What is a semiconductor chip?
A semiconductor is a material, usually silicon, that can either conduct or block electricity. Chips pack billions of tiny switches made from it onto a small piece of silicon, and they power everything from phones to AI data centers.
Updated September 24, 2026
A semiconductor is a material, most often silicon, whose ability to carry electricity can be switched on and off. Engineers fine-tune it by adding tiny amounts of other elements. A chip (or integrated circuit) is a small slice of silicon packed with transistors, microscopic switches built from that material. The most advanced chips hold billions of them.
How chips are made
- Design. Engineers lay out the circuits in software.
- Fabrication. In ultra-clean factories called fabs, circuits are built up layer by layer on round silicon wafers. Light projects the patterns (photolithography), then chemicals etch and dope the silicon.
- Packaging and testing. Finished wafers are cut into individual chips, packaged and tested.
The finest layers of today's leading chips are printed with extreme ultraviolet (EUV) machines made by ASML, which use light with a wavelength of just 13.5 nanometers. ASML says it spent more than €6 billion over 17 years before shipping the first production EUV system in 2013.
Who makes them
- Designers create chips but don't build them. NVIDIA is "fabless" and relies on TSMC and Samsung to make its chips.
- Foundries manufacture for others. TSMC, founded in 1987 as the first dedicated foundry, served 534 customers in 2025.
- Integrated makers like Intel design and build their own chips, and Intel now also offers manufacturing to outside customers.
Why chips matter now
- AI demand. Global chip sales rose 25.6% to $791.7 billion in 2025, according to the Semiconductor Industry Association, which named AI as a main driver. AI runs on specialized chips like GPUs and TPUs.
- Supply chains. The most advanced chipmaking is concentrated in Taiwan and South Korea.
- Policy. The US CHIPS and Science Act of 2022 set aside $50 billion to boost American chip manufacturing and research.
Quick questions
What is a chip foundry?
A factory business that manufactures chips other companies design, so designers don't need their own plants. TSMC pioneered the model in 1987.
Why is Taiwan so important for chips?
Taiwan, mainly through TSMC, makes most of the world's most advanced chips. A 2021 industry study found 92% of cutting-edge capacity was in Taiwan.
What does 3nm or 2nm mean?
It names a generation of chipmaking technology, where a smaller number means more transistors fit on a chip. IBM says its 2nm design fits 50 billion transistors on a fingernail-sized chip.
Does NVIDIA make its own chips?
No. NVIDIA designs chips but is fabless: it relies on partners, including TSMC and Samsung, to manufacture them.
Sources: IBM: What are semiconductors?, ASML: EUV lithography systems, TSMC: Dedicated foundries explained, NIST: CHIPS for America, SIA: Global semiconductor sales 2025