D[Apple<br>Design] -->|Designs| B E[Cadence<br>EDA] -->|Software| C B -->|Chips| F[Data Centers] F -->|Cloud| G[Microsoft<br>Azure] F -->|Cloud| H[Amazon<br>AWS] style A fill:#ff9900,stroke:#333,stroke-width:2px style B fill:#ff9900,stroke:#333,stroke-width:2px style C fill:#00cc00,stroke:#333,stroke-width:2px ```

Critical Nodes (Deep Dives)

We have prepared detailed investment theses for the most critical nodes in this supply chain:

• The Architect: NVIDIA (NVDA) - The AI Factory.
• The Monopoly: ASML (ASML) - The Physics Bottleneck.
• The Shield: TSMC (TSM) - The Manufacturer.
• The Cloud: Microsoft (MSFT) & Amazon (AMZN) - The Distributors.

Company Universe

Financial Metrics (Key Performance Indicators)

• Gross Margins:
  • EDA/IP: >80% (Software economics).
  • Fabless: 60-70% (High R&D, low CapEx).
  • Foundry: 50-60% (TSMC), but high depreciation.
  • OSAT: 15-20% (Commoditized).
• R&D Intensity: Fabless companies should spend 20-30% of revenue on R&D.
• CapEx Intensity: Foundries spend 30-50% of revenue on CapEx.

Risks

• Geopolitical: Taiwan concentration (TSMC produces 90% of advanced chips). Any conflict is a black swan.
• Cyclicality: Memory (DRAM/NAND) is boom/bust. Logic is more stable but still inventory-sensitive.
• Customer Concentration: ASML relies heavily on TSMC, Samsung, and Intel.