USING INDUSTRY ANALYSIS FOR 

STRATEGIC INTELLIGENCE

Capabilities and Strategic Intent

by Chuck Howe

National Intelligence University

Washington, DC

January 2015
Using Industry Analysis for Strategic Intelligence: Capabilities and Strategic Intent 

In Chuck Howe’s Using Industry Analysis for Strategic Intelligence: 

Capabilities and Strategic Intent, the author argues that the 

Intelligence Community should evaluate globalization as a 

strategic factor affecting interdependencies between nations. 

He outlines a variety of industry analysis techniques—including the Five Forces 

Model, the External Environment Model, and the Value Chain Model—that could 

be valuable to analysts. Using the semiconductor industry as a case study, Howe 

illustrates methods that analysts should use in deriving strategic insights from 

industrial capability. 

Using Industry Analysis for Strategic Intelligence is part of the National Intelligence 

(NI) Press Occasional Paper Series. Occasional Papers examine topics of unique 

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USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

iii

ACKNOWLEDGMENTS

First and foremost, I thank Jeff Stillman, in the Office of Analytic Integrity and 

Standards, for leaving my fellowship research proposal on the “stack” for consideration by the ODNI Exceptional Analyst Fellowship selection committee. 

Even though I am not an intelligence analyst, he recognized the value of a different perspective, and throughout encouraged my project.

Also critical to the existence of this project was the support of my leadership in 

AT&F, especially Wally Coggins, to gap my position for the year and allow me 

the time to research, write, and produce this introduction to industry analysis 

for the analytic community.

Many thanks to current and former faculty members at the Industrial College 

of the Armed Forces (now Dwight D. Eisenhower School for National Security and Resource Strategy). There are several war colleges in the Department 

of Defense, but only one Industrial College. Drs. Linda Brandt and Rich Shipe 

reviewed my research proposal and spent even more of their time to provide an 

outside review of the manuscript. When I was a student at ICAF many years 

ago, Dr. Gerald Abbott introduced me to the primary sources on industry 

structure economics and analysis; I appreciate his continuing mentorship in 

this subject area. Last, but not least, CAPT Susan Maybaumwisniewski, USN 

(ret.), a former colleague at ICAF, now at BENS, provided early brainstorming and outline direction to this project—a wonderful person to kick an idea 

around with.

I would be remiss if I did not mention the semiconductor industry that I have 

followed for the last six years. There are no better representatives than the outstanding people at SEMI and EDAC. They are exemplars of an industry that is 

always willing to educate others on the challenges they face at the leading edge 

of this global industry. 

I started my understanding of the analytic community by taking Analysis 101 

and Open Source Academy courses. It was great meeting the “up-and-coming” 

crop of intelligence analysts, and they showed me they had the wherewithal to 

try new analytic methods. Outside of the classroom, the development of the 

industry analysis methodology was aided immeasurably by the meetings with 

analysts across the Intelligence Community. At each of meetings I would repeat 
Chuck Howe

iv

the mantra “industry analysis models are a tool, not a solution,” to assure the 

analyst I was looking to complement their analytical skill set. Intelligence analysts remain the target audience for this book, and it is hoped that they will add 

it to their toolkit. 

In my travels across the analytic community, I came upon a small but very productive team at the Institute for Analysis. They listened to and critiqued several 

iterations of my project, and their director, Donn Treese, even provided an outside review of the manuscript. 

Dr. Cathryn Thurston, the acting vice president of OOR, provided unflagging 

support to this book, even when that support had to compete with construction projects, the relocation of the office, staff departures to early retirements, 

and the never-ending lineup of master’s thesis aspirants at NDIC (now NIU). 

Her editorial direction on draft submissions kept my initial intent intact, while 

greatly improving its delivery. 

Finally, I want to recognize my wife, Cindy, an extraordinary teacher, for her 

unfailing support throughout this endeavor. Thank you, Cindy. 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

v

Contents

Chapter One: Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Organization of Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Globalization and National Competitiveness . . . . . . . . . . . . . . . . 3

Role of Intelligence Community: 1950s to 1980s . . . . . . . . . . . . . 4

Moving Intelligence Community Out of Its Comfort 

Zone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Competing Analysis: Short-Term Crises and Long-Term 

Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Chapter Two: Industry Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Overview of Financial Activity of Firm . . . . . . . . . . . . . . . . . . . . 10

Porter Five Forces Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

External Environment Model . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Value Chain Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Chapter Three: Putting It All Together—The Five Steps . . . . . . . . . . . 21

Step 1: Select the Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Step 2: Define the Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Step 3: Identify Sources of Information . . . . . . . . . . . . . . . . . . . . . . . . . 27

Step 4: Collect Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Industry Observations from Data Collection . . . . . . . . . . . . . 32

Step 5: Analyze Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

East Asia: Semiconductor Industry . . . . . . . . . . . . . . . . . . . . . . 52

Strategic Intelligence Insight . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Chapter Four: Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Chuck Howe

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Contents continued

Applying Industry Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Follow the Steps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Utility of Industry Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Increased Attention by the Intelligence Community to 

Globalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

APPENDIXES

Appendix A: External Environment Model Segments 

and Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Appendix B: Semiconductor Industry Tutorial . . . . . . . . . . . . . . 75

Appendix C: Information Sources Specific to 

Semiconductor Industry . . . . . . . . . . . . . . . . . . . . . . . . . . 89

BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

ABOUT THE AUTHOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

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Chapter One

Introduction

The U.S. Intelligence Community needs to augment its primary focus on political and military dimensions to address the potential for strategic surprise 

due to the changing nature of business, industry, and national competitiveness in a global economy. The Council on Competitiveness, a nonpartisan, 

nongovernmental organization of American chief executive officers, university presidents, and labor leaders, highlights the complex nature of these 

changes (see box).1

Lens of Competitiveness

A rising standard of living for all Americans is not guaranteed. The United States 

now operates in a truly global economy:

● Companies are outsourcing and spreading their value chains globally

● Hundreds of nations are trading tens of trillions of dollars daily in the

 financial markets

● Strong markets and talent pools have emerged in the developing world

● Businesses and governments operate across highly integrated regional 

 economies

● Vast communications networks allow for immediate global connectivity 

 and information transfer and also create unprecedented vulnerabilities

● New risks, such as competition for natural resources, climate change

 and terrorism, now affect the competitiveness of countries, companies, 

 and communities

Whether our citizens and businesses will thrive in the new global economy depends largely on our ability to understand and act upon these prevailing forces of 

change and attract high-value economic activity to regions across America.

Source: Council on Competitiveness, www.compete.org.
Chuck Howe

2

The opening observations from the Council on Competitiveness highlight 

the major strategic shifts in a global economy and their importance to our 

country. The developing economies of the world are driving these shifts, and 

their industrial capability is a major component of their success. Analyzing an 

industry in another country or region of the world can yield strategic insights 

about a nation’s capabilities and strategic intent.

While the U.S. Intelligence Community is aware of the discussion, as evidenced in the 2009 National Intelligence Strategy, it still needs to pay closer 

attention to the strategic implications of these changes. In particular, intelligence analysts must be able to gauge the global competitiveness of other 

nations in order to ensure that this dimension is a consideration in strategic 

assessments.

A key indicator of competitiveness is industrial capability. A nation’s industrial capability is an economic engine, producing jobs, growth, and ultimately 

prosperity. Developed and developing nations realize this and want to build 

an industrial engine to reap the benefits. Relatively recent advances in information technology that produce unprecedented amounts of open-source 

information help these nations.2 Business strategists and competitive intelligence professionals use many analysis tools to mine the plethora of open 

sources—to understand the plans and intentions of other firms and the global 

market—so that they can achieve a competitive advantage.

Although the Intelligence Community is not collecting information on individual businesses, it is interested in national- or regional-level plans and 

aspirations. To shed light on sometimes-opaque economic plans and strategic 

intentions, the all-source intelligence analyst can use open-source data, industry analysis tools, and a nation’s interest in growing its economy. 

In short, a nation’s policy and investment decisions to grow and sustain its 

industrial capability are visible through their interactions with industry. The 

thesis of this book is that an all-source intelligence analyst can employ the 

analysis tools of business strategists and competitive intelligence professionals to develop strategic intelligence insights regarding a nation’s plans and 

intentions.
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

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Organization of Discussion

To support the thesis and intelligence focus of this book, the remaining 

chapters of this book are all oriented toward the all-source analyst. The book 

consists of four chapters. This first chapter provides general background information, to help orient the reader. Chapter 2 introduces industry analysis 

and proposes a methodology for application in the Intelligence Community. 

Chapter 3 describes the five steps an all-source analyst would go through to 

provide inputs for an intelligence assessment. Chapter 4 presents concluding 

discussions on the value of industry analysis to the U.S. Intelligence Community. There are also three appendixes. Appendix A provides a template for 

one of the industry analysis models presented in Chapter 2. Appendixes B 

and C, respectively, provide a semiconductor tutorial, as well as information 

related to the semiconductor industry—of use in understanding the discussion in the main chapters.

Background

Before starting our discussion of industry analysis and its application, there 

are two personal observations operating in the background.3 The first is that 

globalization and its potential for strategic impact on national competitiveness has not yet grabbed the full attention of the Intelligence Community. The 

second observation concerns the Intelligence Community’s grasp of other nations’ industrial capabilities; outside of leading-edge science and technology, 

defense issues, dual-use technologies, and nonproliferation, the Intelligence 

Community is largely silent. The following two subsections briefly provide 

the background for these observations.

Globalization and National Competitiveness

The term globalization has many definitions. Suzanne Berger, in her book 

How We Compete: What Companies around the World Are Doing to Make It in 

Today’s Global Economy, describes globalization as “the acceleration of the processes in the international economy and in domestic economies that operate 

toward unifying world markets.”4 These changes and the domestic concerns 

they cause are not unprecedented. There was an earlier period bracketing the 
Chuck Howe

4

turn of the nineteenth century that also saw the same levels of capital mobility, trade, and immigration among countries. This early period of globalization was broken by World War I, and it was not until the 1980s that the 

world economy returned to the same high levels of capital mobility, foreign 

direct investment, and trade. An important point regarding the end of this 

earlier period of globalization is that nations were largely able to shut off their 

ties to the outside world (from the 1920s through the 1980s) and continue 

economic growth. 

Role of the Intelligence Community: 1950s to 1980s

A look at the history of the Intelligence Community, specifically foreign 

economic intelligence during the Cold War, reveals that one of the stated 

purposes, “To assist in divining the intentions of potential enemies in the 

conviction that how they act in the economic sphere is likely to reveal 

intentions,” generated a lot of support for industry-sector analysis.5

This initial interest in industry-sector analysis in the early years of the Cold 

War was also due to a sense among policymakers that the Soviet Union could 

possibly outperform the United States economically and militarily.6 To address this concern, the Central Intelligence Agency devoted considerable 

analytical resources to industry studies. These studies of selected sectors are 

characterized as assessing

the strengths, weaknesses, and prospects of these sectors in 

detail and on a continuing basis. These studies generally 

had a special focus on the technological level of the given 

industry. They supported not only intelligence objectives 

but, as contributions to publications of the Joint Economic 

Committee of Congress, contributed to the general pool of 

knowledge on the Soviet economy.7

These analyses focused on vulnerabilities in the Soviet economy and, especially, areas where progress could hamper their economic development. As 

the Cold War progressed, increasing emphasis on international and military 

topics resulted in the transfer of analyst resources away from Soviet economic 

performance and specific industry-sector analysis of the Soviet Union.8
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

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While it is clear that globalization and the practice of industry analysis by 

the Intelligence Community are not unprecedented, what has been the role 

of the Intelligence Community in more recent experience? Michael L. Dertouzos, Richard K. Lester, and Robert M. Solow, a group of MIT researchers, 

made this prediction in their 1989 book, Made in America: 

To live well, a nation must produce well. In recent years 

many observers have charged that American industry is not 

producing as well as it ought to produce, or as well as it used 

to produce, or as well as the industries of some other nations 

have learned to produce. If the charges are true and if the 

trend cannot be reversed, then sooner or later, the American 

standard of living must pay the penalty.9

Mark Lowenthal describes the corresponding debate in the Intelligence Community at that time: 

During the late 1980s some people maintained that several 

of these issues (overseas competitiveness, trading relations, 

foreign economic espionage, industrial espionage undertaken by businesses, and possible countermeasures) could 

be addressed, in part, through a closer connection between 

intelligence and U.S. businesses [emphasis in original]. 

Few advocates of closer intelligence–business collaboration, 

however, had substantial answers for some of the more compelling questions that it raised (which is one reason that this 

approach was quickly rejected).10

This description is the most up-to-date open-source assessment of the Intelligence Community’s consideration of industry analysis. In 2006, Suzanne 

Berger, who was a major contributor to the work of Dertouzos et al., the 

MIT group that provided important observations and prescriptions in Made 

in America, released the book How We Compete. In it, Berger observed that 

all of the industry prescriptions they had made in 1989 had become the basic 

operating code of American companies. But Berger also said, “[A]mong our 

greatest concerns today is one that was not on the list in the 1980s—how 

to make good companies and good jobs stick in the United States.”11 She 

further observed: 
Chuck Howe

6

Then, our challenge seemed to be import penetration. Today, 

the fragmentation of the system of production has changed 

the problem. Now it’s the prospect that the resources available to companies abroad—and well-educated and lower 

cost workers are one of the main attractions—will induce 

businesses to shift their activities abroad. 

Globalization is upon us, and, unlike the early twentieth century, nations 

cannot “turn it off” and build or sustain industrial capability.

Moving the Intelligence Community Out of Its Comfort Zone

The Intelligence Community’s internal discussions in the 1980s about sharing intelligence with business to foster our national competitiveness should 

not be confused with what is being advocated here—the development of strategic intelligence insights from understanding the development of industrial 

capability in other nations and the consideration of these strategic insights in 

producing intelligence products for our national policymakers. Although globalization is all around us, the National Intelligence Strategy fails to push the 

Intelligence Community out of the traditional political-military sphere.12 As 

Fareed Zakaria observes of America’s traditional perspective, “At the politicalmilitary level, we remain in a single-superpower world. But in every other 

dimension—industrial, financial, educational, social, cultural—the distribution of power is shifting, moving away from American dominance.”13

To be fair, the Intelligence Community is not ignoring globalization; it is 

just not actively pursuing it. But a closer look at the first of its four strategic 

goals in the 2009 National Intelligence Strategy, “Enable wise national security 

policies,” could provide an avenue for collection and analysis of trends in 

globalization.14 In support of that goal, the Intelligence Community further 

explains it “will provide policymakers with strategic intelligence that helps 

them understand countries, regions, issues, and the potential outcomes of 

their decisions. We will also provide feedback to policymakers on the impact 

of their decisions.”15 So, if the Intelligence Community is aware of globalization and one of its strategic goals could support analysis of global trends, what 

is the argument for operating outside its spheres of comfort by taking a closer 

look at other nations’ industrial capability?
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

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Competing Analysis: Short-Term Crises and Long-Term Problems

We cannot ignore that the Intelligence Community is heavily engaged in our 

nation’s current overseas military commitments. Plus, the Intelligence Community is also charged with addressing transnational issues, such as criminal 

organizations, failed states, ungoverned spaces, the global economic crisis, 

climate change, energy competition, rapid technological change, and dissemination of information.16 But the main question of this book is: who in 

the Intelligence Community is monitoring the industrial capabilities of other 

nations and regions, which may have a major impact on American interests 

and security? 

While the National Intelligence Council provides a forecast of economic 

changes occurring over the next 15 years, these observations are based on 

general trends forecasting major economic shifts, strategic materials, and energy.17 Outside of the Intelligence Community, there is already recognition 

of the need for new tools to understand and communicate the nature of 

global economic integration. Timothy Sturgeon highlights that “studies that 

rely solely on macro-level statistics such as trade and investment cannot help 

but render invisible the detailed contours of the world economy.”18 The main 

point here is that while statistics and analysis on global economic information are readily available for purchase over the Internet, there is also strategic 

intelligence of interest to the Intelligence Community and policymakers in 

the “contours.” The tools and methods used by industry analysts highlighted 

in the following chapters will enable the all-source analyst to see some of the 

contours in the world economy and gain strategic intelligence insights of use 

to national policymakers.

The opening observations from the Council on Competitiveness highlight 

the major strategic shifts in a global economy and their importance to our 

country. The developing economies of the world are driving these shifts, and 

their industrial capability is a major component of their success. Analyzing an 

industry in another country or region of the world can yield strategic insights 

about a nation’s capabilities and strategic intent. Chapter 2 introduces industry analysis and proposes a methodology for applying it in the Intelligence 

Community.

USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

9

Chapter Two

Industry Analysis

There are innumerable analytical tools employed in business. Our purpose is 

to identify and employ the analytical tools that can provide strategic insights 

into a nation’s industrial capability. The industry analysis involves a detailed 

review of the external and competitive forces that influence the way an industry develops.19 This is what sets industry analysis apart from an all-source 

analyst simply performing a keyword search for information sources about an 

industry. The three analytical tools discussed here are widely used in business. 

They are the Porter Five Forces Model, the External Environment Model, and 

the Value Chain Model. 

Long-term background preparation for this book—and in particular selection of these three analytical models—stems from various sources: experience 

as an acquisition officer in the Department of Defense; early exposure to the 

disciplines of business and industry analysis as part of preparing for a master’s 

of business administration degree; continuing professional education at the 

Industrial College of the Armed Forces (ICAF), analyzing industry sectors 

and their importance to national security, as well as learning to look beyond 

the numbers to appreciate the strategic interplay between government and 

industry; and teaching industry analysis to graduate-level students at ICAF, 

where use of the Five Forces Model and the Value Chain Model proved the 

most valuable for students to appreciate the structure of an industry, and 

where use of the External Environment Model broadened their understanding of the interaction between industry and government. The open-source 

methodology and data-collection approaches for this book resulted from that 

experience at ICAF. 

That said, the industry analysis approach introduced in this chapter and elaborated on in the following chapters is easily understood and does not require 

the intelligence analyst to have a business or technical background. In fact, 

the intelligence analyst may have a head start in comprehending its application due to his or her training in other analysis techniques, such as the analysis of competing hypotheses. To begin our discussion of the industry analysis 

models, we will start with a brief look at the nature of a firm or corporation.
Chuck Howe

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Overview of the Financial Activity of a Firm

A firm’s performance has two components—survival and profitability.20 The 

measure of survival is obvious, but the profitability component is measured 

by profit maximization, whereby a firm determines the price and quantity of 

output that delivers the greatest profit. Figure 2.1 provides a top-level view of 

a firm’s financial activity.

Firm Financial Markets

Government 

Firm

Invests

in Assets

Equity Shares

Debt

Taxes

Retained Cash Flow

Cash for securities 

issued by firm

Cash 

Flow

Generated

By Firm’s

Operations

Dividends

and Debt

Payments

Figure 2.1: Financial Activity of a Firm21

Figure 2.1 shows that the firm (red block) generates cash by issuing stocks 

to or borrowing from financial markets (blue block). The firm uses this cash 

in developing goods or services and the resulting cash flow generated is then 

used within the firm (retained earnings), paid out to the financial community 

(stock dividends, debt repayments), and paid to the government (taxes).

This simple model allows the reader to visualize the effects of a country’s public policy, financial, or market announcements that are reported regarding a 

firm or even an entire industry. For example, when a government announces 

Chartering, 

Regulation, Policy
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

11

a 10-year exemption for the collection of any taxes from a firm that relocates 

to their country, the firm can now use more of its cash flow, via retained 

earnings, to fund research and development, buy additional assets, or use 

it to enhance its standing with the financial community by retiring debt or 

increasing dividends. The reality is much more complex, but this basic model 

and the economic maxim of profit maximization are useful for understanding 

interactions between governments and industry.

Academics studying business and industry economics develop models by observing how firms organize and perform against their competitors and in the 

marketplace. As the business world changes, these academic communities 

find some insights to be timeless, while others are modified or even discarded. 

Businesses also use many of these models to analyze their competitors. The 

Strategic and Competitive Intelligence Professionals (SCIP) organization 

bridges the academic and business world and provides good sources for exploring and discussing the methods of competitive intelligence.22 According 

to Robert Grant’s Contemporary Strategy Analysis, one of the most comprehensive industry texts, competitive intelligence has three main purposes:

● Forecast competitors’ future strategies and decisions.

● Predict competitors’ likely reactions to a firm’s strategic initiatives.

● Determine how competitors’ behavior can be influenced to make it

more favorable.23

In academia and the competitive world of business, as long as the models and 

associated analytical methods are of use, they will survive—although not without some tailoring. The following discussion will describe the key elements of 

each model. This will help the all-source analyst to understand the industry 

structure to the extent that it yields, in combination with the other models, 

strategic intelligence insights regarding a nation’s plans and intentions.

Porter Five Forces Model

The first model carries the name of its developer, Michael Porter of Harvard 

University. Porter arguably produced the seminal text on industry analysis, 

Competitive Strategy, which describes his Five Forces Model.24 The model is 

meant to convey the forces acting on an industry. Our usage of the model is 
Chuck Howe

12

very different from that of the business analyst who is working to understand 

competitors. For our collection purposes, the Five Forces Model provides a 

mental construct to use in reviewing and determining which data to keep for 

further analysis. For example, when reading an article, is it possible to determine who is the buyer and who is the supplier? What is the threat of product substitution if prices rise too high? What are the barriers to entry to the 

industry? Can a government overcome this barrier to entry through policy 

decisions? How intense is competition within the industry? Is the intensity of 

competition inviting government involvement? Today, thirty years later, the 

business community still uses this model to describe their industry and gain 

insights into how it is changing. 

In economic terms, an industry can be defined as “a group of firms producing products that are close substitutes.”25 The Five Forces Model, shown in 

Figure 2.2, is meant to convey the primary forces that affect the structure and 

conduct of the industry. In business, the end result of conducting industry 

analysis via the Five Forces Model is a description of the industry that the 

company will use to determine a strategy it will pursue in the future. The 

main point is that a firm does not want to pursue a strategy that is not going 

to lead to a competitive advantage. For the intelligence analyst, however, the 

end result of conducting industry analysis via the Five Forces Model is a conceptual understanding of the industry that will then aid in the collection and 

analysis of information on the industry in all of its global locations. 

Figure 2.2 shows the five forces affecting the structure and conduct of an industry: threat of new entrants, bargaining power of buyers, bargaining power 

of suppliers, threat of substitute products or services, and rivalry among existing competitors. 

The threat of new entrants concerns how easily a new competitor emerges from 

outside the industry. Intense price competition is one sign that it is easy for 

other firms to enter into the industry. And if it is easy for new entrants to 

appear, firms already in the industry may choose to pursue future investment 

opportunities outside of the industry. Examples of barriers to entry are large 

capital costs for plants and equipment, unique process or product technologies, and government regulation. 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

13

Threat of 

New Entrants

(What are barriers to entry or exit?)

Power of

The Supplier

(Who are the suppliers?)

Threat of

Substitution

(What is the availability of substitutes?)

Existing Competitors &

Intensity of Competition

Power of

The Buyer

(Who are the buyers?)

Figure 2.2: Porter Five Forces Model26

The bargaining power of the buyer or supplier is meant to capture the extent to 

which the industry determines the prices in their industry. If suppliers to the 

industry hold a unique material required for an industry to continue, then 

they may temporarily hold an advantage in setting prices for the industry. 

Similarly, if the buyers of the industry product or service have a lot of power, 

they can dictate prices or demand features in the products they buy. The word 

“temporary” applies in all of these cases, as industry and business operate in 

dynamic environments. 

The threat of substitution concerns the potential for buyers to buy substitute 

products or services if the industry demands high prices or does not respond 

to buyer requirements. 

The rivalry among competitors is central to the Five Forces Model. This is the intensity of competition among firms and the characteristics of that competition. 

One obvious factor in the intensity of the rivalry is market growth (slowing, 

increasing); a not-so-obvious factor is exit costs. A company in an industry with 

intense rivalries may find few options for pursuing other ventures (including 
Chuck Howe

14

exiting) due to large investments in plants and equipment (e.g., automotive 

industry, oil refining industry). Contrast this last point with the earlier discussion on the threat of new entrants.

In summary, the Five Forces Model captures the key factors that determine 

the profits earned by firms in an industry, the value of the product to the buyer, the power of the supplier to set prices, and the intensity of competition. 

External Environment Model

For the business analyst, the External Environment Model complements the 

Five Forces Model in support of business planning. But for our purposes, we 

will use the External Environment Model as our collection framework to gain 

strategic insights into a nation’s capabilities and strategic intent.

The External Environment Model moves our inward-looking frame of reference for the industry outward to the strategic level.27 The premise behind 

considering the external environment is simply that firms and industries 

operate in an environment that can have a large impact on their competitiveness. While the external environment has an effect on the structure and 

conduct of an industry and the firms within, the specific segments of the 

external environment for examination will vary according to the user. These 

different segments are often denoted by the acronyms applied to the External 

Environment Model in use. For example, “PEST” stands for political/legal, 

economic, social, and technological segments, while “STEEP” refers to social, 

technological, economic, ecological, and political/legal segments.28 Reflecting the increasing emphasis on “green” issues, there is also “STEER,” which 

stands for socio-cultural, technological, economic, ecological, and regulatory 

segments.29 The definition of the segments selected is all oriented toward 

identifying external forces or impacts on the industry. For example, referring 

to PEST, one aspect of the political/legal segment is looking for the degree to 

which government regulation directs or influences the conduct of industry. 

One element of the economic segment is the impact of the global economy 

on the domestic economy and markets. Another element of the social segment is workforce education and skill levels, and an element of the technological segment is the level and focus of government expenditures for research 

and development.
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

15

While the selection and definition of segments vary, the important point for 

our purposes is the value of having a framework to guide the collection of 

information for further analysis. And these models can be combined to make 

new models, too. For example, Fleisher developed the Nine Forces Model by 

applying STEEP/PEST factors in conjunction with the Five Forces Model 

(four PEST segments plus five forces equals nine forces).30 Similarly, we will 

also integrate the knowledge we gain from the Porter Five Forces Model with 

relevant external segments to form a generic overview of an industry from 

both inside and out. Figure 2.3 shows a framework displaying the segments 

and elements we will use to collect information (a step discussed later).

Economic

Demographic Industry

Environment

Threat of New

Entrants

Power of Supplier

Power of Buyer

Threat of Substitutes

Intensity of Rivalry

Sociocultural

Global

Technological

Political/Legal

Figure 2.3: Framework for Information Collection31

The hexagon in the middle of the figure represents the industry environment 

and lists the forces described by the Five Forces Model. The segments arrayed around the hexagon represent the external environment that surrounds 
Chuck Howe

16

an industry. The segments of this framework are not cast in stone, and one 

does not have to collect information on every element. Appendix A lists the 

segments and their constituent elements for this framework. When reading 

about an industry, the analyst should use the segments and elements, and 

include the five forces, as a template for categorizing, sorting, and saving information. This approach is subjective, but useful, because all of the data will 

be collated and have source documentation.

In summary, the External Environment Model, which encompasses the Five 

Forces Model, captures the key external factors that influence the profits 

earned by firms in an industry and the intensity of competition. For our 

purposes, analysts should be able to use the External Environment Model 

to form a mental picture of the industry as they perform data collection and 

analysis. It is important to clarify that, while in business, the Five Forces 

and External Environment Models provide a basis for strategic planning, we 

are focusing on identifying and understanding industry interactions with national governments to develop strategic intelligence insights. Once analysts 

have internalized their understanding of the industry, they can then quickly 

perform the day-to-day task of reviewing industry information and extracting 

any strategic intelligence insights.

Value Chain Model

The final model is the Value Chain Model. This model is important because 

it identifies the fundamental activities in an industry that influence or control 

the profitability or growth of an industry. These key activities are also frequently the areas where nations exercise export controls for national-security 

or national-competitiveness reasons.

The Value Chain Model provides a contextual framework for review and evaluation of information. Are there activities that are not only key (hence are on 

the value chain), but also determine or control growth or profitability in the 

industry? For example, a country concerned about national competitiveness 

may focus its attention on those key activities that determine the growth of 

that industry.

The Value Chain Model was introduced to the broader business community 

in the 1980s.32 The value chain, as originally envisioned, is oriented toward 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

17

the firm and, in large corporations, the business unit. The example provided 

in Figure 2.4 is a visualization of the value chain discussed in Porter’s book, 

The Competitive Advantage of Nations. 

PRIMARY ACTIVITIES

Firm Infrastructure

Human Resource Management

Technology

Procurement

SUPPORT

ACTIVITIES

Inbound

Logistics

Outbound

Logistics Operations Margin

Margin

Marketing &

Sales Service

Figure 2.4: Value Chain (© Dinesh Pratap Singh)33

A firm using the Value Chain Model will lay out its major activities and then 

systematically evaluate how each activity adds value to the firm. Business analysts understand that this analysis also includes the relative performance of 

competitors in executing those activities. This approach supports the firm’s 

strategic planning to achieve competitive advantage. 

For Porter’s purposes 30 years ago, applying the value chain to anything above 

the level of the firm (to the industry or sector level) would not shed much light 

on the unique value that the firm had in creating competitive advantage. Back 

then, the value chains of U.S. industry were primarily domestic. Multinational 

firms had overseas subsidiaries in place to deliver products from domestic U.S. 

value chains. Today, however, multinational corporations base many parts of 

the value chain, including product development and manufacturing processes, 
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18

in many regions and countries. Lifting the value chain to the industry level 

begins to make sense. 

For our purposes, we will exclusively focus on developing the value chain 

at the industry level. The Intelligence Community is not interested in the 

competitive advantage of individual firms; our focus is on understanding the 

structure and conduct of an industry and the strategic intelligence insights its 

interactions with other nations can provide. Fortunately, there is a body of 

work in academe that applies the Value Chain Model in describing the scope 

and scale of globalization, including how industries organize to operate in a 

global environment.34 For example, Timothy Sturgeon’s work recognizes that 

development of many products is now the result of global value chains. Academicians seeking to understand the governance of such far-flung industries 

identify several different types of global value chain governance (Figure 2.5).

Lead

Firm

Materials

End Use

Price

Suppliers

Component/

Material

Suppliers

Component/

Material

Suppliers

Captive

Suppliers

Degree of Explicit Coordination

Degree of Power Asymmetry

Low High

Market Modular Relational Captive Hierarchy

Lead

Firm

Lead

Firm

Customers

Turn-key

Supplier

Integrated

Firm

Relational

Supplier

Figure 2.5: Global Value Chain Governance (© Taylor & Francis Group)35

Value 

Chains
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19

Figure 2.5 shows both vertical and horizontal integration by governance 

type. At the far left, the value chains flow “up” from materials to end use. Arranged horizontally across the bottom is the degree of coordination required 

between activities and the degree of power asymmetry. Within the value 

chain examples, the black arrows indicate where price is the only interaction between activities in the value chain, and the solid white arrows indicate 

where information is included in the interaction. Looking at the far right, the 

integrated firm maintains competency in all facets of that industries’ value 

chain. At the far left, the most basic value chain, the market, is a price-based 

market with multiple suppliers and customers communicating only via price. 

The models in-between show varying complex, symbiotic relationships between suppliers and buyers within the value chain. As one moves from basic 

to more complex value chains, the development of standards and the ability to exchange information far more complex than pricing information are 

major facilitators for the development of a global value chain. For now, these 

global value chain governance models should be kept in the background; they 

will be of more use when we select and analyze an industry.

In summary, the Value Chain Model captures the key value-added activities 

of the industry, and the Governance Model shows the level of complexity of 

the value chain. Developing or being able to interpret the value chain for the 

industry under analysis is an important early step in understanding the industry. Internalizing an understanding of the industry value chain also contributes to the day-to-day task of reviewing industry information and extracting 

any strategic intelligence insights.

The firm is the fundamental business unit, and a group of firms that produce 

similar products are collectively referred to as an industry. This chapter has so 

far provided three basic models to help the analyst frame the scope of industry analysis. The Porter Five Forces Model helps in understanding the forces 

influencing the conduct and structure of industry via the power of the buyer 

and supplier to set prices, the threat of substitution and new entrants to the 

industry, and the intensity of the existing competition. For our purposes, the 

analyst can use the Five Forces Model to form a mental picture of the industry. The External Environment Model identifies how and to what extent firms 

and the industries in which they reside interact with the external environment. For our purposes, the analyst will use the External Environment Model 
Chuck Howe

20

segments and elements in developing the collection plan (discussed later). 

The Value Chain Model will become central to the analyst’s understanding of 

the industry under analysis, and also provides a context for reviewing information regarding the industry. 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

21

Chapter Three

Putting It All Together—The Five Steps

This chapter discusses how the all-source analyst, covering a region or country desk, includes commercial industry when tasked to provide inputs for 

an intelligence assessment. There are five steps in the process used by the 

analyst: (1) select an industry, (2) define the industry, (3) identify sources of 

information, (4) collect information, and (5) analyze results. The five steps 

are described below.

Step 1: Select the Industry

For the business analyst, selecting the industry for analysis is straightforward. 

For the all-source analyst, however, selecting the region or country of strategic 

interest is even more straightforward. If a nation wants to foster development 

of an industry with a view toward improving national competitiveness, its 

domestic firms must become efficient producers of that industry’s products. 

While a nation can subsidize an inefficient industry, that does not mean its 

segment of the industry will have a comparative advantage over another nation’s industrial capability for that product. For the all-source analyst, the 

policy or resource actions by a nation in fostering development in their industrial capability are of interest for the strategic intelligence insights they 

may provide.

Criteria for Selecting Industry

Our selection criteria include looking for an industry that is mature, global, 

and has a large presence in the region or country we are interested in. But first, 

a couple of new terms—mature and global—require a brief explanation. 

The concept of industry maturity is sometimes shown as a stage in the life cycle 

of an industry. Using the measure of industry sales, the industry life cycle has 

the following periods: introduction, growth, maturity, and decline.36 Other 

industry life-cycle portrayals, using the same measure of industry sales, label 

the periods of change as fragmentation, shakeout, maturity, and decline.37

For our analysis, a mature industry is one in which the industry structure is 

stable and there is little change in the rank of leading firms. 
Chuck Howe

22

A global industry is where an individual firm’s competitive position in one 

country is affected by its position in other countries, and the reverse is also 

true.38

The final criterion, a large presence in the region or country, provides a starting point in selecting and reviewing industry candidates. Potential candidates 

for industry analysis are available from reviewing the Department of Commerce website for publicly released analysis on U.S. International Trade in 

Goods and Services. For this example, Department of Commerce International Trade Administration (ITA) publicly released factsheets were used.39

A March 2009 ITA factsheet states that “capital goods” represent the largest 

U.S. export category and lists the top capital good export categories as civilian aircraft ($3.8 billion), semiconductors ($2.6 billion), industrial machines 

($2.3 billion), telecommunications equipment ($2.3 billion), and medicinal 

equipment ($2.2 billion).40 The United States holds a comparative advantage 

in these industries, where we are the more efficient producer of a product and 

it is to the advantage of other nations to trade with us to obtain that product 

or service. Conversely, a list of major U.S. imports would indicate where other 

nations’ industries may have a comparative advantage over U.S. industry. 

Starting with the ITA export factsheet cited earlier, an Internet search for the 

worldwide manufacturing rankings for an industry will provide a quick check 

on that industry’s presence in the region or country of interest. This Internet 

search will also provide initial leads on sources of information regarding the 

industry. 

To illustrate our analysis, the semiconductor industry will be the industry 

analysis example for the remaining steps. The semiconductor industry is a 

major export for the United States. It is a mature industry with established 

leaders, and a global industry with major outsourcing of manufacturing steps, 

such that any changes that affect facilities in other countries have an effect 

throughout a firm’s operations. Other countries in the world want to advance 

in this industry, so industry analysis may yield strategic intelligence insights 

into another nation’s plans and intentions that may affect U.S. comparative 

advantage in the semiconductor industry and, by extension, U.S. national 

competitiveness. Finally, the semiconductor industry has a large presence in 

East Asia, a region of strategic intelligence interest to the United States. 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

23

Step 2: Define the Industry

The starting point for the business analyst in formulating industry strategies 

and plans is to first define the industry and understand its structure. The importance of specifically identifying the industry for analysis is analogous to the 

task of the all-source analyst in clearly identifying collections requirements. 

In business, the analyst may have the subject-matter advantage of being in the 

industry, but there are still limits on the resources available for collection and 

analysis. The analyst in business may start with the six-digit North American 

Industry Classification System (NAICS) code for his or her industry and use 

it to access industry data collected by the U.S. Department of Commerce.41

While the NAICS code and Department of Commerce data are available to 

the all-source analyst as well, the ITA factsheet and Internet search results that 

the previous step provides are more germane to that analyst. 

To understand the industry under analysis, the all-source analyst has to research sources of general information on semiconductors and the industry. 

Appendix B provides the results of open-source Internet research on the basics of semiconductors and their manufacture. 

Constructing a Value Chain: Aid to Industry Definition

One way to capture an understanding of this newfound information is to 

construct a value chain for the industry. The following discussion on developing an industry value chain is based on the information in Appendix B. 

An industry value chain is the set of interrelated activities that, taken together, cover the cost of providing the product or service. For the semiconductor industry, the standardization of process steps and information exchange 

between processing steps led to the globalization of the value chain for this 

mature industry.42 The semiconductor or electronic components industry 

and the term “value chain” are mentioned frequently in academic and industry trade journals. There are even illustrations of value chains for various 

aspects of the semiconductor industry available on the Internet. For example, 

in Figure 3.1, the Taiwan Semiconductor Industry Association 2009 Report 

outlines a semiconductor value chain to indicate the number and distribution 

of Taiwan firms comprised in its domestic semiconductor industry.
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24

8 Wafer

Final Testing

256 Fabless 14 Fabrications 30 Packaging 37 Testing

Chip Designer Mask

3 Mask

Fabrication, Wafer

Probing and Dicing Packaging

19 Chemicals

4 Leadframe

15 Substrate

Figure 3.1: Taiwan Semiconductor Industry, 2008 (© Taiwan Semiconductor Industry Association)43

The Taiwan semiconductor industry value chain follows the product flow 

from design to test of the packaged chip. The figure indicates that, in 2008, 

Taiwan had 256 firms involved in the design of integrated circuits. The term 

“fabless” denotes firms that create and sell the designs of integrated circuits, 

but do not fabricate (manufacture) integrated circuits. The figure also indicates 14 firms with fabrication operations and 30 firms with packaging 

operations. 

Academic papers employ value chains to evaluate industries, and those value 

chains produced in the country of interest can yield insights into how important an industry is to a nation. For example, Figure 3.2 shows a semiconductor value chain reflecting Taiwan’s capability in the design of integrated 

circuits relative to capabilities of other advanced countries. The Technovation 

article from which the figure was derived goes on to discuss the strategy of the 

Taiwan semiconductor industry and the reasons behind its relative success at 

that point in time. Although dated, the article still provides background for 

collection and analysis on the semiconductor industry in Taiwan.
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

25

(Upstream)

Market

Specification

IC Design

Implementation

Flow

Define

Standards

EDA

Software

Support

Behavioral Level Design

RTL Level Design

Post-Layout Verification

Physical Level Design

Circuit Level Design

Gate Level Design

(Downstream)

Process

Technology

Market Analysis & 

Product Planning

System/Application 

Level Specification

Foundry Manufacturing,

Packaging and Testing

Semiconductor Material,

Manufacturing Equipment

Speed,

Quality,

Flexibility,

Cost

Taiwan’s

Niche

Advantage 

of 

Advanced

Countries

Figure 3.2: Taiwan Integrated Circuit Design Capabilities (© Elsevier)44

For our immediate purposes, the value chain in Figure 3.2 confirms the steps 

and their sequence in the production of semiconductors. The value chain 

also provides key terms that are encountered in analyzing the semiconductor 

industry.

Figure 3.3 shows a semiconductor value chain that can be used to illustrate 

the semiconductor manufacturing process and the globalization of the industry value chain.
Chuck Howe

26

Electronic

Design

Automation

Chip Mask Fabrication

Design

Packaging Testing

Substrate Frame

Chemicals

Fabrication

Equipment

Lithography Wafer

Suppliers

Figure 3.3: Semiconductor Value Chain45

Figure 3.3 shows the major value-added activities in the industry (chip design, mask, etc.), as well as the key suppliers to the industry (electronic design 

automation, lithography, etc.). An important point for analysts to understand 

is the variation in ownership of the value-chain activities for this mature industry. For example, in Figure 3.4, the top value chain shows the domain of 

the integrated design manufacturer and refers to a firm that participates in 

all the steps in the value chain. In terms of global value-chain governance 

(remember Figure 2.5), this is a hierarchical governance with high degrees of 

explicit coordination within the firm and power asymmetry over the suppliers. The middle value chain in Figure 3.4 shows the domain of the foundry, 

and refers to a semiconductor fabrication firm that fabricates the wafers from 

designs provided by other firms, and then returns the wafers to the customer. 

Finally, the bottom value chain in Figure 3.4 shows the domain of a fabless 

firm. This firm creates the integrated circuit design (intellectual property) and 

sells the design to other companies or subcontracts for fabrication. 

In terms of global value-chain governance, both a foundry and a fabless firm 

are examples of modular value-chain governance. The standardization of design-manufacturing interfaces and information supports a lower degree of explicit coordination and power asymmetry over others. A useful way to think 

of power asymmetry is in terms of the power of the buyer or supplier in the 

interchange. The integrated design manufacturer has a lot more power over 

suppliers than the foundry or fabless firm. 
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27

Electronic

Design

Automation

Chip Mask Fabrication

Design

Packaging Testing

Substrate Frame

Chemicals

Fabrication

Equipment

Lithography Wafer

Suppliers

Electronic

Design

Automation

Chip Mask Fabrication

Design Packaging Testing

Substrate Frame

Chemicals

Fabrication

Equipment

Lithography Wafer

Suppliers

Electronic

Design

Automation

Chip Mask Fabrication

Design

Packaging Testing

Lithography Wafer Substrate Frame

Suppliers

Integrated

Design

Manufacturer

Fabless

Chemicals

Fabrication

Equipment

Foundry

Figure 3.4: Semiconductor Value Chain—Firm Participation46 

Step 3: Identify Sources of Information

Timothy Sturgeon points out the importance of not focusing on macro-level 

statistics, such as trade and investment, to understand a country’s plans and 

intentions, because they “cannot help but render invisible the detailed contours of the world economy.”47 Also beware the technophile’s focus on “the 

next big thing” or, at the other end of the spectrum, the engineer’s focus on 

details. Keep these cautions in mind when starting to scan and select topics 

from the “daily scrape” for further review and analysis.48

This section takes the next step of identifying the types of potential opensource data available to support the industry analysis. Appendix C lists, by 

category, potential data sources specific to the semiconductor industry.
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28

Books

While currency of the data source is a primary consideration, the search 

should include recent books on the industry. 

Reports

The National Academy of Sciences, a nonprofit institution, has a searchable 

website of its publications, many of which are free to download. While the 

publication of National Academy reports is unpredictable, you can set e-mail 

notifications when topics of interest are available. The federal government, 

particularly within the Department of Commerce, provides a regular stream 

of trade and industry statistics, but occasionally it will also produce reports 

on global trade topics that are of interest. For example, the Bureau of Industry 

and Security (www.bis.doc.gov/) provides current news regarding trade issues, 

and the Defense Industrial Base Programs link provides a list of Defense Industrial Capability and Technology Assessments regarding foreign industrial 

development that may be of interest. 

Trade Associations

Most industries have trade associations, and the associations usually release 

publications. Trade association websites provide news and documents, although the frequency of their updates and data available can be irregular. 

Trade Journals 

The most useful sources of current information are the industry trade journals. While there are government policy announcements and occasional analytical articles of use in metropolitan newspapers and business magazines, 

many of the stories are not much more than news releases from the subject 

company. 

Other Internet Sources

This category concerns the ever-evolving platforms and content of the Internet. A few examples follow.

YouTube

The website YouTube (www.youtube.com), although pedestrian to aficionados 

of social media, can still provide good sources of information. 
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Blogs 

Blogs written by industry analysts, enthusiasts, or employees can be a good 

source of information. 

Twitter

The use of Twitter by the trade journals and even companies is noteworthy, 

but they typically tweet links to journal or marketing content already accessible via other means. 

Webcasts, Virtual Conferences 

The increasing use of webcasts and virtual conferences are good real-time 

sources. Subscriptions to the industry trade journals will lead to announcements of these events. The events offer another avenue for the industry to 

share information and develop market opportunities. The presenter slides are 

usually available for download prior to the presentation or the site may allow 

archival access.

Trade Shows

Trade shows, the best alternative to actually visiting semiconductor companies 

in other countries, obviously present challenges to the all-source analyst even 

beyond the requirements of time and funding. Trade association websites and 

trade journals carry advertisements for upcoming tradeshows. Tradeshows offer sessions in a variety of areas; it pays to read the program beforehand to 

ensure that the tradeshow is not devoted to a sub-industry topic or technical 

interchange. Also, unless the analyst is multilingual, it is advisable to ensure 

that the session is in English or a simultaneous translation is available. A 

walkthrough of the exhibit halls, including gathering literature, proves useful. 

One caution is that most corporate booths require a business card or the signing of a register before they provide literature. The purpose of the exhibit hall 

is to generate business leads for the companies, so the collection of literature 

may have to be skipped if identification presents a problem.

Step 4: Collect Information

For the purposes of this discussion, data was collected from November 2009 

to June 2010, using all of the sources discussed in the preceding subsection. 

The sources included subscriptions to multiple semiconductor industry trade 
Chuck Howe

30

journals, two semiconductor industry trade shows (Tokyo and Seoul), and 

one industry strategy symposium (Half Moon Bay, California). With the 

Porter Five Forces and the Value Chain Models for context, relevant online 

information was saved in the program Zotero, organized by folders labeled 

with the External Environment Model segments. Also available were digital 

copies of the tradeshow proceedings. 

Preparing for Collection

The sources that are included in the “daily scrape” of open-source media require preplanning. 

Using E-mail as an Information Portal

For this project, a separate Gmail account was created just to receive industry 

trade journals and other industry source materials. During the workweek, the 

trade journals push their content out to subscribers. Via the Gmail account, 

it was possible to quickly scan the subjects and synopsis of articles in each 

journal. 

Capturing and Sorting Information

There are several ways to capture results. One approach is to use a series of 

e-mail folders to keep and organize items of interest. The freeware program 

Zotero was chosen to collect, manage, and cite the source materials.49 Zotero 

was active and ready to use whenever the browser was open. Saving a copy 

of an article entailed clicking the Zotero icon in the toolbar, and selecting 

“create new item” in the folder designated. Zotero uses a cloud-based storage 

approach to capture a copy of the specific article, and also puts a copy on the 

computer. The reviewed trade journal is placed in a folder within the Gmail 

account that is marked by the name of the journal in case it is necessary to access the journal again. The advantage of Zotero’s cloud-based approach is that 

the analyst can work from multiple computers and keep up with the work. 

In June 2010, Zotero’s annual rate was $20 for 1 GB of storage ($1.67 per 

month). A plus for Zotero is that it has a plug-in to Microsoft Word, permitting direct transfer of citations from Zotero to a Word document.50
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

31

Filing Information

The External Environment Model provided the framework for active collection of information on the industry. Folders were created in Zotero and 

labeled with the names of the segments in the model. Here is the list of virtual 

folders established in Zotero to capture information:

Demographics

Economic

Global

China

Europe

India

Japan

Korea

Singapore

Taiwan

Political/Legal

Sociocultural

Technological

Note that, within the global element, country-specific folders were also developed for information that pertains only to that country. There is also a folder 

named Industry Analysis that was used to collect information regarding the 

structure and conduct of the industry. Figure 3.5 shows a screenshot of the 

online data collection (Zotero tool) for this industry analysis. 
Chuck Howe

32

Figure 3.5: Data Collection Using Zotero

In Figure 3.5, the Global folder is highlighted in the far-left column. The 

middle column lists all the articles saved in that Global folder; highlighted 

is an article titled “Survey: China is key to IC recovery in 2010.” Doubleclicking on that title opens up the article in that window for rereading. In 

the far-right column is a snapshot of the citation, including the date it was 

accessed and the article’s Web address. The review and collection of data in 

one place with a clear documentation trail will be advantageous during the 

analysis. Once the data-collection framework is in place, the analyst can start 

reviewing and collecting information. There will be a large volume of information arriving every day, but it is possible to quickly scan and save information of interest.

Industry Observations from Data Collection

Thus far, we have discussed the first four steps: select the industry; define the 

industry; identify sources of information; and collect information. In this 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

33

subsection, we look at industry observations resulting from the data collection. 

We summarize observations on the current state of the semiconductor 

industry based on the results of the open-source collection. The summary will 

provide a backdrop for step five: analyze results (the following subsection). 

There, we will review and analyze collection results on East Asia—the focus 

of our analysis.

At this point, the analyst should be comfortable with reviewing incoming 

information on the semiconductor industry. The Five Forces Model and the 

Value Chain Model aid in reading and comprehension during collection. The 

External Environment Model and the Zotero software tool provide a means 

to sort and preserve collection results. The observations at this point will be 

a collection of opinions and facts consistent with how the industry views itself. While the psychology of intelligence analysis is beyond the scope of this 

discussion, Figure 3.6 provides a conceptual view of applying the industry 

analysis model for intelligence analysts.51

Knowledge of Industry Structure

From Value Chain Model

“What’s Key To That Industry”

Sorting of Key Industry Information 

Per External Environment Model

Five

Forces

Analyst Strategic Framework

NIC Global Trends

National Intelligence Strategy

Region/Country Knowledge

Portfolio Tasking

Focused

Review

NIE development

Intelligence Product

Increased Knowledge

Results

Analyst Judgment of

Key Strategic Insights

From Applying Industry

Analysis Methodology

Analyst

Too Much

Information

What’s Important?

Figure 3.6: Conceptual View of Model Application 

Figure 3.6 shows the analyst at the center because he or she is the target 

audience for this book. On the left side, the blue cloud indicates the large 

amount of open-source information and the caption “Too Much Information” describes the daily challenge of the all-source analyst. Along the top 
Chuck Howe

34

are arrayed the various models described in Chapter 2, but it also includes 

the analyst’s strategic perspective and tradecraft experience. The combination 

of industry analysis models and the strategic framework provides a new lens 

for the analyst to now perform a “Focused Review” of industry-related data. 

The “Analyst Judgment of Key Strategic Intelligence Insights” represents the 

intellectual task of reviewing and assessing the information collected. This 

is not a serial process; the analyst over time builds a strategic perspective of 

the industry and draws equally strategic and intelligence insights (or connections) from his or her tradecraft experience. This subsection provides the 

result of building a strategic perspective on the semiconductor industry. Later 

in this chapter, under step 5, we describe the result of focusing our newfound 

perspective on the target region of East Asia and suggest strategic intelligence 

insights for use in the intelligence products listed in Figure 3.6 as “Results.” 

It is worth stating again that the intellectual process of learning to use the industry analysis models, learning to understand the industry, collecting information, developing observations, and finally generating strategic intelligence 

insights is not serial.

Summary of Industry Observations

The semiconductor industry faces continuing consumer demand to increase 

capability and decrease prices. The advances in technology have been impressive; however, achieving each advancement (sometimes referred to as a technology “node”) requires enormous amounts of capital, and it is the economics, 

not the technology, that is becoming the main driver. Four primary observations resulted from the information collection and analysis of the industry:

1. Economics of pursuing the leading edge is in question; 

2. “Globalization” of the industry market is not a remedy for profitability

 concerns; 

3. East Asia’s emergence as the industry’s production center is an outcome of

pursuing profitability through globalization; and 

4. Industry’s active pursuit of alternative markets for avenues of profitability is

an outgrowth of the competitiveness within the industry.
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35

Economics of Pursuing Leading Edge Is in Question

A hallmark achievement of this industry has been its ability to regularly deliver increasing capability. However, while there is a lot of discussion of the 

approaching physical limits of achieving further increases in the number of 

transistors that can be crammed onto an integrated circuit, industry analysts 

believe the real barrier may be an economic one. At semiconductor equipment conferences this year, several speakers brought up the point that new 

technology nodes may not meet the 18-month cycle of delivering new capability per Moore’s Law.52 Figure 3.7 illustrates the industry’s fear that the 

financial hurdles may be too great for delivering new capability.

An Industry in Transition

z Chipmakers need to keep pace with tech and focus on design

z . . . while the cost of manufacturing and R&D continue to grow

~$4.5 to

 $6.0B

~$3.5 to

 $4.0B

~$2.5 to

 $3.0B

90-65 nm 45-32 nm 22-12 nm

Increased complexity

Fab Start-up Cost

Comparison

USD Millions

Process R&D Cost

USD Millions

2003-2007 2008-2011 2012 onwards

~$1300M

90-65 nm 45-32 nm 22-12 nm

~$600 to

 $900M

~$310 to

 $400M

1 Industry average for Logic process R&D,

2 Average capex of 300mm Logic fabs in World Fab Watch database. Source: In-Stat 1/07, World

 Fab Watch; analyst reports; press clippings.

Figure 3.7: Financial Hurdles for Semiconductor Industry 

(© GLOBALFOUNDRIES)53

Figure 3.7 shows the increasing research and development costs required to 

achieve decreasing feature size. The figure also shows that the industry faces 

huge costs to build the fabrication facility to render that design into a chip. 

In terms of Porter’s Five Forces Model, both of these factors represent high 
Chuck Howe

36

barriers to entry for a company interested in joining the industry. These large 

investments also represent high exit costs for existing firms. 

Figures 3.8 and 3.9 illustrate that even the conceptualization and design of 

leading-edge chips are becoming cost prohibitive and resulting in fewer new 

design starts. One result is that many companies within the industry will continue production using older feature dimensions, and will reuse old blocks of 

design (intellectual property) in order to avoid the enormous costs of leadingedge design and fabrication.

Software Prototype Validation

Physical Verification Architecture

DESIGN COSTS

DESIGN COSTS ARE INCREASING RAPIDLY WITH

GROWING TRANSISTOR COUNT

160

140

120

100

80

60

40

20

0

COST ($M)

0.13μm

(40M)

32nm

(150M)

22nm

(180M)

45nm

(120M)

65nm

90M

90nm

(60M)

Feature Dimension (Transistor Count)

Figure 3.8: Increasing Design Costs (© International Business 

Strategies, Inc.)54
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

37

Figure 3.8 illustrates the increasing cost of design in leading-edge integrated 

circuits. The growing software cost is due to the increase in software required 

throughout the design process to achieve breakthroughs in the performance 

of integrated circuits. 

 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Year

10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Number of Design Starts

DESIGN STARTS BY FEATURE DIMENSION

0.25μm

0.35μm

0.18μm

>0.35μm

0.15μm

0.13μm

90nm 65nm

45nm

22nm 32nm

Figure 3.9: Decreasing Design Starts (© International Business 

Strategies, Inc., 2010)55

Figure 3.9 illustrates that increasing costs of pursuing the leading edge in 

semiconductors are resulting in a slowdown of new starts in leading-edge design. Instead, companies are trying to earn as much revenue as possible from 

existing designs and fabrication facilities. In terms of the Five Forces Model, 

the intensity of competition requires a company to commit huge amounts of 

capital in order to stay at the leading edge of the industry. These capital commitments have led to fewer competitors with clear leaders in each category of 

the industry. For example, Intel is the world leader in microprocessor units in 

terms of sales and market share.

When you factor in the huge costs to stay on the leading edge and the industry’s claim that the returns on investment are increasingly difficult to find, it is 
Chuck Howe

38

hard to see why firms even try to pursue the leading edge. Figure 3.10 shows 

a slide from an industry strategy session that graphically captures this point, 

but does not provide any answers.

But . . . Moore’s Law has not driven a 

Revenue Growth Difference

Moore’s Law versus Not Moore’s Law Driven ● Moore’s Law Driven =

— NAND

— DRAM

— MPU

● Moore’s Law Laggards =

— everything else

● The reason?

— Most Moore’s Law

 Gains are Given

 Up in Price

 l DRAM -12%

 l NAND -16%

 l MPU -1%

 l Average -3%

1996 1998 2000 2002 2004 2006 2008

Copyright @ 2000 by VLSI Research Inc. All rights reserved.

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Not Moore’s Law Driven

Share of Total Semiconductor Sales

Moore’s Law Driven

Figure 3.10: Lagging Edge over Leading Edge in Semiconductor Sales 

(© VLSIresearch. “Economics and Collaboration Panel Discussion” SEMI 

ISS 2010. Half Moon Bay: SEMI, 2010.)56

Figure 3.10 illustrates that, despite all the attention paid to the leading edge 

(Moore’s Law–driven) and the expectation that a leading-edge strategy will result in higher profits, the fact is that the share of total semiconductor sales has 

remained steady between the leading and lagging edge. The statement “Most 

Moore’s Law Gains are Given Up in Price” illustrates the power of the buyer (in 

this case, the electronics-equipment manufacturer) in the semiconductor industry. So the semiconductor firm (supplier) has to either find ways to remain 

competitive or exit the industry, possibly going out of business altogether. 

Unfortunately, even if a company steps back from the enormous costs of 

leading-edge fabrication, it will still face intense price competition in the 

trailing edge that requires it to carefully select its strategy. Figure 3.11 shows 

that, while integrated design manufacturers still predominated in the top 20 

semiconductor sales leaders (as of 2008), the Taiwan Semiconductor Manufacturing Company, a pure-play foundry, is in the top five, and two fabless
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

39

firms, Qualcomm and Broadcom, registered the highest growth rates. For the 

remaining integrated design manufacturers to stay at the leading edge, they 

must continue to leverage their lead in market segments with large amounts 

of capital investment. 

2008 Top 20 Semiconductor Sales Leaders ($M)

2008

Rank

2007

Rank

Company Headquarters 2007 Tot

Semi

2008 Tot

Semi

2008/2007 %

Change

1 1 Intel U.S. 35,021 34,490 -2%

2 2 Samsung South Korea 19,951 20,272 2%

3 3 TI U.S. 13,309 11,966 -10%

4 4 Toshiba Japan 11,850 11,059 -7%

5 5 TSMC* Taiwan 9,813 10,556 8%

6 7 ST** Europe 8,637 9,052 5%

7 8 Renesas Japan 8,001 7,017 -12%

8 13 Qualcomm*** U.S. 5,619 6,477 15%

9 9 Sony Japan 7,203 6,420 -11%

10 6 Hynix South Korea 9,201 6,182 -33%

11 12 Infineon Europe 5,772 5,972 3%

12 11 AMD U.S. 6,013 5,808 -3%

13 14 NEC Japan 5,593 5,732 2%

14 15 Micron U.S. 5,520 5,688 3%

15 10 NXP Europe 6,026 5,318 -12%

16 16 Freescale U.S. 5,447 4,898 -10%

17 23 Broadcom*** U.S. 3,754 4,509 20%

18 17 Fujitsu Japan 4,568 4,462 -2%

19 21 Panasonic Japan 3,810 4,321 13%

20 19 Nvidia*** U.S. 3,979 3,660 -8%

-- -- Total Top 20 -- 179,087 173,859 -3%

*Foundry **Not incl. flash and ST-NXP Wireless in 2007 & 2008 ***Fabless

Source: Company reports, IC Insights

Figure 3.11: Integrated Design Manufacturers Still Predominate (© IC Insights)57

Figure 3.11 not only lists the leaders in the semiconductor industry, it also 

shows the international makeup of the industry. One notable absence on the 

list is mainland China, which is usually portrayed in the media as a juggernaut in manufacturing.
Chuck Howe

40

“Globalization” of the Industry Market is not a Remedy for 

Profitability Concerns

Collaboration and Protection of Intellectual Property

The industry understands the technology challenges ahead, but finds it increasingly difficult to find the capital and business model to fund the necessary research and development for pursuit of the next technology node. One possible 

solution the industry is exploring is collaborations in research and development 

between semiconductor firms. The International Semiconductor Technology 

Roadmap is the best example of this type of collaboration. Participating firms 

are able to share technology and still achieve differentiation in their product. 

A few large firms, such as Intel, still choose to fund their own research and 

development and keep their technology advantage in-house. Other firms also 

carefully guard their intellectual property, but do so in a surprising way. For 

example, within weeks of the release of Apple’s iPad, the Canadian company 

Chipworks released an analysis and cross-section images of the core processor 

chip and correctly identified Samsung as the designer and fabricator.58 This 

practice of reverse engineering and publishing the integrated circuit design of 

another firm is protected by the Semiconductor Chip Protection Act in the 

United States, which allows reverse engineering “for the purpose of teaching, 

analyzing, or evaluating the concepts or techniques embodied in the mask 

work or circuitry.”59 The industry uses this carefully stipulated openness to 

share achievements and protect its intellectual property.

Expanding Market, Increasing Competition

Another hallmark of this industry is the growth in unit volume, which drives 

lower cost per unit of semiconductors. One observation in EE Times India

stated that “the total semiconductor TAM [total available market] grows because of—not in spite of—the 35 percent per year reduction in the unit price 

of transistors.”60

During this past decade, electronics consumption has shifted from business 

use to personal and home use, and this is growing despite the economic 

downturn. One supporting figure cited is that 55 percent of the world 

GDP of electronics is now from personal consumption.61 The $226 billion 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

41

semiconductor industry is a key part of the $1.1 trillion electronics industry.62

Despite the recent economic downturn, the semiconductor content of 

electronic systems was forecasted to increase about 27 percent for 2010.63

A major portent of the future of the semiconductor market lies in the rising awareness of people in other parts of the world to the use of portable 

electronics such as cell phones. However, a significant portion of these groups 

only has an annual per capita income of greater than U.S. $3,000.64 Industry 

analysts are warning business to be aware of the tipping point, when 50 percent or more of its demand is in emerging markets.65 Figure 3.12 illustrates 

the point that, while the majority of this rising consumer class will have high 

expectations for capability, they will not have the economic means to afford 

it, thereby exerting further downward pressure on prices.

Market Trend: Polarization in Market

Population Pyramid

Annual income per capita US$

Population & Market 

Characteristics

Advanced countries

Upper & Middle Income layer

Population: 1,500M

● Upgrade Demand for

High Value-added & Low Energy

Consumption products

Lower Income layer

Population: 4,000M

● New Demand to upgrade life 

standard Limited Spec & Low

Cost product

● Renewable Energy Potential

Demand

Establish operational structure to reduce chip or panel per cost

Tier 1

>$20,000

Tier 2

$3,000-20,000

Tier 3

<3,000$

New Purchasing Group

Source: “The NEXT 4 BILLION” International Finance corporation

Figure 3.12: Future Market Economics (© Tokyo Electron using information 

from “The NEXT 4 Billion” International Finance Corporation and “The 

Fortune at the Bottom of the Pyramid” Strategy + Business, no. 26: 2–14)66
Chuck Howe

42

Figure 3.12 also provides a sociocultural insight regarding rising living conditions in developing nations around the world. While the industry is struggling with future profitability, demand in developing countries is increasing. 

This bodes ill for the semiconductor industry, because the power to set prices 

is still firmly in favor of the consumer.

Ultimately, a semiconductor company has to turn a profit in order to survive 

in the industry. Turning a profit means being able to sell enough chips over 

what it cost to develop and produce them. One figure cited at an industry 

strategy session is that there needs to be a total available market of at least 

$2 billion in order to justify pursuing a 32 nm advanced chip design.67

The qualifying 2013 product markets were listed as mobile phones, personal 

computers, video games, and televisions with set top boxes. The financial 

community expects that before a semiconductor company invests its capital 

in a project, the expected value from the project will cover its investment and, 

in addition, earn a higher return than alternative uses for that capital. 

East Asia’s Emergence as the Industry’s Production Center is an 

Outcome of Pursuing Profitability through Globalization

It was the drive for profitability that forced U.S. firms to first outsource 

finished electronic components to Asia for use in producing end items for 

consumption.68 The developing standardization of design-to-manufacturing 

interfaces helped the rise in technical sophistication of Asian countries, and 

now that region is becoming the fabrication center of this global industry.69

The global Value Chain “modular” model discussed earlier in this chapter 

neatly captures the current semiconductor design and fabrication processes. 

The establishment of the dedicated foundry model in Taiwan is central to understanding the modularity of the industry.70 While there are variations in scope 

and organization, in its simplest form, the foundry receives the chip design 

“intellectual property” from a customer and produces wafers with the integrated circuits. The customer then takes the wafer and either finishes the process or 

outsources it to yet another firm, so they only handle sales of the finished chip. 

A pure-play foundry does not fabricate and market its own chips. Sometimes 

an integrated design manufacturer will contract out its excess production capacity to other firms and produce chips in their fab for them. 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

43

The dedicated foundry is a way to transfer portions of the huge costs (and 

technology risks) of semiconductor fabrication outside of the firm. Some 

“fab-lite” semiconductor companies are reducing their fabrication capabilities 

to cover only key technology areas and are relying on foundries for production of the remainder of their product portfolio. Other “fabless” firms have no 

fabrication capability and are concentrating on generating designs for fabrication or for sale to other companies. 

The result of all these changes is a shift in semiconductor manufacturing to 

Asia, where the majority of the foundries are located. Figure 3.13 shows, by 

geographic region, the change in installed capacity (use of 200 mm equivalents allows inclusion of all wafer sizes) from 1995 to 2009; it also includes 

forecasts for 2010 and 2011. The center of gravity for this industry is clearly 

shifting to East Asia.

18

16

14

12

10

8

6

4

2

0

1995199619971998199920002001200220032004200520062007200820092010

2011

Source: SEM World Fab Database, Nov 2009

Worldwide Installed Capacity over Time

in 200mm Equivalents

Installed Capacity by Region

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

-5.0%

-10.0%

Taiwan

SE Asia

S Korea

Japan

Europe &

Mideast

China

Americas

Change

In Millions

13.6%

8.9%

13.6%

12.2%

6.0% 6.0%

9.7%

3.3%

20.1%

14.1%

13.2%

17.5%

7.0%

-4.0%

4.4%

-6.4%

Change in %

Figure 3.13: Rise of Asia in Semiconductor Manufacturing (© SEMI Industry Research & Statistics)71 
Chuck Howe

44

Industry’s Active Pursuit of Alternative Markets for Avenues of Profitability is an Outgrowth of the Competitiveness within the Industry

There are several promising areas for future growth in the semiconductor 

industry that are not as capital intensive or technologically challenging. These 

areas are photovoltaic (PV) and light emitting diodes (LED). There is also 

an emerging and potentially large application area for semiconductors in the 

biomedical market. 

Photovoltaic (PV). Photovoltaic (or solar-cell) fabrication starts with square 

silicon wafers and uses a simpler—relative to CMOS (complementary 

metal-oxide-semiconductor)—fabrication process to produce a solar panel. 

Figure 3.14 shows a simplified version of the process; note the absence of the 

repeated mask exposures that produce the complex designs of an integrated 

circuit. The fabrication of the solar cell starts with flat sheets of silicon that 

are the same size as the finished solar cell. The processing of the silicon into 

a solar cell is much quicker than the process for fabricating an integrated 

circuit. While it is important to control the introduction of impurities in 

the process, solar-cell fabrication does not require the same level of stringent 

process controls involved in integrated-circuit fabrication.

Silicon Wafer Base Roughen the Surface Add Dopants

Deposit an 

Anti-Reflective 

Coating

Add Conductive Grid

Add Glass

Figure 3.14: Fabrication of a Solar Cell72
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

45

The PV market is a topic of much discussion, but the business model for 

widespread adoption is still not in place. As Figure 3.15 indicates, demand in 

the industry is still heavily dependent on government subsidies for producers 

and consumers. Until PV can compete economically with conventional power sources, its progress will continue to depend on government subsidies.

Demand and Supply are Partners

Manufacturing (supply) typically follows the market and/or low cost 

areas of manufacturing.

The Supply/Demand picture for the PV industry is unbalanced — 

one region Europe represents 76% of all demand. Germany is 

consumed 58% of first time sales in 2009.

China shipped the majority of product into the market. In 2009, 

2-gigawatts of cheaply priced inventory led to an installation figure 

that is higher than first time sales.

2009 Shipments 

(not including 2008 inventory)

2009 Demand 

(based on Sales to first point of sale)

Europe

76%

(primarily Germany)

Europe

25%

Japan

17%

Rest of 

World

(primarily 

China)

51%

Japan

5%

North America

7% North America

10%

Rest of the World

9%

@2010 Navigant Consulting, Inc. PV Services Program

Figure 3.15: PV Market Still Developing (© Navigant Consulting)73 
Chuck Howe

46

It is interesting to note from Figure 3.15 that China is a major producer of 

photovoltaic devices, but is not a major consumer. The fabrication finding is 

not surprising, since photovoltaic fabrication is not as complex as integrated 

circuits, but the future of mainland China as a consumer of photovoltaics 

remains open to speculation.

Light Emitting Diodes (LEDs). LEDs are another promising growth area. 

They are based on semiconductor substrates and, in concept, are even simpler 

than PV cells to produce. The LED industry is characterized as being 10 years 

behind the semiconductor industry in terms of process control and automation.74 Figure 3.16 provides a simple view of the fabrication steps. 

Figure 3.16: LED Fabrication (© Yole Développement)75

The fabrication of an LED also begins with silicon substrate. A layer of material is grown on the substrate, and the resulting epiwafer is ready for further 

processing. The dies are cut out of the epiwafer and packaged in a fixture with 

electrical connections. 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

47

Figure 3.17 shows that the promise of continuing market growth for LEDs 

is in the consumer-product areas of automobiles, flat-screen televisions and 

monitors, and energy-efficient applications, such as commercial and residential lighting. These growth projections and low technology barriers are now 

drawing larger semiconductor companies into this segment. While the consumer will benefit from the increasing competition, only the firms that can 

quickly scale up production will remain profitable.

Lighting (others)

Lighting (office)

Lighting (home)

LCDTV

Auto (others)

Auto (headlight)

Small/Mid LCD

Signal

M$

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

200420062008201020122014201620182020

Figure 3.17: LED Market Forecast (© iSuppli )76

Figure 3.18 shows that the distribution of LED fabs is the highest in East 

Asia. The LED fab has a lower barrier to entry, and East Asia is close to the 

buyer (in this case, electronics and automotive manufacturers).
Chuck Howe

48

North America

# of fabs 4

Europe

# of fabs 4 Korea

# of fabs 7

Japan

# of fabs 11

China

# of fabs 22

Southeast Asia

# of fabs 2

Taiwan

# of fabs 36

Legend

l Upcoming fabs

Source: SEMI(R) Opto/LED Fab Watch Database, March 2010

l

l

l

l

l

l

Figure 3.18: LED Fabs Worldwide (© SEMI Industry Research & 

Statistics)77

Biomedical. The semiconductor industry is awakening to the market potential 

of the application of semiconductors in medicine. During an EE Times virtual 

conference on Medical Systems Design (cited as an example data source in 

the preceding subsection), the keynote speaker presented a slide (Figure 3.19) 

listing the drivers and potential for growth in this market segment. 

Notes:

l Filtered by Product Type Discrete/LED

l Information is subject to change
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

49

Aging populations

 — By 2020 well over 1 billion people

 worldwide will be 60 years and older

Rising healthcare costs

 — US Healthcare spending is 16+% of

 GDP

 — Costs to grow from 2 trillion in 2007 to 

 3.1 trillion in 2012

Remote and emerging markets

 — China healthcare expenditure increased

 50% from 2008 to 2009

Consumer medical equipment

 — Over 40% of annual semiconductor

 sales are for consumer medical devices

$M

$140,000

$120,000

$100,000

$80,000

$60,000

$40,000

$20,000

$0

1979198119831985198719891991199319951997 19992001200320052007

CAGR: 1997-2007 = 9.5%

Source: MDDI, Databeans and TI data

Medical devices and

supplies market

Global trends driving growth

Figure 3.19: Medical Devices Market Potential (© Doug Rasor)78

Figure 3.19 provides insights into the drivers for potential demand for semiconductors in medical applications. The aging of populations in developing 

and developed nations is one driver. Another projected demand driver is rising healthcare costs, even in developing nations. 

During a keynote address at SEMICON Korea, Tien Wu, the chief operating 

officer of ASE (Advanced Semiconductor Engineering), Taiwan (the world’s 

largest provider of semiconductor-manufacturing services in assembly), presented a slide (Figure 3.20) showing that medical applications are part of the 

next semiconductor life cycle. The speaker went on to say that every single life 

cycle tends to be larger than the previous one, and champions of one tend to 

lose in the next life cycle.79
Chuck Howe

50

Information

Communication

Life Sciences?

●Search engine

●Info service

● Machine-to-machine

●Intelligent appliances

●Bio-medical

●Green energy

●CPU

● Memory

●Storage

●Connectivity

●Bandwidth

●People-to-people

PC

WW Cell Phone PR - 52%

WW PC PR - 17%

 1980 1985 1990 1995 2000 2005 2010 2015

2008

Improvement of Life Experience

Semiconductor Life Cycles

Figure 3.20: Semiconductor Life Cycles (© ASE Group)80

The continuing reductions in the size of integrated circuits and power requirements are raising the potential for integration of semiconductors into 

the human body. As Figure 3.21 illustrates, the applications of semiconductors are poised to become essential to our health and well-being. 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

51

Figure 3.21: Semiconductor Integration into Biomedical Devices 

(© Doug Rasor)81

Summary

This subsection provided the result of building a strategic perspective on the 

semiconductor industry. The observations are the result of reviewing and 

evaluating a large body of collected information. The extensive footnoting for 

each observation provides the means for recalling and verifying the source of 

these observations. To summarize, particularly with respect to influences on 

the structure and conduct of relations between this industry and the governments with which they interact: (1) the industry is caught between buyer 

expectations and skyrocketing development and fabrication costs; (2) this 

industry-wide challenge at the leading edge is driving a continuing search for 

funding; and (3) the shakeout in the industry at the leading edge is driving 

competition in the trailing edge and alternate avenues of profitability (e.g., 

photovoltaic, LEDs, medical devices). 
Chuck Howe

52

Step 5: Analyze Results

At this point, the all-source intelligence analyst needs to review the information collected and initial industry insights to make connections beyond the 

business world to produce strategic intelligence insights. The results of this 

fifth and final step will round out the all-source analysts’ perspective and provide inputs for future intelligence products. We focus our newfound perspective on the target region of East Asia and suggest strategic intelligence insights 

for use in producing the intelligence products listed in Figure 3.6.

East Asia: Semiconductor Industry

While their approaches vary, the national governments in East Asia all set 

out to foster the establishment and growth of the industry.82 But this governmental involvement does not guarantee continuing success. Brown and 

Linden explain: 

For governments, the years of U.S.-Japan rivalry established 

the reduced scope for government intervention in an established industry. In the 1970s a range of policy tools such as 

tariffs and subsidies were available to the Japanese government in its efforts to overtake U.S. chip firms, and international trade agreements forced these to be dropped once 

Japan’s industry was established. The direct policy tools of 

the past have been sidelined by various agreements under 

the World Trade Organization (WTO), although developing countries like China are still able to provide subsidies to 

push their infant industry along.83

Figure 3.22 summarizes the state of the semiconductor industry in East Asia. 

A discussion of each country follows the figure.
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

53

Market

Strength

Value Chain 

Focus

Technology

Node

Industry

Outlook

Government

Involvement

Observation

Japan Memory Lithography, 

Fabrication, 

Packaging, 

Testing

Leading 

Edge

Falling 

Behind

Minimal, 

Export 

Controls

Seeking growth 

through

outsourcing 

and joint ventures in process 

R&D

Korea Memory Design, 

Fabrication, 

Packaging, 

Testing

Leading 

Edge

Memory Trying to 

Expand 

Domestic 

Capability 

Beyond Memory Sector

One Company 

dominates. 

Domestic 

Industry is still 

developing.

SingaporeFoundry Fabrication TBD TBD TBD Acquisition of 

Chartered by 

off-shore 

investors, 

outcome still 

TBD.

Taiwan Memory, 

Foundry, 

PV, LED

Design,

Fabrication,

Packaging, 

Testing

Leading 

Edge

Positive 

Growth

Decreasing, 

Export 

Controls

Strategy 

emerging to 

keep Taiwan 

at leading edge 

and off-shore 

trailing edge 

and associated 

value chain 

steps to 

mainland 

China.

China Foundry,

PV, LED

Design,

Fabrication,

Packaging, 

Testing

Constrained

By Export 

Controls

Positive 

Growth 

in 

Trailing 

Edge

Very Involved, 

and Governments at 

National, 

State, and 

Local levels 

have equity 

stake in domestic firms.

Chinese 

government 

interested in 

developing 

capability to 

address new 

markets such as 

PV and LED.

Figure 3.22: Summary of East Asia Semiconductor Industry, 2010

➠

➠

➠

➠
Chuck Howe

54

Japan

Japan is still a major competitor in the chip industry, but its domestic 

economic turmoil and its inability to adapt to the changing semiconductor 

market have affected its standing.84 Japan’s older established chip firms are 

pursuing consolidation and are outsourcing design and fabrication outside of 

Japan.85 Referencing the semiconductor value chain, Japanese semiconductorequipment manufacturers (machines that fabricate the chips) are competitive 

and increasing shipments to China and Taiwan.86 Japan is home to Nikon 

and Canon, the number two and number three firms of the top lithography 

companies in the world.87 Japanese-headquartered companies are the world 

leaders in the packaging materials segment of the semiconductor industry, 

with a 2009 combined market share of 65 percent of an estimated $15.8 

billion packaging-materials market.88 Beyond encouraging energy-saving 

semiconductor applications, the Japanese government is not playing a major 

role in their mature domestic semiconductor industry.89

Korea

Korea’s Samsung is the world leader in memory production and flat-panel 

displays, but the government is concerned about the concentration of its semiconductor industry in the memory market, continuing dependency on the 

import of integrated circuits for incorporation into consumer electronics, a 

slow start in creating a fabless sector, and the rise of China’s industrial capability.90 The Korean news media provides a sociocultural insight into perceptions 

of China’s rise, characterizing Korean workers as avoiding the arduous work in 

semiconductor and LCD production, while their counterparts in China work 

at one-fifteenth of the annual salary of a Korean worker. That same article 

describes Korean firms as seeming to be horrified at the full-fledged efforts of 

high-ranking China officials to establish a predominant position in the semiconductor industry. The Korean semiconductor industry is concentrated in a 

few very large companies, of which Samsung is clearly the flagship. Koreanheadquartered semiconductor packaging materials companies are increasing 

their overseas versus domestic sales, but in comparison to Japan, they remain 

a small player.91 The remainder of Korea’s firms on the semiconductor value 

chain primarily supply the domestic giants of electronics, LG and Samsung.92

EE Times reports that the Korean government’s “System IC 2010” project 

is an effort to jump-start the nation’s fabless community, including analog 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

55

start-ups, but it is too early to see the results.93 Samsung recognizes the risk of 

the company’s concentration in memory and is expanding into the foundry 

arena, already scoring a significant win by producing the processor for Apple’s 

new iPad.94 Through its “low carbon, green growth” vision, the Korean government is supporting the industrialization of renewable energy sources as a 

driver for new employment and economic growth.95

Singapore

According to the Economic Development Board of Singapore, there are four 

12-inch fabs in operation in Singapore by the world’s top three wafer-foundry 

companies.96 This island nation is also home to headquarters activities of over 

125 electronic companies (including the 50 largest). Recently, U.S.-based Applied Materials opened its first facility in Asia for manufacturing its advanced 

semiconductor-fabrication equipment, citing that over 70 percent of its business is now in Asia.97 Singapore’s Chartered foundry (once 62 percent owned 

by the Singapore government’s investment agency, Temasek Holdings) struggled to compete with Taiwan foundry’s Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC), 

and was acquired in 2009 by the Advanced Technology Investment Company 

(ATIC), a wholly owned subsidiary of the Abu Dhabi government.98 This acquisition, folded into the ATIC and AMD Global Foundries venture, creates 

a first-tier foundry competitor.

Taiwan

Taiwan is home to the world’s two largest pure-play chip foundries—Taiwan 

Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC)—and also has the largest number of LED fabs. 

Figure 3.23 shows that, in terms of integrated-circuit foundry sales, these two 

firms are positioned well ahead of their peer competitors. 

2009 Major IC Foundries

2009

Rank Company FoundryType Location

2007 

Sales

($M)

2008 

Sales

($M)

08/07

Sales 

%

2009

Sales

($M)

09/08 

Sales 

%

1 TSMC Pure-Play Taiwan 9,813 10,556 8% 8,989 -15%

2 UMC Pure-Play Taiwan 3,430 3,070 -10% 2,815 -8%
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2009 Major IC Foundries continued

2009

Rank Company FoundryType Location

2007 

Sales

($M)

2008 

Sales

($M)

08/07

Sales 

%

2009

Sales

($M)

09/08 

Sales 

%

3 Chartered* Pure-Play U.S. 1,458 1,743 20% 1,540 -12%

4 GlobalFoundries Pure-Play U.S. 0 0 N/A 1,101 N/A

5 SMIC Pure-Play China 1,550 1,353 -13% 1,075 -21%

6 Dongbu Pure-Play South 

Korea 510 490 -4% 395 -19%

7 Vanguard Pure-Play Taiwan 486 511 5% 382 -25%

8 IBM IDM U.S. 570 400 -30% 335 -16%

9 Samsung IDM South 

Korea 355 370 4% 325 -12%

10 Grace Pure-Play China 310 335 8% 310 -7%

11 He Jian Pure-Play China 330 345 5% 305 -12%

12 Tower** Pure-Play Europe 231 252 9% 292 16%

13 HHNEC Pure-Play China 335 350 4% 290 -17%

14 SSMC Pure-Play Singapore 350 340 -3% 280 -18%

15 TI IDM U.S. 450 315 -30% 250 -21%

16 X-Fab Pure-Play Europe 410 368 -10% 223 -39%

17 MagnaChip IDM South 

Korea 322 290 -10% 220 -24%

Source: IC Insights, company reports

*Purchased by GlobalFoundries in 4Q09.

**Tower bought Jazz in 2008.

Figure 3.23: TSMC Top among Foundries (© IC Insights, Company 

Reports)99

Given our previous discussion of the modularization of the semiconductor 

value chain and the rise of East Asia, it is not surprising to see the preponderance of foundries located there. The foundry model promises to shield a 

semiconductor firm from the intense capital costs of fabrication. It remains to 

be seen how far the fabless or fab-lite model will continue to progress.

Despite its history as the first chipmaker in Taiwan, UMC is seen as now falling behind the technology curve, succumbing to the continuing demands for 

capital to stay at the leading edge.100 TSMC continues to grow, and expansion 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

57

plans garner most of the news regarding Taiwan’s semiconductor industry. At 

the front end of the value chain, TSMC’s Electronic Design Automation plans 

and offerings have led some analysts to identify TSMC as a new integrated 

device manufacturer (IDM).101 Also at the front end, TSMC announced its 

collaboration with MAPPER Lithography (a Netherlands firm) to incorporate 

a maskless lithography technology in its manufacturing processes.102

Akira Minamika, a speaker at SEMICON Japan, presented a slide (Figure 

3.24) that reinforces the view that TSMC is going to grow beyond the business model of a pure-play foundry. TSMC’s announcement that it is going 

to open an R&D center and wafer fab to develop and produce LEDs clearly 

establishes an IDM role for TSMC, as least in optoelectronics, despite its assurances that it will remain a pure-play foundry in the IC market sector.103

This is significant, because a key selling point of a pure-play foundry is that it 

does not compete with its customers by producing its own line of chips. 

System

IC Production

Application platform

IC design platform

EDA IP Process & Device Package

software application architecture

Foundry

Fabless ASSP

Japan IDM

New TSMC

TSMC will cover Japanese IDM

Figure 3.24: TSMC’s Expanding Coverage (© IC Insights, Company 

Reports)104
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58

Figure 3.24, provided at an industry tradeshow in Japan, highlights the recognition that TSMC is expanding its coverage of the value chain. This will be 

an interesting development, since Japanese firms use the foundry capabilities 

of TSMC and have not viewed TSMC as a competitor. 

Although TSMC has a Samsung-like impact in its global stature, Taiwan has 

a more diverse semiconductor industry, with close ties to domestic and international electronics-manufacturing companies. Reflecting this strength of 

diversity is a recent legislative resolution that asks the Economics Ministry to 

discard a restructuring plan for Taiwan’s DRAM industry, characterizing it as 

a waste of resources.105 However, in the same session, it agreed to cut Taiwan’s corporate tax rate from “20 to 17 percent and retain tax breaks targeted 

at R&D,” which will sustain its national competitiveness.106

Strategic Intelligence Insight 

The most interesting developments from a strategic intelligence perspective 

are the growing ties between Taiwan’s and mainland China’s semiconductor 

industries. In February 2010, Taiwan relaxed restrictions on “high-tech investment in China in another move to help local companies expand their global 

market shares and competitiveness.”107 The Taiwan Ministry of Economic Affairs will establish a panel to screen proposed investments. Existing regulations 

still in force prohibit local foundries from setting up 300 mm wafer fabs or 

foundries capable of processes below 130 nm, but will allow them to invest in 

or acquire China-based wafer foundries. Taiwan regulations now allow its chip 

companies to set up a maximum of three wafer fabs in China using processes 

less advanced than 0.18 micrometers (180 nm). The new rules also apply to 

low-end IC design and chip set packaging and testing industries, although 

projects greater than $50 million require screening for approval.108

Prior to this announcement, Taiwan’s electronic manufacturing firms (the 

buyers of semiconductor chips) made use of China’s labor force and location to build consumer end items. For example, Flextronics International, a 

Taiwan firm and one of the world’s largest electronic manufacturing firms, 

is expanding its presence in China with a design center and manufacturing 

facilities in Wuzhong Export Processing Zone. This expansion complements 

its two existing computing design centers in Shanghai and Wujiang.109 A 

government official in Taiwan allowed that the provisions on investments or 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

59

acquisitions of Chinese wafer foundries were meant to cover UMC’s thenillegal investment in the Chinese foundry firm He Jian in 2006 and TSMC’s 

pending stake in the Chinese foundry SMIC (a result of its successful intellectual property rights dispute with SMIC [Semiconductor Manufacturing 

International Corporation]).110 Upon approval, UMC will be able to acquire 

the remaining 85 percent of He Jian, and TSMC will take a 10 percent stake 

in SMIC.111 TSMC’s chairman said they have no intent to take any day-today role in SMIC, and that they intend to keep their leading-edge fabs in 

Taiwan in order to take advantage of economies of scale; however, he also said 

they have submitted a technology-transfer application to produce higher-end 

circuits on its Shanghai wafer plant (about 200 mm fab).112

Smaller companies representing semiconductor value-chain activities are also 

strengthening ties to mainland firms. Chipbond Technology, a Taiwan firm 

that provides backend assembly processing for LCD driver ICs (a key component in LCD TVs), is requesting permission from the Taiwan government 

to increase its current holdings (20 percent) and take a majority share in 

China-based Chipmore Technology, in order to gain a foothold in China and 

its growing consumer market.113 Taiwan’s automotive industry, a consumer 

of ICs, is actively working to establish cross-strait agreements with China’s 

automotive industry. Examples of IC applications include low-cost night vision systems, 360-degree viewing systems, and rain sensors.114 A final, more 

conventional indicator of the increasing economic links between the two industries is illustrated by Taiwan’s export statistics for May 2010: “[E]lectronics had the largest export value of $6.627B, rising by 47% on year and China 

(including Hong Kong) represents 43.8% of Taiwan’s total export value.”115

China

China’s rise as an economic power is clear, but a subject of continuing debate is 

China’s “openness” to reforms in governance and economics as it continues to 

develop. A single industry analysis can provide a degree of insight by the nature 

of its method of inquiry. Using our example of the semiconductor industry, here 

is the checklist of reasons why strategic insights on China are discoverable:

● The semiconductor industry is a priority for China.

● The technology and manufacturing leadership is centered in companies

headquartered outside of China.
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60

● The semiconductor industry has a history of openness in technology 

roadmaps and achievements.

● Semiconductor companies will not share their intellectual property or 

relocate manufacturing without openness in how their intellectual

property is protected.

These points will be addressed as our analysis of results continues. 

Figure 3.25 provides a map of the distribution and types of wafer fabs and 

foundries in China at the end of 2009. 

Source: “China Semiconductor Wafer Fab and Foundry Outlook” March 2009

Beijing

Xian

 Chengdu

Guangzhou

Hong Kong

 Shanghai

SMIC Fab 4 300 mm 

SMIC Fab 5 300 mm 

SMIC Fab 6 Backend 

SGNEC Fab 1 150 mm 

CSMC Fab 3 150 mm 

 Shenyang

Wuxi

Hynix-Numonyx Fab C1 

300 mm 

Hynix-Numonyx Fab C2 

300 mm 

CSMC Fab 1 150 mm 

CSMC Fab 2 200 mm 

CSWC Fab 5 150 mm 



Suzhou Hejian Fab 1 200 mm 

 Hefa Fab X 300mm 

 PowerChip 200 mm 

Kushan IC Spectrum 200 mm 

 Anadigics 150 mm 

Hangzhou Silan Fab 2 150 mm 

 

 Ningbo BYD Semiconductor Fab 1 150

mm 

 

 

Zhuhai ACSMC Fab 1 150 mm 

Shenzhen Founder Electronics 150 mm 

 SMIC Fab 16A/B 300 mm 

 SMIC Fab 15 200 mm 

Xiyue Fab 1 150 mm 

 

ProMOS Fab x 200 mm 

ProMOS Fab X 300 mm 

Nantong GMIC Fab 1 200 mm 

Cension Fab 11 200 mm 

 

Dalian

Intel Fab 68 300 mm *

 Chongqin Wuhan

WXIC Fab 12 300 mm 

 

SMIC Fab 7 200 mm 

 Tianjin

LPSC Fab 1 150 mm  

 

SMIC Fab 1 200 mm 

SMIC Fab 2 200 mm 

SMIC Fab 3 Backend 

GSMC Fab 1 200 mm 

GSMC Fab 2 200 mm 

GSMC Fab 3 300 mm 

HHNEC Fab 1 200 mm 

HHNEC Fab 2 200 mm 

HHNEC Fab 1C 200 mm 

HHNEC Fab x 300 mm 

ASMC Fab 2 150 mm 

ASMC Fab 3 200 mm 

ASMC Fab 4 200 mm 

BCD Fab 1 150 mm 

BCD Fab 2 200 mm 

TSMC Fab 10 200 mm 

Belling Fab 2 150 mm  

SMIC Fab 8 300 mm  

SMIC Fab 9 CIS 

SMIC Fab 10 Photo.V 

 Leshan

 

 

 Leshan

Jiling

Fuzhou

Fushun Microelectronics Fab 2 150 mm 

JSMC Fab-x 150 mm 

Sino-Chip Fab X 

300 mm 

Dong Ying Fab X

200 mm 

 

 

Shangdong

Zheng Zhou 

Honest Trust FabX 

200 mm 

 

 

Henan

Henan

Legend

 Site in production/ramp

 Site under construction

* Site equipping

 Site in plan

City of population >7M

City of population <7M

Capital

Figure 3.25: China Semiconductor Wafer Fab and Foundry Outlook

(© SEMI)116
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Studying the distribution and wafer-handling size of the semiconductor 

plants in China reveals several things. First, the majority of their capability 

cannot process 300 mm wafers, the current state of the art in the industry. 

Second, the majority of their manufacturing capability is clustered along the 

coastal areas. One factor driving this is the requirement to have a reliable 

infrastructure in place to support a semiconductor fab. This infrastructure 

must include reliable power, water, roads, and suppliers to support the 24/7 

demands of a semiconductor fab.

China’s government has a great interest in developing indigenous semiconductor fabrication capabilities. SEMI analysis of China includes the following excerpts: 

Since China surpassed Japan and the US in 2007 to 

become the world’s largest consumer of ICs, China policy 

makers have increasingly voiced concerns about the 

‘chip gap’ between supply and demand. In 2008, China 

consumed approximately one-quarter of the world’s ICs, 

yet manufactured only $5.6 billion in chips, enough to 

support only 8% of their domestic requirements. By 2011, 

the China IC market will grow to $85 billion with domestic 

production expected to reach $8.2 billion, about 10% 

(iSupply, IC Insights, CSIA). By 2013, China’s share of the 

global chip market will reach 35%. In the past, in markets 

such as computers, mobile phones, and automobiles, such 

an imbalance between supply and demand has prompted 

increased investments in local production capacity.

... [T]he Chinese government also remains the biggest 

investor in the semiconductor industry in China. In the past 

five years, the China government influenced the investment 

of about $7 billion in new fabs. In the next five years, local 

government will likely continue to be the significant coinvestor in strategic IC Fab projects throughout the country. 

Going forward, the central government may also invest up 

to $30 billion on semiconductor (semiconductor equipment 

and material are included), also software and high-end chip 

hardware industry by 2020.117
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62

The profitability of China’s leading-edge foundry, SMIC, provides insights 

into the government’s progress. In 2000, the governments of Beijing, Shanghai, Wuhan, Chengdu, and Guangzhou put forward the resources to support 

SMIC.118 After 10 years of investment, as Figure 3.26 illustrates, SMIC, 

China’s bid to create a leading-edge foundry, has yet to turn a profit.119 

Figure 3.26: Profitability of Taiwan and Mainland China’s Leading-Edge 

Foundries (© VLSIresearch. In “China Leads World Out of Recession, 

Through Recovery.” January 14, 2010, Semiconductor International.)120

Figure 3.26 shows that, on a profit-per-wafer basis, Taiwan’s TSMC has 

clearly outperformed China’s SMIC. In addition to infrastructure requirements, a semiconductor fab has equally demanding process requirements. 

A high degree of process maturity is required in order to achieve success 

(both in terms of quality of product and turning a profit) in operating a 

semiconductor fab. SMIC’s profit performance and TSMC’s out-of-court 

settlement with SMIC (due to SMIC’s theft of intellectual property belonging to TSMC) led to a turnover in SMIC leadership.121 All of this indicates 
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that China’s semiconductor industry has not attained the required process 

maturity required for leading-edge IC fabrication.

Recognizing that the bulk of the semiconductor market is in the trailing edge, 

taking advantage of the economic downturn, and the migration of the industry to 300 mm equipment, the trade press believes that China will invest 

billions over the next several years into repurposing and refurbishing 200 mm 

and 300 mm fabs, and utilizing primarily used and refurbished equipment.122

Referencing some of the earlier figures showing the relative rankings of semiconductor firms, it is clear that the largest companies still reside outside of 

China. Also, the research and development expenditures of these industry 

leaders are much greater than China has been willing or able to invest.

China’s intellectual-property laws and their enforcement are still a work in 

progress. One company characterizes patent enforcement in China as “slightly improved from terrible to bad,” and said that China now concentrates 

enforcement on discovering export items to Europe, Japan, and the United 

States that illegally use China’s intellectual property, recognizing that enforcement within China is not possible.123 One rationale for TSMC’s out-of-court 

settlement with SMIC is that it did not want to bankrupt SMIC and risk 

TSMC’s intellectual property being acquired or lost entirely.124 Now, TSMC, 

with its minority share, can closely monitor SMIC’s use of TSMC’s technology. The IBM Corporation is very adept at handling intellectual-property 

licensure for semiconductor processes, only raising eyebrows in the industry 

by offering technology that may allow Chinese firms to “catch up.”125

Freescale, a U.S. semiconductor design firm, has five IC design centers in China, and describes its Chengdu center as “the front lines in the development 

and customization in the networking-chip arena.”126 One approach to protecting intellectual property would appear to be in jointly developing technology with China. Intel Capital, the Intel Corporation’s global investment arm, 

and China Investment Corporation (CIC) announced that they are going to 

pair CIC’s resources with Intel Capital’s technology expertise to make strategic 

investments in pioneering for companies engaged in the next generation of 

groundbreaking technologies.127 Although the agreement states that the investments will be outside of China, this is an interesting development to watch 

in order to understand the extent of the globalization of intellectual property. 
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64

As related earlier, many of the largest firms in the industry locate only less 

important processing or fabrication steps in China, sometimes due to export 

control laws, but also due to concerns about intellectual-property infringement. 

For example, Intel continues to run its leading-edge fabs outside of China in 

order to protect its microprocessor and process technology. Applied Materials 

operations in China has taken measures to prevent intellectual-property theft, 

such as “sealing its computers’ ports in Xian, to prevent easy use of flash drives”; 

controlling removal of computers by employees; and maintaining computer 

passwords and door codes to control technology access.128 Applied Materials 

continues to conduct its research and development in laboratories in the 

United States and Europe, but put its first Asian equipment-manufacturing 

operation in Singapore, where protection of intellectual property is more 

developed. Despite the risks of intellectual-property theft, the rising purchasing 

power of China’s population, and governmental trade and tax policies, the 

semiconductor industry is placing more capability in China. 

The example of Applied Materials and the establishment of a laboratory for 

assembly-line design in Xian illustrate the financial incentives for establishing 

operations in China. According to an article in the International Herald Tribune, 

first the Xian city government sold a 75-year land lease to Applied Materials at 

a deep discount, and then it reimbursed the company for about a quarter of the 

complex’s operating costs for five years.129 Thomas J. Friedman, an op-ed columnist with The New York Times, interviewed Paul Otellini, the CEO of Intel, 

comparing the incentives in the United States with those in China: 

“The things that are not conducive to investments here are 

[corporate] taxes and capital equipment credits,” he said. “A 

new semiconductor factory at world scale built from scratch 

is about $4.5 billion—in the United States. If I build that 

factory in almost any other country in the world, where they 

have significant incentive programs, I could save $1 billion,” 

because of all the tax breaks these governments throw in. 

Not surprisingly, the last factory Intel built from scratch was 

in China. “That comes online in October [2010],” he said. 

“And it wasn’t because the labor costs are lower. Yeah, the 

construction costs were a little bit lower, but the cost of operating when you look at it after tax was substantially lower 

and you have local market access.”130
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Incentives to relocate to China are available to many countries, but they 

are not always financial incentives. An article in Business Week stated that 

Yukio Sakamoto, the president of Elpida Memory Inc., Japan’s sole maker 

of computer-memory chips, announced plans to build factories in Taiwan 

and China to meet demand and reduce tax payments. Reading further in the 

article, it is clear Elpida is also relocating to avoid Chinese import tariffs.131

In the same article, Intel (United States) and Hynix (Korea) set up factories in 

China “to avoid a 17 percent value-added tax that applies to chips imported 

into China and used in electronics sold domestically.” 

Despite China’s outwardly successful mix of incentives and tax policies, the 

original equipment manufacturers (OEMs), assemblers of final end items for 

consumption, are still very cost conscious and will move to lower-cost areas of 

the world if it is more profitable. China’s rising labor costs, increases in energy 

prices, quality problems, intellectual-property theft, and a global modular 

value chain keep other regions of the world as viable alternatives.132

When the economic downturn occurred in 2009, many Chinese workers left 

the coastal area and returned home to inland areas. Now, with the economic 

recovery and China’s stimulus spending, many of these workers find work at 

home and are not migrating back to the coastal areas—inflating wages in the 

coastal areas, where electronics manufacturing is centered.133

On the environmental-regulatory front, China is planning to implement 

REACH (Register, Evaluation, and Authorization of Chemicals) regulations 

similar to the European Union’s REACH. The REACH regulations require 

companies to declare the types and uses of chemicals in production and also 

include chemicals released during the end products’ normal use.134 The effects and enforcement of these regulations on the semiconductor industry 

remain to be seen.

China is aggressively pursuing all the new avenues of profitability. As shown 

earlier, China has a large number of LED fabs in operation. In photovoltaic 

(PV) production, already noted is Applied Materials’ opening of the world’s 

largest solar research center in China. Domestically, China’s government is 

working with their PV Industry Association to assist in setting up a photovoltaic industry alliance for research and standards setting. It might be a strategic 

insight to say that, in order for China to incorporate the PV industry into its 
Chuck Howe

66

energy economy, it will need to set standards for PV components and grid 

connections, improve those grid connections, and resolve the economics of 

getting PV-generated power (requiring large open areas) to distant population areas.135 Figure 3.27 illustrates the PV cluster areas in China.

Figure 3.27: China’s Photovoltaic Industry (© ResearchinChina)136

While Figure 3.27 provides the location of industry clusters for mainland 

China PV manufacturers, more important is the previous citation that describes the Chinese government’s hosting of meetings to set standards and 

share information among the domestic PV companies.

Medical-device applications provide a sociocultural view into China and why 

the semiconductor industry is looking at China as a large potential market. 

An article in EE Times China states: 

The portable/home electro-medical device market is enjoying a fast and stable expansion in China due to the government’s medical reform, citizens’ concern in healthcare, and 

the unique features the devices are offering. 

The CAGR of portable electro-medical device market is 

expected to go up significantly, with market survey showing 

rapid expansion from 8 billion yuan ($1.17 billion) in 2006 to 

28 billion yuan ($4.1 billion) in 2011. “The market is proven 

to have a powerful anti-risk capability because the whole 
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67

market is oriented toward China’s internal demand and is 

basically insusceptible to the global financial crises. In China, 

the market is only in the initial startup phase, so the market 

demand is huge. In addition, the Chinese have an increasingly 

high consciousness of health,” Zhou Wensheng, senior sales 

manager of ADI’s medical division in Asia-Pacific, said.

Like ADI, the worldwide semiconductor manufacturers cast 

more eyes on the portable/home electro-medical device market of China. Looking forward to the future, everyone will 

have multiple portable medical devices rather than just one, 

making it a more exciting market than the cell phones. After 

losing the country’s huge mobile phone market, numerous 

Europe and U.S. companies are expected to try their best to 

get a share of the portable/home electro-medical device market of China. “China and the world have a huge demand for 

the portable electro-medical devices, and China will enter 

the list of the largest electro-medical device manufacturers 

and largest markets,” Fan Xujin, chief product marketing 

engineer of Microchip’s medical product division, said.137

Summary

While Japan was the leading challenger to the U.S. lead in the semiconductor industry in the 1980s, Japan’s domestic economic challenges have slowed 

the growth of its semiconductor industry. Important is the decline of Japanese firms in manufacturing lithography equipment (the basis for the key 

value-chain activity, mask creation). Japanese companies Nikon and Canon 

were the leaders in the lithography-equipment market, but they are now overshadowed by the market leader ASML, headquartered in the Netherlands. If 

business conditions do not change, ASML will have a virtual monopoly on 

leading-edge lithography equipment.

The Korean firm Samsung is the world’s leader in semiconductor memory, 

but its enormous size has not translated into development of a broader semiconductor industry in Korea. 

Singapore is the leader in hosting the regional headquarters functions of almost all the major semiconductor companies in the world. But Singapore’s 
Chuck Howe

68

divestment of Chartered Semiconductor to outside investors leaves open the 

question of its future industrial capability.

Taiwan is a success story in joint government and private industry development of an industrial base capability. Taiwan’s semiconductor industry is 

conscious of the challenges of staying at the leading edge and is pursuing cost 

savings by off-shoring trailing-edge and associated value-chain steps to lowercost areas, such as mainland China. 

Mainland China has a strategy to develop an indigenous capability to supply 

the chips that they currently must import for both domestic and export 

industries. Various levels of government in China provide incentives and 

equity backing to domestic semiconductor firms. After a decade of investing 

to establish a leading-edge foundry in China, the government is now content 

to buy up trailing-edge semiconductor fabrication equipment and relocate it 

to China. In the PV- and LED-fabrication sectors, where there are no leadingedge export controls, China is rapidly building up value-chain elements 

tailored to these market sectors. Analyzing the semiconductor industry and 

East Asia provides some strategic insights. 

Despite China’s juggernaut appearance in technology advancement, the leading 

edge of semiconductors represents a difficult level to attain and, as a result, China 

is slowing its indigenous leading-edge development. China’s internal market potential, incentives, and tax policies are attracting the placement of semiconductor operations in China, but concerns about intellectual property are still valid. 

As the foremost consideration, if higher profits can be earned in manufacturing 

outside of China, then manufacturers will relocate elsewhere, despite China’s 

policies. A sign of China’s rising consumer population is forecasted to increase 

demand for cell phones, LCD TVs, and medical devices within China. 

A strategic insight that rises up to the level of strategic intelligence insights 

is the growing economic ties between mainland China and Taiwan. Taiwan 

industries are leveraging Chinese industry in pursuit of competitive 

advantage. China is gaining advanced technology and building its industries 

through ties to Taiwan and other nations. This insight will be developed and 

discussed further in the next chapter’s concluding discussion and evaluation 

of the value of industry analysis to the Intelligence Community.
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Chapter Four

Conclusion

An all-source intelligence analyst can use the analysis tools of business strategists and competitive intelligence professionals in analyzing an industry in 

another country or region of the world. By using these tools, an analyst is able 

to develop strategic intelligence insights about a nation’s plans and intentions. 

The main conclusions to be drawn are as follows: (1) industry analysis is easy 

to grasp and only a little harder to apply; (2) the results of industry analysis 

provide a useful lens for intelligence-collection analysis and synthesis; and 

(3) globalization has become a defining force in the world, and merits more 

attention from the Intelligence Community.

Applying Industry Analysis

The application of industry analysis is, first and foremost, not a major break 

with the conduct of all-source analysis. Industry analysis will provide a lens 

(or frame of reference) that complements the existing repertoire of analysis 

tools within the Intelligence Community. At a minimum, it offers a better 

alternative than performing a keyword search on open-source business and 

industry information. 

Follow the Steps

The steps for conducting industry analysis are straightforward and meant to 

be easily internalized. The first steps of selecting and defining the industry 

for analysis will be the most difficult. For one thing, selecting an industry 

that will yield strategic insights automatically excludes countries that, while 

of interest to the Intelligence Community, do not have a developing industry 

sector or choose not to participate in the global economy. Second, defining an 

industry is time-consuming, but its practice (and, concurrently, the exposure 

to economics and industry structure) will serve the analyst in defining other 

industries in the future. Using the models described earlier will facilitate a 

focused review and selection of sources.

The collection and analysis steps are the most straightforward for the allsource analyst. At that point, the analyst will understand the nuances of the 
Chuck Howe

70

industry information before him or her and have a framework for collection and analysis. The major difference in these steps, between the business 

analyst and the all-source analyst, is the strategic perspective the all-source 

analyst brings to the task. In addition, the all-source analyst can synthesize 

the findings with other Intelligence Community inputs to improve strategic 

understanding.

Utility of Industry Analysis

In the last chapter, the major strategic-intelligence insight points to the growing economic ties between mainland China and Taiwan. Analysis of the semiconductor industry provides this insight, but also lays the foundation for 

future analysis of other industries, such as the automotive industry, to see if 

they are also fostering cross-strait ties. 

Another topic for further exploration is mainland China’s progress in rebuilding its power-generation infrastructure to handle alternative “green” power 

generation and applications. The photovoltaic and light-emitting diode industries (subsets of the semiconductor industry) provide a window into a 

challenge that the United States also faces. It is now clear that mainland China has an interest in developing its indigenous semiconductor industry and is 

willing to deal with Taiwan in pursuit of that goal. This strategic insight lasers 

through the unpredictability of nationalism or geopolitical flare-ups. 

Utilizing the addition of a new lens for intelligence analysis is achievable at 

the level of the all-source analyst by examining current national intelligence 

estimates to see how our strategic insight above “fits” with the prevailing view 

within the Intelligence Community. The classification of national intelligence 

estimates leaves this action outside of this book. Ian Bremmer, however, in his 

book The End of the Free Market, offers an interesting strategic assessment independent of our industry analysis in the context of discussing the challenges 

posed by state-sponsored capitalism:

Beijing’s primary military concern is the risk of a direct or 

proxy conflict with the United States over Taiwan. But the 

Chinese leadership is well aware that no U.S. government 

will support a Taiwanese bid for independence, and why 

should the Chinese launch a self-defeating invasion of the 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

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island when it can co-opt most of Taiwan’s business elite 

with privileged access to investment opportunities on the 

mainland? So far, globalization has been good to China’s 

Communist Party, and wars are bad for business.138

It is important to point out that the inclusion of industry analysis is meant 

to enhance the national-intelligence estimate, not drive startling new conclusions. What is suggested here is that too great a focus on political and 

military dimensions by the Intelligence Community leads to discounting the 

influence of economics in international politics.139 The strategic-intelligence 

insights we seek come from examining the “contours” of industry interactions 

with foreign governments, and any contributions to a national-intelligence 

estimate resulting from these strategic-intelligence insights will be in the 

“contours” of the estimate. As a result, the final utility or value-added assessment of industry analysis remains within the analysis community. 

Increased Attention by the Intelligence Community to Globalization 

In the introductory chapter, the background question of the role of the Intelligence Community in assessing the effects of globalization came with a brief 

historical perspective. A couple of the points from this perspective are worth 

highlighting. First, the Intelligence Community at one time believed that the 

way a nation (the Soviet Union) acted in the economic sphere was likely to 

reveal its intentions. Second, policymakers’ interest in the community’s industry analysis was motivated by perceptions of the United States potentially 

being outperformed economically and militarily by the Soviet Union. 

The Soviet Union is consigned to the history books, and there is no concern 

about a renaissance of centralized command economies among the world’s 

nations. But there is a relatively new competitor to the U.S. free-market 

system, which is a “state-sponsored capitalism” that may spark an interest in 

reviving industry analysis within the Intelligence Community. State-sponsored 

capitalism “is a system in which the state dominates markets primarily for 

political gain.”140 The recent acquisition of Chartered Semiconductor in 

Singapore highlighted earlier is an example of state-sponsored capitalism at 

work. The Singapore government’s holding company was a major shareholder 

in Chartered and approved its sale to a joint venture by a holding company 

of the Abu Dhabi government and the publicly traded semiconductor firm 
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AMD.141 This exchange was in part a nation-to-nation business transaction 

that, in the case of Abu Dhabi, solely benefits the ruling family. 

Ian Bremmer notes that state-sponsored capitalism is not protectionism for 

developing national competitiveness; it is the state “using markets to create 

wealth that can be directed as political officials see fit.”142 Put another way, 

the major difference in state-sponsored capitalism vis-à-vis free-market capitalism is that the overriding objective of state-sponsored capitalism is maintaining the party in power, not the prosperity of its people.143

The potential for the United States being outperformed economically and 

militarily is open for debate, but it should not be the threshold for reawakening industry analysis within the Intelligence Community. The global interdependencies between nations are a fact and, in the case of U.S.-China 

relations, have even earned the catchphrase “mutually assured economic destruction.” This play on the Cold War term “‘mutually assured destruction’ is 

not to suggest that a new cold war is upon us, but that the battle for the free 

market is a battle for national competitiveness that must avoid catastrophic 

outcomes.”144 Even though the current priorities of the Intelligence Community reflect its customers’ requirements, there is a need for the community 

to step up and enhance its intelligence offerings with insights into globalization and its potential effects on national security.
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Appendixes

Appendix A

External Environment Model Segments and Elements145 

Economic

Sociocultural

Global

Technological

Demographic

Political/Legal

Source: Adapted from Hoskisson, Hitt, and Ireland.

Demographic

Population Size, Age/Gender Structure, Geographic Distribution, Ethnic Mix

Economic

Distribution/Uses of Resources, Impact of Global Economy on Domestic Economy/

Markets, Macroeconomic Factors
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Sociocultural 

Cultural Attitudes, Customs, Values, Education/Skill Levels, Workforce Diversity, 

Attitudes about Quality of Work Life, Concerns about Environment

Global

Important Political Events, New Markets, Changes to Existing Markets, Different 

Cultural and Institutional Attributes

Technological

Product Innovations, Focus of Private and Government-Supported R&D Expenditures, New Technologies

Political/Legal
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Appendix B

Semiconductor Industry Tutorial

The purpose of this appendix is to provide a brief tutorial on semiconductors, 

the key activities involved in their development, and the size and composition 

of their market. Chapter 2 introduces three models to use in industry analysis, 

and Chapter 3 describes a methodology for selecting an industry for analysis, 

which, for the purposes of this book, is the semiconductor industry. The next 

step is to define the selected industry, which in this case requires developing a 

broad understanding of the semiconductor industry. This understanding will 

first be put to use in developing a value chain for the industry. The development of a value chain is an iterative process; it reflects and reinforces your 

understanding of the industry. It is quite possible that a value chain is already 

available from open sources. If so, it can be used as a guide for sorting out the 

key activities and processes involved in producing semiconductors. Following 

the industry definition step, the value chain will be put to further use during 

the collection and analysis of information on the semiconductor industry.

Since the technology behind semiconductors is over 60 years old, there is a 

wealth of open-source information on the semiconductor industry, both in 

print and on the Internet. What will become readily apparent is how far that 

technology has progressed, especially in process development and applications. There are useful glossaries of industry-related terms available on the 

Internet. This appendix will cite several for definitions so the analyst has a 

choice of sources in case a website becomes unavailable.146 To understand an 

industry, a basic understanding of its products and markets is necessary. For 

the semiconductor industry, product knowledge equates to a basic understanding of semiconductors and their development into integrated circuits. 

Research into the size and composition of the semiconductor market brings 

into focus the globalization of the industry and its importance to developed 

and developing nations of the world. 

Gain knowledge of semiconductors and their development into 

integrated circuits. 

Devices made from semiconductor materials are the foundation of the computer and communications industries. Also familiar are the multitude of 
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consumer-oriented electronic devices (such as cell phones) in use in almost 

every corner of the earth. Semiconductors are also increasingly used in the 

automotive and medical-devices industries, and form the basis for promising devices for saving or generating energy.147 One surprising fact is that, 

although it was the U.S. federal government’s funding of basic research and 

government demand for electronics that fueled the early growth of this industry, today the government constitutes less than 1 percent of the semiconductor market.148

The first question to answer is: what are semiconductors? A semiconductor is 

a material that has the properties of a conductor and an insulator. The exact 

properties are determined during the production of the silicon crystal and the 

processing of the wafer that provides the platform for the integrated circuit. 

The fabrication process described here is referred to as CMOS (complementary metal-oxide semiconductor) and is the industry’s main manufacturing 

platform.149 Figure B.1 illustrates the process for creating the silicon crystal.

Chunks of

Polycrystalline 

Silicon

Quartz Pulling

Crucible

Monocrystalline 

Silicon

Melting Seeding

Figure B.1: Crystal Growth150

There are several methods for creating the silicon crystal for wafers. The process in Figure B.1 is common and the one most likely to be found in diagrams, pictures, or video on the semiconductor process. The rough silicon 

material is noteworthy because, while it is a common material, there can be 

temporary shortages of supply due to the cyclical nature of the semiconductor market. The raw material is melted in a furnace.151 The next step, called 

seeding, involves lowering a single silicon crystal into the molten material. The 

molten silicon immediately affixes itself to the seed, forming a single crystal, 

and while the seed is slowly withdrawn, its simultaneous rotation produces 
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the resulting cylindrical shape. The cylinder of pure silicon is often referred to 

as a boule.152 The process is controlled to produce the desired diameter of the 

finished wafer. A wafer is defined as “a thin slice with parallel faces cut from a 

semiconductor crystal.”153 Wafers are produced in a wide variety of sizes and 

characteristics. The state of the practice now produces up to 300 mm (about 

12 inches in diameter) wafers. 

To create the wafers, the boule is removed from the furnace and the two 

ends are sawed off. Figure B.2 shows the entire boule cut into the thin slices 

referred to as the wafers. Following this, the wafers are run through a lapping 

process to remove surface irregularities and produce a uniform flat surface. 

Lapping involves placing the wafer on a revolving surface with a constant 

stream of a fine abrasive material, and then another surface revolving in the 

opposite direction placed above. The sandwiching of the wafer between the 

counter-rotating surfaces and the wet abrasive gradually removes irregularities. The etching step is a chemical process to remove any crystal damage from 

lapping. Polishing, the final step, smooths the uneven surface left by the lapping and etching and makes the wafer flat and smooth.

Up to 12", ~300 mm in 

diameter

Cooling Slicing Wafers

~0.2mm thick

Lapping Etching Polishing

Figure B.2: Wafer Processing

Integrated Circuits

A wafer is composed of a semiconductor material and is the platform for the 

process that creates integrated circuits, which are then packaged into chips. 

An integrated circuit, or IC, is created on a wafer, usually made of silicon, 

and can hold anywhere from hundreds to hundreds of millions of electronic 

components, such as transistors, resistors, and capacitors.154
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Transistor Density

The familiar phrase “Moore’s Law” is frequently referred to in articles regarding the semiconductor industry. In reality, Moore’s Law is not a law at all; it 

is an observation made by Gordon Moore in the 1960s and later revised in 

the 1970s. His observation, remarkably prescient, is that the transistor densities on integrated circuits will double every two years.155 Transistor density 

is important because more transistors equates to more functions in a smaller 

space, lower power requirements, and, with economies of scale, lower cost. 

Figure B.3 provides an example of increasing capability and decreasing price 

for semiconductor memory. 

Reduced Memory Cost Drives New Architecture and Applications

1979 1984 2001 2005 2007

SONY 

WALKMAN

SONY 

DISCMAN

IPOD 

ORIGINAL IPOD NANO IPOD TOUCH

Storage 

Technology

Cassette 

Tape CD Hard Drive Flash Flash

Storage 

Size

60 MB

(20 songs)

700 MB

(26 songs)

5 GB

(1,000 songs)

4 GB

(800 songs)

16 GB

(3,200 songs)

Cost $200 $299 $400 $249 $399

Device Cost 

per Song $10 $11.50 $0.40 $0.31 $0.13

Figure B.3: Memory Example (© Mentor Graphics)156

All of these are what the industry and its customers have come to expect. 

Figure B.4 illustrates how Moore’s Law is still a driving force in the semiconductor industry: 
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Traditional

ORTC Models

Information

Processing

Digital content

System-on-chip

(SoC) Combining SoC and SIP: Higher Value Systems

Interacting with people

and environment

Non-digital content

System-in-package

(SiP)

Functional Diversification (More than Moore)

Moore’s Law & More

HV Passives Biochips Power

Sensors

Actuators Analog/RF

Scaling (More Moore)

(Geometrical & Equivalent scaling)

Baseline CMOS: CPU, Memory, Logic 130nm

90nm

65nm

45nm

32nm

22nm

-

-

-

v

Beyond CMOS

Figure B.4: Beyond Moore’s Law (© Semiconductor Industry 

Association)157

Note that the y-axis scale shows decreasing numbers, with “nm”—nanometers, or a billionth of a meter—appended to each. The numbers refer to the 

width of the smallest feature—“feature size”—on an integrated circuit. 

Feature Size

Almost all trade journal issues bring up the topic of feature size, typically by 

using the shorthand of providing the scale of the integrated circuits in nanometers. Figure B.5 provides a pictorial representation of the comparative size 

of objects on a nanometer scale. 
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How many nanometers is ... Approximately

The width of a hair 100,000 nanometers

The width of a red blood cell 10,000 nanometers

The length of a typical bacterium 1,000 nanometers

The width of a dust particle 800 nanometers

The wavelength of red light 650 nanometers

The wavelength of ultraviolet light 300 nanometers

The length of a typical virus 100 nanometers

The size of a membrane enzyme 10 nanometers

The width of a carbon atom 1 nanometer

The distance between carbon 

atoms

0.15 nanometers

Figure B.5: Size Comparison (© Northwestern University Nanoscale 

Science and Engineering Center); Images in Nanoscale (© Dennis Kunkel 

Microscopy, Inc.); Table by Waldron and Batt (© McNeil-Lehrer 

Productions)158

Referring to Figure B.5, feature sizes below 25 nm are now going into production. This means the size of an individual circuit path on a chip is smaller 

than the length of a virus and a little larger than a strand of DNA. A topic of 

much discussion is: what comes after the limits of scaling are reached?

Chip Design

The process for creating chips starts with the design. The software used in designing chips is an entire industry unto itself. It is called the electronic design 

automation (EDA) industry, and this industry develops and sustains integrated 

circuit design tools. EDA Consortium, the electronic design automation industry trade association, also has a web-accessible video that quickly describes 

the entire semiconductor design and fabrication process.159 The design for 
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an integrated circuit is captured on digital files that are used throughout the 

manufacturing process.160 These digital files are representative of the information exchange that characterizes a modularized value chain.

Chip Fabrication

Figure B.6 provides a simplified view of this process. The design information is first used to create a mask. In simple terms, the mask is a clear piece 

of quartz, referred to as a reticle, which is etched with one level of the integrated circuits’ design. Today’s integrated circuits may have many layers, so 

there would be a reticle for each layer. Using lithography, a process similar to 

processing photographs, the wafer is coated in a material referred to as “photoresist”; then a light is projected through the reticle, and that layer of the 

design is transferred via exposure to the wafer. A key step in process planning 

is maximizing the number of copies of the design layer that can be placed 

on the wafer. Each of those copies on the wafer is referred to as a “die.” Per 

the design files, the wafer is then sent off to additional processing; one step 

removes the exposed photoresist, leaving the design of the integrated circuit 

behind. The wafer is then recoated with photoresist and is exposed using the 

reticle containing the next level of the design.

Figure B.6: Fabrication Steps

Referring to Figure B.6, the bare wafer on the left is ready to start the fabrication process. The wafer is coated with photoresist and then moved to the 

lithography station, where it is exposed to light. The reticle (also referred 

to as the mask) is a thin piece of quartz that is etched with one level of the 

integrated circuits’ design. The mask holds a layer of the design and, when 

the wafer coated with photoresist is exposed to a light source, the areas of the 
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wafer not obscured by the design pattern on the mask are exposed. This wafer 

is then put through a series of chemical baths that strip away the exposed 

photoresist on the wafer, leaving the layer of the design untouched. The wafer 

is then re-covered with photoresist and run through the lithography station, 

and then put through a series of chemical baths to strip away the photoresist 

and leave the second layer of the design on the wafer. 

To process the wafer with multiple mask sets (one mask for each layer on the 

individual chip) takes weeks. Since the processing steps for a typical fortylayer chip design take so long, and it is cost-prohibitive to build an additional 

line, semiconductor companies pursue other options, such as increasing the 

number of chips they produce on each pass through the process. 

One approach for increasing the number of chips produced is to increase the 

wafer size. The industry standard is currently a 300 mm wafer (roughly 12 

inches in diameter). The industry movement from 200 mm to 300 mm wafers provided an increase of 125 percent in surface area on which to produce 

integrated circuits (dies). For example, this transition means that for a die size 

of 161.3 square millimeters (approximately 1⁄4 square inches), the fabrication 

line is processing 376 dies per wafer on a 300 mm wafer versus 148 dies on 

a 200 mm wafer.161

The industries’ nine-year transition from 200 mm to 300 mm and the cost of 

developing an entirely new process line are not lost on the equipment manufacturers. While 300 mm wafer processing continues to deliver productivity 

improvements, that transition did not translate into higher profit margins for 

the semiconductor-equipment industry. The industry is currently debating a 

move to a 450 mm wafer (a 125 percent increase over 300 mm), but only a few 

of the industry leaders are showing interest, and there is no agreed-to business 

model that shows funding for the transition and also provides a reasonable 

return on investment for the semiconductor-equipment manufacturers.162

Chip Packaging

Figure B.7 shows the continuation of the fabrication process once all of the integrated circuit design is on the wafer. When all of the design is processed into 

the wafer, each die on the wafer is tested, and any defective dies are marked. 

The individual dies are then cut from the wafer and undergo further testing. 
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The usable dies are attached to frames and, after wire bonding and encapsulation, they are chips ready for placement in their intended application. 

Die

Chip

Packaging

Frame

Die

Separation

Finished Testing

Wafer

Defective

Die

Figure B.7: Die Testing and Packaging

The semiconductor industry is technology driven and requires a continuing 

investment in research and development to produce the advances observed 

by Moore’s Law. Equipment to produce a leading-edge computer chip costs 

hundreds of millions of dollars.163 A basic understanding of the fabrication 

of semiconductors is possible in a short amount of time. The fact that global 

industry is trying to figure out how to reduce feature size so it can deliver 

increased performance in ever-smaller packages is readily apparent without 

requiring a technical degree or know-how. 

Understand the size and composition of the semiconductor market. 

Industry trade associations, industry trade press, international trade organizations, market research firms, and government documents are just a few of the 

available sources for market information. For the semiconductor industry, 

the World Semiconductor Trade Statistics, a nonprofit corporation, compiles 

industry trade statistics and provides market forecasts.164 The data is provided by the member semiconductor companies and is considered to be a 

reliable source of information. The top-level forecasts are provided free via 

their website. For 2008, the world semiconductor market was $248.6 billion, 

and Figure B.8 shows the major market segments and their relative percentage of the total market.
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Discrete

Optoelectronics

Sensors

Analog

Micro

Logic

Memory

30%

21%

14%

19% 7%

7%

2%

Figure B.8: Total World Semiconductor Market, 2008—$248.6 Billion165

A look at the composition of the semiconductor market segments reveals that 

logic, memory, and micro devices are the largest segments. The IC Insights 

glossary cited earlier and the Semiconductor Glossary provide the following 

definitions for the semiconductor market segments shown in the figure:166 

● Discrete—A class of electronic components that includes power transistors and rectifiers, each of which contains one active element. In contrast, 

ICs typically contain hundreds, thousands, or millions of active elements

in a single die. 

● Optoelectronics—A device that is responsive to or that emits or modifies light waves; for example, LEDs, optical couplers, laser diodes, and 

photo detectors.

● Sensors—A component that provides an electrical signal in response to a 

specific physical or chemical stimulus, such as heat, pressure, magnetic

field, or a particular chemical vapor.

● Analog—Integrated circuit realizing analog functions; in analog systems, 

output signal follows continuously input signal. 

● Micro—Integrated circuits that are microcomputer related. This category

contains three subcategories, that is, microprocessor (MPU), microcontroller (MCU), and digital signal processor (DSP).
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❍ Microprocessor—(1) A central processing unit (CPU) fabricated on 

 one or more chips, containing the basic arithmetic, logic, and con-

 trol elements of a computer that are required for processing data; 

 or (2) an IC that accepts coded instruction, executes the instructions 

 received, and delivers signals that describe its internal status. The 

 instructions may be entered or stored internally.

❍ Microcontroller—A single-chip microcomputer with onboard pro-

 gram ROM and I/O that can be programmed for various control 

 functions.

❍ Digital Signal Processor—Digital circuits used to enhance, analyze, 

 filter, modulate, or otherwise manipulate standard real-world (i.e., ana-

 log) functions, such as images, sounds, radar pulses, and other such

 signals in real-time.

● Logic—Integrated circuit performing switching functions; implements

logic functions, such as AND, OR, and NOT. Also includes Application

Specific Integrated Circuits and Field Programmable Gate Arrays.

● Memory—Integrated circuit consisting of memory cells and usually 

including associated circuits such as those for address selection and 

amplification. A class of integrated circuits that store digital information, for example, ROM, EPROM, EEPROM, Flash memory, DRAM, 

and SRAM.

The industry trade press is also a good source of market information. For example, in Figure B.9, EE Times India reports the change in semiconductor 

revenue by end-use from 1995 to 2009. As the figure’s title indicates, the 

only major change in the total available market (TAM) is the incorporation 

of handheld wireless. The market sectors and percentages have remained relatively steady, which reflects a mature industry. Remember, during this step 

of building understanding, we are not trying to analyze the semiconductor 

market and what the above market allocations portend for the industry. It 

is enough that we understand what major product areas are the buyers of 

semiconductors.
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Figure B.9: Semiconductor Total Available Market (TAM) (© Semico 

Research)167

Now that we have looked at the market for semiconductors (power of the 

buyer), it is also important to understand who are the major producers of 

semiconductors (intensity of competition). Figure B.10, reported in EE Times

Asia, shows the top semiconductor vendors ranked by revenue estimates for 

2009. These companies will become familiar as information is collected. It is 

readily apparent that Intel is by far the leading semiconductor producer, with 

Samsung a distant second, and the remaining companies trailing behind it.

Top 10 Semiconductor Vendors by Revenue Estimates, 2009 

(Millions of U.S. Dollars)

2009 

Rank

2008 

Rank Vendor

2008 

Revenue

2009 

Revenue

2008–2009 

Growth (%)

2009 

Market 

Share (%)

1 1 Intel 34,814 33,253 -4.5 14.6

2 2 Samsung Electronics 17,391 17,686 1.7 7.7

3 3 Toshiba 10,601 9,604 -9.4 4.2

4 4 Texas Instruments 10,593 9,142 -13.7 4.0

5 5 STMicroelectronics 10,270 8,510 -17.1 3.7
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Top 10 Semiconductor Vendors by Revenue Estimates, 2009 

(Millions of U.S. Dollars) continued

2009 

Rank

2008 

Rank Vendor

2008 

Revenue

2009 

Revenue

2008–2009 

Growth (%)

2009 

Market 

Share (%)

6 8 Qualcomm 6,477 6,409 -1.0 2.8

7 9 Hynix Semiconductor 6,010 6,035 0.4 2.6

8 7 Renesas Technology 7,081 5,670 -19.9 2.5

9 11 Advanced Micro 

Devices

5,298 5,157 -2.7 2.3

10 6 Infineon Technologies 

(incl. Qimonda)

8,224 4,682 -43.1 2.1

Others 138,375 122,223 -11.7 53.5

Total Market 255,134 228,371 -10.5 100.0

Source: Gartner (March 2010)

Figure B.10: Top 10 Semiconductor Vendors, 2009 (© Gartner, Inc.)168

Figure B.11 shows the top ten semiconductor companies projected by 2010 

capital investment; the inclusion of the major product line for each company 

is also useful. For example, Intel is listed as having the largest revenue of 

semiconductor companies in 2009, and its major product area is listed as 

MPU, or microprocessor unit. The microprocessor is the main component in 

the computers that now come in so many forms and sizes. The large revenue 

numbers reported by Intel are also consistent with the computer sector of 

the semiconductor market being the largest of the various sectors. Samsung 

reported the second-largest revenues, and its major product area is memory. 

While memory is important to the computer sector, memory applications are 

also present in the consumer, communications, and automotive sectors. There 

is also a major product category, foundry, which appears on the list. Referring 

to the value-chain examples in Chapter 2, a foundry is a firm that does not 

design and produce its own line of semiconductors. The foundry receives the 

design information and masks from a customer and fabricates the individual 

die. In some cases, they do not even separate the die from the wafer, and the 

customer will either complete the packaging of the die or outsource the task 

to another vendor. The value chain helps to visualize what activities are being 

discussed in the trade press.
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Top 10 Semiconductor Industry Capital Spenders*

2010

Rank Company

2007

($M)

07/06 %

Change

2008

($M)

08/07 %

Change

2009

($M)

09/08 %

Change

2010F

($M)

10/09 %

Change

Major

Product

1 Samsung 7,964 16% 6,750 -15% 3,518 -48% 5,000 42% Memory

2 Intel 5,000 -13% 5,197 4% 4,515 -13% 4,900 9% MPU

3 TSMC 2,557 6% 1,877 -27% 2,687 43% 4,800 79% Foundry

4 Toshiba 3,595 18% 2,210 -39% 950 -57% 1,950 105% Memory

5 AMD/

GlobalFoundries**

1,683 -9% 621 -63% 466 -25% 1,900 308% MPU/

Foundry

6 Hynix 5,145 8% 2,900 -44% 855 -71% 1,840 115% Memory

7 Micron 3,700 23% 2,300 -38% 800 -65% 1,715 114% Memory

8 Nanya 2,098 131% 695 -67% 640 -8% 1,415 121% Memory

9 UMC 850 -15% 349 -59% 551 58% 1,350 145% Foundry

10 Elpida 2,111 59% 890 -58% 535 -40% 1,000 87% Memory

Total 34,703 12% 23,789 -31% 15,517 -35% 25,870 67%

*Includes company’s share of joint-venture spending **Includes Chartered in 2010

Source: IC Insights, Company Reports

Figure B.11: Top 10 Semiconductor Industry Capital Spenders 

(© IC Insights, Company Reports)169

Understanding the size and scope of the market makes it apparent that the 

semiconductor industry, although mature, is still experiencing growth. It 

may seem counterintuitive that a mature industry continues to spend large 

amounts on research and development, but that is because, while the semiconductor process steps are easy to understand, the actual achievement of 

producing the design is intellectually and capitally intensive. To bring it up to 

a strategic level, it is also important to note where the leading companies are 

headquartered and where they are producing their product. This will become 

apparent as collection begins and will be important in our analysis task. For 

now, having a list of the key competitors will be useful in the collection and 

analysis of industry information. 

This appendix provides a basic background in the industry we want to analyze. At this point, we have a general overview of semiconductors and the processing of semiconductors into integrated circuits, and insight into the size 

and composition of the semiconductor market. A test of our understanding 

is to construct a value chain for the industry. If you have already found one 

for the industry, use it as a contextual template for the collection and analysis 

of industry information. 
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Appendix C

Data Sources Specific to Semiconductor Industry

Books

Since getting the latest data is a primary consideration, it is important to 

search for recent books on the industry. For example, at the start of research 

for this study, a 2009 book by Claire Brown and Greg Linden, Chips and 

Change, turned out to be an excellent data source for understanding the origin, development, and future of the semiconductor industry.170 The book 

even provides a value chain for the semiconductor industry. A 2008 book on 

China’s high-technology industry, China’s Science and Technology Sector and 

the Forces of Globalization, provides an interesting perspective on the prospects and problems for development of China’s semiconductor industry.171

Reports

The National Academy of Sciences, a nonprofit institution, has a searchable 

website of its publications, and many are free to download.172 While the 

publication dates of National Academy reports are unpredictable, you can 

request e-mail notifications when topics of interest are available. The federal government, particularly within the Department of Commerce, provides 

a regular stream of trade and industry statistics, but occasionally they will 

also produce reports on global trade topics that are of interest. For example, 

the Bureau of Industry and Security provides current news reports regarding 

trade issues, and its Defense Industrial Base Programs link provides a list of 

Defense Industrial Capability and Technology Assessments regarding foreign 

industrial development that may be of interest.173

Trade Associations

The major semiconductor trade association websites provide news and documents, although the frequency of their updates and data available are irregular. The major semiconductor industry trade associations are

● Semiconductor Industry Association (SIA): www.sia-online.org.

 They provide an updated factsheet with basic statistics on the worldwide 
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 semiconductor market and also provide issue papers regarding global 

 competition.

● Taiwan Semiconductor Industry Association (TSIA): 

www.tsia.org.tw/Eng.

● Japan Electronics and Information Technology Industries Association 

(JEITA): www.jeita.or.jp/english.

● Korea Semiconductor Industry Association (KSIA): www.ksia.or.kr/

eng/main.

● China Semiconductor Industry Association (CSIA): www.csia.net.cn.

(Note: website’s language is not translated into English.)

● Singapore Semiconductor Industry Association (SSIA): http://www.

ssia.org.sg.

● Electronic Design Automation Consortium (EDAC): www.edac.org.

● Semiconductor Equipment and Materials International (SEMI): www.

semi.org. SEMI is an international trade association that represents the

suppliers to the semiconductor industry. It also includes suppliers to the 

display and photovoltaic (solar-cell) industries. The SEMI trade shows are

held around the world, with each providing insight into the host

country’s semiconductor industry. The SEMI international standards

forum invites members to collaborate on developing standards. 

The SEMI industry statistics group presents industry forecasts and invites 

other organizations to also share their forecasts at SEMI events.

Trade Journals

The most useful sources of current information on the semiconductor industry are the industry trade journals. Trade journals are much better sources 

than government policy announcements and the occasional analytical articles in metropolitan newspapers and business magazines, because many of 

those stories are not much more than news releases from the subject company. The industry trade journals, on the other hand, are reflective of the 

global evolution of this industry, and not only carry articles of interest to the 

technical community, they also provide analysis and forecasts on industry-wide 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

91

issues. The semiconductor trade press is not immune to industry competition, 

though. For example, during this book’s preparation, the parent company for 

the trade journal Semiconductor International ceased operations and removed 

its content from the Internet. The reality of publishing these days makes it 

important to capture hardcopies of source articles in order to document the 

sources of analysis. In the semiconductor industry, most of the trade journals 

are available as Web subscriptions, some without charge, while others charge a 

small fee for subscribing or downloading full text articles:

● EE Times Asia: www.eetasia.com.

● EE Times India: www.eetindia.co.in.

● Electronic Design News: www.edn.com.

❍ Electronic Business—separate subscription available from EDN.

❍ ElectronicNewsToday—separate subscription available from EDN.

● ElectroIQ—portal for electronics manufacturing: http://www10.giscafe.

com/nbc/articles/1/737191/%3Cem%3Ewww.ElectroIQ.com%3C/em%3E.

❍ Solid State Technology—digital edition available from ElectroIQ.

● SEMI Newsletters: www.semi.org.

❍ SEMI Global Update

❍ Semiconductor Manufacturing Newsletter (simplified Chinese)

● DigiTimes, www.digitimes.com—provides news summaries free of charge, 

but to access full articles requires a subscription. 

Other Internet Sources

This category concerns the Internet and its ever-evolving platforms and content. The website YouTube (www.youtube.com), although pedestrian to aficionados of social media, still provides good sources of information. Using search 

terms gained from your study of the industry can yield video clips from news 

organizations, trade associations, and even companies within the industry.174
Chuck Howe

92

Blogs and Twitter

The blogs by industry analysts, enthusiasts, or employees are embedded or 

linked into many of the industry trade journals, and can be a good source of 

information. The EDA Consortium website has a publications page (www.

edac.org/news_publications.jsp) that provides a list of links to trade journals, 

but also provides links to news and blog sites, such as EDACafé (http://

www.edacafe.com), or individual bloggers, such as EDA Confidential (www.

aycinena.com). 

The use of Twitter by the trade journal Semiconductor International is noteworthy, but it only Tweeted links to its journal content. This trial experiment 

went offline with the demise of that trade journal.

Webcasts and Virtual Conferences 

The increasing use of webcasts and virtual conferences provide good real-time 

sources. Subscriptions to the industry trade journals will lead to announcements of these events. These events offer another avenue for the industry to 

share information and develop market opportunities. The presenter slides are 

usually available for download prior to the presentation, or the site allows 

archival access. Figure C.1 shows a recent EE Times virtual conference portal 

that provides all the trappings of a conference with spaces for the auditorium, 

exhibition, and business meetings.175
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

93

Figure C.1: Virtual Conference Portal (© UBM Electronics)

Referencing Figure C.1, in a six-hour conference, the listeners can choose the 

sessions they want and even interact with the presenter via the portal interface. A visit to the exhibit hall provides a view of kiosks for each company exhibiting. Entering the kiosks, the visitor sees a list of company content, such 

as product presentations and white papers. The virtual conference remains as 

an archive on the EE Times website, but, as with other Internet sources, it is 

advisable to download the information before it disappears.

Trade Shows

Trade shows are the best alternative to actually visiting semiconductor companies in other countries. Tradeshows will offer sessions in a variety of areas, 

and it pays to read the program beforehand to ensure it is not devoted to a 

sub-industry topic or technical interchange. Also, unless you are multilingual, make sure the session is in English or that simultaneous translation 

is available. Be sure also to take the time to walk through the exhibit halls 

and gather literature of interest. One caution is that most corporate booths 

will require a business card or the signing of a register before they will give 

out literature. The purpose of the exhibit hall is to generate business leads 

for the companies, so bring appropriate identification if you want to collect 
Chuck Howe

94

information. As a final note, in the absence of attending the trade show, the 

trade press usually reports from the show and provides their perspective via 

the Internet. By way of an example of what is available, the SEMI tradeshows 

are scheduled a year in advance and occur in a different country each quarter. 

The SEMI tradeshows provide market forecast presentations, and also offer 

a copy of the proceedings. The shows provide an outsider’s perspective of 

semiconductor companies (SEMI represents the suppliers to the industry), as 

well as insight into the future outlook for the industry. 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

95

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EDN. March 11, 2010. http://www.edn.com/design/integrated-circuitdesign/4312346/IC-reverse-engineering-a-design-team-perspective.

Tseng, Clark. “LED Industry Set to Enter Fast Growth Stage in 2010: New 

Investments, New Market Entrants.” SEMI. http://www.semi.org/en/

IndustrySegments/LED/CTR_035763?id=sguna0410.

UBM Electronics. “Enjoy the Show.” Image screenshot. EE Times Virtual 

Conference: Medical System Design. May 20, 2010. http://www.

eetimes.com/medical/. 

Van Opstal, Debra. The Resilient Economy: Integrating Competitiveness and Security. Council on Competitiveness. July 2007. http://www.compete.org/

publications/detail/31/the-resilient-economy-integrating-competitiveness

-and-security/. 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

107

Vardaman, Jan, and Dan Tracy. “Japanese Companies Continue to Dominate 

the Packaging Materials Market.” SEMI. January 5, 2010. http://www.

semi.org/en/MarketInfo/PackagingMarket/ctr_033627?id=sgurow0110.

VLSI Research. “Economics and Collaboration Panel Discussion.” Panel presentation at SEMI ISS, Half Moon Bay, CA, January 2010.

Waldron, Anna M., and Carl A. Batt. “How Small Am I? The Science of 

Nanotechnology.” PBS NewsHour Extra. 2010. http://www.pbs.org/

newshour/extra/teachers/lessonplans/science/nanotechnology.html.

Wang, Hsiao-wen. “Why TSMC Showed Mercy.” CommonWealth Magazine. February 4, 2010. http://english.cw.com.tw/article.do?action =show

&id=11727.

Wilson, Ron. “Semiconductors, emerging markets, and self-interest of survival.” EDN. November 20, 2009. http://www.edn.com/blog/1690000169/

post/1770050777.html?nid=3357&rid=16641388.

World Semiconductor Trade Statistics. “WSTS Semiconductor Market 

Forecast Autumn 2009.” November 17, 2009. http://www.wsts.org/

PRESS/PRESS-ARCHIVE/WSTS-Semiconductor-Market-ForecastAutumn-2009. 

Yoshida, Junko. “New Renesas chief shares renaissance roadmap.”

EE Times Asia. May 24, 2010. http://www.eetasia.com/ARTP_

8800607528_499495. HTM.

Zakaria, Fareed. The Post-American World. New York: W. W. Norton & Company Inc., 2008.

USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

109

NOTES

1 While the Council on Competitiveness is not the only voice on these issues, it provides an open-source forum on national competitiveness and concomitant issues.

2 Thomas L. Friedman’s books, including The World Is Flat (New York: Farrar, Straus 

and Giroux, 2005) and its follow-on editions, provide a good overview of the impact 

of global Internet connectivity and the diffusion of knowledge it enables.

3 Based on my reading of “The National Intelligence Strategy,” Director of National Intelligence (DNI), August 2009.

4 Suzanne Berger, How We Compete: What Companies around the World Are Doing to 

Make It in Today’s Global Economy (New York: Doubleday, 2006), 9.

 5 Gerald K. Haines and Robert E. Leggett, Watching the Bear: Essays on CIA’s 

Analysis of the Soviet Union (Pittsburgh: Government Printing Office, 2003), 17.

6 Ibid., 18.

7 Ibid., 21.

8 Ibid., 17.

9 Dertouzos et al., Made in America, 1.

10 Mark M. Lowenthal, Intelligence: From Secrets to Policy, 4th Edition (Washington, DC: CQ Press, 2009), 267. (Since this observation was made, the source was 

released in a 5th edition.) The compelling questions can be synopsized as protecting 

intelligence sources and methods, determining distribution rules for intelligence 

gathered, and whether there was an implicit quid pro quo from the government 

providing intelligence to business.

11 Berger, How We Compete, 290–91.

12 Based on my reading of the “National Intelligence Strategy,” DNI, August 

2009.

13 Fareed Zakaria, The Post-American World (New York: W. W. Norton & Company, 2008), 4.

14 DNI, “National Intelligence Strategy,” 5.

15 Ibid.

16 DNI, “National Intelligence Strategy,” 3–4.

17 National Intelligence Council. Global Trends 2025: A Transformed World, November 2008, iv. This observation was listed under the heading “Relative Certainty.”
Chuck Howe

110

18 Timothy J. Sturgeon, “How Do We Define Value Chains and Production Networks?” MIT Industrial Performance Center Working Paper Series, April 2001, 

http://www.inti.gob.ar/cadenasdevalor/Sturgeon.pdf.

19 Industry analysis definition adapted from Business Dictionary, http://www.

businessdictionary.com/definition/industry-analysis.html. 

20 Anita M. McGahan, How Industries Evolve (Boston, MA: Harvard Business 

School Press, 2004), 7.

21 Adapted (with permission) from Stephen A. Ross, Ronald W. Westerfield, and Jeffrey Jaffe, Corporate Finance, 7th ed. (New York: McGraw-Hill, 2005), Figure 1.4.

22 Strategic and Competitive Intelligence Professionals, a leading industry nonprofit organization, defines competitive intelligence “as a necessary, ethical business 

discipline for decision making based on understanding the competitive environment.” Strategic and Competitive Intelligence Professionals FAQ, http://www.scip.

org/re_pdfs/1395928684_pdf_FrequentlyAskedQuestions.pdf.

23 Robert M. Grant, Contemporary Strategy Analysis, 5th ed. (Malden, MA: Blackwell Publishing Ltd., 2005), 113.

24 Michael E. Porter, Competitive Strategy (New York: Free Press, 1980).

25 Robert E. Hoskisson, Michael A. Hitt, and R. Duane Ireland, Competing for 

Advantage (Mason, OH: Thomson South-Western, 2004), 82.

26 Adapted (with permission) from Michael E. Porter, “The Five Competitive 

Forces That Shape Strategy,” Harvard Business Review (January 2008), http://hbr.

org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1.

27 The word environment is not meant to connote a focus on the impact of “green” 

or “eco-friendly” factors on an industry.

28 Craig S. Fleisher and Babette E. Bensoussan, Business and Competitive Analysis

(Upper Saddle River, NJ: FT Press, 2007), 88.

29 Boundless, “Overview of Types of Plans and Tools for Planning,” May 20, 2014, 

https://www.boundless.com/management/strategic-management/the-planning-process/

overview-of-types-of-plans-and-tools-for-planning/. 

30 Fleisher and Bensoussan, Business and Competitive Analysis, 88.

31 Adapted (with permission) from Robert E. Hoskisson, Michael A. Hitt, and R. 

Duane Ireland, Competing for Advantage (Mason, OH: Thomson South-Western, 

2004), Figure 3.1.

32 Michael E. Porter, Competitive Advantage (New York: Free Press, 1985).
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

111

33 Dinesh Pratap Singh, “Dinesh Pratap Singh’s Visualization for Porter’s Value 

Chain,” August 5, 2009, http://commons.wikimedia.org/wiki/File:Porter_Value_Chain.

png. 

34 Timothy Sturgeon, “How Do We Define Value Chains and Production Networks?,” MIT Industrial Performance Center Working Paper Series, April 2001, 

http://www.inti.gob.ar/cadenasdevalor/Sturgeon.pdf.

35 Gary Gereffi, John Humphrey, and Timothy Sturgeon, “The Governance of 

Global Value Chains,” Review of International Political Economy 12, no. 1 (February 2005): Figure 1. Reprinted with permission of the authors and Taylor & Francis Group, http://www.global-production. com/scoreboard/resources/sturgeon_2005_

governance-of-value-chains.pdf.

36 Michael E. Porter, Competitive Strategy (New York: Free Press, 1980), 158.

37 Anita M. McGahan, How Industries Evolve (Boston, MA: Harvard Business 

School Press, 2004), 67.

38 “Global Industry,” Economy Watch, http://www.economywatch.com/worldindustries/global-industry.html.

39 International Trade Administration, http://www.trade.gov/.

40 International Trade Administration, “U.S. Export Fact Sheet,” http://trade.gov/

press/press_releases/2009/export-factsheet_031309.pdf.

41 The NAICS code specifies industries by the type of product or service they 

produce.

42 Berger, How We Compete, 78–79.

43 Adapted (with permission) based on graphic provided by the Taiwan Semiconductor Industry Association. For more information, see “Overview on Taiwan IC 

Industry—2009 Edition,” http://www.tsia.org.tw/Uploads/Publications/2012%20

Overview-Final.pdf.

44 Adapted (with permission) from Pao-Lang Chang and Chien-Tzu Tsai, “Finding the niche position-competition strategy of Taiwan’s IC design industry,” Technovation 22, no. 2 (February 2002): Figure 1.

45 Charles L. Howe, “Semiconductor Value Chain,” Industrial College of the 

Armed Forces, Washington, DC, January 2006.

46 Ibid.

47 Timothy Sturgeon, “How Do We Define Value Chains and Production Networks?” MIT Industrial Performance Center Working Paper Series. April 2001, 

http://www.inti.gob.ar/cadenasdevalor/Sturgeon.pdf.
Chuck Howe

112

48 The term “daily scrape” comes from an open-source analyst who shared his 

method for reviewing and saving articles of interest from the daily newspapers from 

the target country.

49 Zotero was developed by the Center for History and New Media at George Mason University. The program is available for download at: http://www.zotero.org/.

50 Zotero supports many citation formats.

51 Richard J. Heuer’s book, Psychology of Intelligence Analysis (Washington, DC: 

Center for the Study of Intelligence, 1999), is an excellent source for this topic.

52 Personal notes from “SEMI ISS Blue Chip Panel,” SEMI Industry Strategic 

Symposium, Half Moon Bay, CA, January 2010.

53 Adapted (with permission) from Norm Armour, “The Innovation Imperative: 

Toward a New Model for Semiconductor Manufacturing,” presentation at the SEMI 

Industry Strategic Symposium, Half Moon Bay, CA, January 2010, slide 20.

54 International Business Strategies, Inc., “Cost of Participation in Semiconductor Industry Increasing: Impact after 32/28nm,” presentation at SEMI Industry 

Strategic Symposium, Half Moon Bay, CA, January 2010, slide 17 (reprinted with 

permission).

55 Ibid., slide 11.

56 VLSI Research, “Economics and Collaboration Panel Discussion,” SEMI Industry Strategic Symposium, Half Moon Bay, CA, January 2010, slide 7 (adapted and 

reprinted with permission).

57 “Fabless Companies Gain in Top 20 Ranking,” Semiconductor International, 

March 3, 2009 (adapted and reprinted with permission). 

58 Dick James, “Apple’s A4 iPad chip is Samsung 45-nm,” Semiconductor International, April 12, 2010. 

59 Randy Torrance and Dick James, “IC reverse engineering—a design team perspective,” Electronics Design Network, March 11, 2010, http://www.edn.com/design/

integrated-circuit-design/4312346/IC-reverse-engineering-a-design-team-perspective.

60 Walden Rhines, “Is Consolidation the New Game for the IC Industry?” EE 

Times India, April 7, 2010, http://www.eetindia.co.in/ART_8800603040_1800007_

NT_b69fec09.HTM.

61 Akira Minamika, “New phase of electronics market in 2010s” presentation, 

market seminar, SEMICON Japan 2009, Tokyo, Japan, December 2009, slide 30.

62 John Daane, “Semiconductor State of the Industry,” Semiconductor Industry 
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

113

Association, March 17, 2010, http://www.choosetocompete.org/downloads/2010_SOI.

pdf.

63 Ann Steffora Mutschler, “IC Insights ups ww IC market forecast to 27%,” 

Electronics Design Network, March 9, 2010, http://www.edn.com/article/457768-

IC_Insights_ups_ww_IC_market_forecast_to_27_.php.

64 Tokyo Electron, “TEL’s Views on Equipment Maker Future Business,” presentation by Ken Sato, SEMI Industry Strategic Symposium, Half Moon Bay, CA, 

January 2010, slide 9.

65 Ron Wilson, “Semiconductors, emerging markets, and self-interest of survival,” Electronics Design Network, November 20, 2009, http://www.edn.com/

blog/1690000169/post/1770050777.html?nid=3357&rid=16641388.

66 Tokyo Electron, “TEL’s Views on Equipment Maker Future Business.” 

67 Bob Johnson, “The Changing Economics of Moore’s Law,” presentation at SEMI 

Industry Strategic Symposium, Half Moon Bay, CA, January 2010, slide 8.

68 Clair Brown and Greg Linden, Chips and Change: How Crisis Reshapes the Semiconductor Industry (Cambridge, MA: MIT Press, 2009), 44.

69 Berger, How We Compete, 78–82. Berger provides a good description of modularity in the semiconductor industry.

70 Brown and Linden, Chips and Change, 45.

71 SEMI Industry Research & Statistics, “World Fab Forecast and the Trend of Taiwan Foundry and DRAM Fabs,” presentation by Clark Teng, SEMICON Japan, 

Chiba, Japan, December 2009, slide 23 (adapted and reprinted with permission). 

72 Adapted (with permission) from Applied Materials, “What Is Solar Electric 

Power,” Applied Materials video, 6:33, http://www.appliedmaterials.com/mediaresources/wisep.

73 Navigant Consulting, “Solar in the New Decade: How Far Can We Go?” presentation by Paula Mints, SEMI Industry Strategic Symposium, Half Moon Bay, 

CA, January 2010, slide 15 (adapted and reprinted with permission). 

74 David Lammers, “LED Manufacturing Tools Gain Attention,” Semiconductor 

International, January 26, 2010.

75 Yole Développement, “HB LED & LED Packaging 2009,” October 2009: also, 

“LED Manufacturing Steps,” reprinted in David Lammers, “LED Manufacturing 

Tools Gain Attention,” Semiconductor International, January 26, 2010 (reprinted 

here with permission).
Chuck Howe

114

76 iSuppli, “New phase of electronics market in 2010s,” presentation by Akira Minamika, SEMICON Japan, SEMI market seminar, Chiba, Japan, December 2009, 

slide 30 (adapted and reprinted with permission).

77 Clark Tseng, “LED Industry Set to Enter Fast Growth Stage in 2010: New 

Investments, New Market Entrants,” SEMI, April 6, 2010, http://www.semi.org/en/

IndustrySegments/LED/CTR_035763?id=sguna0410 (adapted and reprinted with 

permission). 

78 Douglas Rasor, “Convergence of Technology and Healthcare,” virtual presentation, EE Times, Medical System Design Virtual Conference, May 20, 2010, http://

www.eetimes.com/medical/, slide 3 (adapted and reprinted with permission).

79 Personal notes from SEMICON Korea, Seoul, Korea, February 4, 2010.

80 ASE Group, “Semi Business Evolution,” presentation by Tien Wu, SEMICON 

Korea 2010, Seoul, Korea, February 2010, slide 20 (reprinted with permission).

81 Douglas Rasor, “Convergence of Technology and Healthcare,” virtual presentation, EE Times, Medical System Design Virtual Conference, May 20, 2010, http://

www.eetimes.com/medical/, slide 23 (reprinted with permission).

82 See Berger, How We Compete, 78–79; also, Brown and Linden, Chips and Change, 

197. Mark LaPedus, “Korea’s IC industry seen on shaky ground,” EE Times, October 

20, 2009, http://www.eetimes.com/news/latest/showArticle.jhtml;jsessionid=HCFRU2W

D32O4BQE1GHRSKH4ATMY32JVN?articleID=220700489. Ed Sperling, “Why 

the Chartered Semiconductor Acquisition Matters,” System-Level Design, October 

16, 2009, http://chipdesignmag.com/sld/sperling/2009/09/11/why-the-charteredsemiconductor-acquisition-matters/; SEMI, “Can Government Help High Tech and 

Spur Economic Growth?” February 2, 2010, http://www.semi.org/en/MarketInfo/

ctr_034251?id=sguna0210.

83 Brown and Linden, Chips and Change, 37.

84 Brown and Linden, Chips and Change, 27; Junko Yoshida, “New Renesas chief 

shares renaissance roadmap,” EE Times Asia, May 24, 2010, http://www.eetasia.com/

ARTP_8800607528_499495.HTM.

85 Kenji Tsuda, “Japan’s IC Makers to Consolidate Fabs,” Semiconductor International, February 2, 2009; “Toshiba to Set Up Joint Venture in China for Chip 

Assembly,” Kyodo News International, Kyodo, November 20, 2009, http://satellite.

tmcnet.com/news/2009/11/20/4493943.htm.

86 “Pretax Earnings Improve at 7 Japan Chipmaking Gear Makers,” Semiconductor 

International, February 15, 2010.
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

115

87 Dylan McGrath, “Canon Litho Dreams Hinge on Nanoimprint,” EE Times Asia, 

March 16, 2010, http://www.eetasia.com/ART_8800600815_480200_NT_982140e7.

HTMclick_from=8800044799,9949885433,2010-03-16,EEOL,ARTICLE_ALERT. 

The world’s largest lithography company is AML Holding NV of the Netherlands.

88 Jan Vardaman and Dan Tracy, “Japanese Companies Continue to Dominate 

the Packaging Materials Market,” SEMI, January 5, 2010, http://www.semi.org/en/

MarketInfo/PackagingMarket/ctr_033627?id=sgurow0110.

89 Akira Minamika, “New phase of electronics market in 2010s,” presentation at 

SEMICON Japan 2009, SEMI Market Seminar, Chiba, Japan, December 2009, 

30.

90 Mark LaPedus, “Korea’s IC industry seen on shaky ground,” October 20, 

2009; Mark LaPedus, “Korea lags in analog, experts warn,” EE Times, October 

16, 2009, http://www.eetimes.com/news/latest/showArticle.jhtml;jsessionid=NKWPP

GLPF1RW1QE1GHOSKHWATMY32JVN?articleID=220601073; Lee Chul-ho, 

“[Viewpoint] In China, a Giant Stirs,” Korea JoongAng Daily, February 1, 2010, 

http://joongangdaily.joins.com/article/view.asp?aid=2916001.

91 Vardaman and Tracy, “Japanese Companies Continue to Dominate the Packaging Materials Market,” SEMI, January 5, 2010.

92 LaPedus, “Korea’s IC industry seen on shaky ground,” October 20, 2009. 

93 LaPedus, “Korea lags in analog, experts warn,” October 16, 2009.

94 Dick James, “Apple’s A4 iPad chip is Samsung 45-nm,” Semiconductor International, 

April 12, 2010; Mark LaPedus, “Six reasons why Samsung will succeed in foundry biz,” 

EE Times Asia, March 3, 2010, http://www.eetasia.com/ART_8800599719_480200_

NT_9f869000.HTMclick_from=8800044080,9949885433,2010-03-

05,EEOL,ARTICLE_ALERT.

95 “South Korea bets on renewable energy,” EE Times Asia, January 19, 2010, 

http://www.eetasia.com/ART_8800595704_765245_NT_32db61a9.HTMclick_

from=8800040880,9949885433,2010-01-19,EEOL,ARTICLE_ALERT.

96 Economic Development Board, “EDB Singapore,” June 28, 2010, http://www.

edb.gov.sg/edb/sg/en_uk/index/industry_sectors/electronics/facts_and_figures.html.

97 Business Wire, “Applied Materials Opens Global Hub in Singapore for Manufacturing Semiconductor Equipment,” Semiconductor International, April 13, 2010.

98 Ed Sperling, “Why the Chartered Semiconductor Acquisition Matters,” SystemLevel Design, October 16, 2009, http://chipdesignmag.com/sld/sperling/2009/09/11/

why-the-chartered-semiconductor-acquisition-matters/.
Chuck Howe

116

99 IC Insights, “2009 Major IC Foundries,” in “TSMC Maintains Top Spot 

Among Foundries,” Semiconductor International. January 28, 2010 (adapted and 

reprinted with permission).

100 Mark LaPedus, “UMC needs new strategy,” EE Times Asia, May 26, 2010, 

http://www.eetasia.com/ARTP_8800607794_480200.HTM.

101 Peggy Aycinena, “TSMC: The New Pax Romana,” EDA Confidential, May 

26, 2010, http://www.aycinena.com/index2/index3/tsmc%20pax%20romana%20

2010.html.

102 Market News Publishing, “And MAPPER Reached Joint Development Milestone,” Semiconductor International, February 19, 2010. 

103 Peter Clarke, “TSMC breaks ground on LED lighting wafer fab,” EE Times, 

March 25, 2010, http://www.eetimes.com/electronics-news/4088182/TSMC-breaksground-on-LED-lighting-wafer-fab.

104 Akira Minamika, “New phase of electronics market in 2010s,” presentation at 

SEMICON Japan 2009 SEMI, Market Seminar, Chiba, Japan, December 2009, 

slide 30 (adapted and reprinted with permission).

105 “Taiwan Legislature Rejects DRAM Industry Restructuring Plan,” Semiconductor International, November 12, 2009.

106 “Taiwan Tax Cut Agreement Expected to Benefit Businesses,” Osc Seoul Yonhap in English, January 14, 2010. 

107 Lin Shu-yuan and Sofia Wu, “Taiwan Conditionally Broadens High-tech 

Investment In China,” Central News Agency (CNA), February 10, 2010, http://

www.etaiwannews.com/etn/news_content.php?id=1177917&lang=eng_news&cate_

img=35.jpg&cate_rss=news_Business; “Ban List for Mainland-Bound Investment

Revised,” T@iwan Today, February 10, 2010, http://www.taiwantoday.tw/ct.asp?xitem

=94165&CtNode=415.

108 Ibid.

109 “Flextronics to build design center in Wuzhong,” EE Times Asia, October 

20, 2009, http://www.eetasia.com/ART_8800587191_480100_NT_d705de31.

HTM?8800033984&8800587191&click_from=8800033984,9949885433,2009-

10-20,EEOL,ARTICLE_ALERT.

110 Lin Shu-yuan and Sofia Wu, “Taiwan Conditionally Broadens High-tech Investment In China,” CAN, October 20, 2009. 

111 Asia Pulse, “Taiwanese Chip Foundries Investing in Chinese Firms,” Semiconductor International, April 5, 2010.
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

117

112 David Lammers, “TSMC to Take No Day-to-Day Role in SMIC,” Semiconductor International, November 11, 2009; China Knowledge Newswire, “TSMC 

says no plans to move advanced plants to mainland,” Semiconductor International, 

April 7, 2010.

113 Ingrid Lee and Jessie Shen, “Chipbond to raise stake in China affiliate,” DigiTimes, June 7, 2010, http://www.digitimes.com/NewsShow/MailHome.asp?datePublish

=2010/6/7&pages=PD&seq=219.

114 Quincy Liang, “Taiwan Courts Chinese Automakers—Possibilities of cross-strait 

synergy in the automobile industry,” CENS.com—The Taiwan Economic News, 

April 6, 2010, http://www.cens.com/cens/html/en/news/news_inner_31883.html.

115 Adam Hwang, “Taiwan exports hit record in May,” DigiTimes, June 8, 2010, 

http://www.digitimes.com/NewsShow/MailHome.asp?datePublish=2010/6/8&pages=

VL&seq=200.

116 April Peng, “SMIC Beijing 300mm Fab Reported to Be Planning for Expansion,” SEMI, June 1, 2010, available at http://www.semi.org/en/MarketInfo/

CTR_037308?id=sguna0610 (reprinted with permission from SEMI).

117 “Closing the China ‘Chip Gap’ Creates Long-Term Opportunities for 

Equipment and Materials Suppliers,” SEMI, June 14, 2010, http://www.semi.org/

en/marketinfo/ctr_033668.

118 Hsiao-wen Wang, “Why TSMC Showed Mercy,” CommonWealth Magazine, 

February 4, 2010, http://english.cw.com.tw/article.do?action=show&id=11727.

119 Mark LaPedus, “Analysis: Change is in the wind at SMIC,” EE Times Asia, November 12, 2009, http://www.eetasia.com/ART_8800589303_480100_NT_5bba5b55.

HTMclick_from=8800035720,9949885433,2009-11-12,EEOL,ARTICLE_

ALERT.

120 VLSI Research, “TSMC & SMIC Profitability,” in “China Leads World Out 

of Recession, Through Recovery,” Semiconductor International, January 14, 2010.

121 LaPedus, “Analysis: Change is in the wind at SMIC,” November 12, 2009.

122 “China IC Industry Development Targets Renewed and Repurposed Fabs,” 

Targeted News Service, March 8, 2010.

123 Margery Conner, “Protecting your hardware IP in China: Practical experience,” 

Electronics Design Network, February 4, 2010, http://www.edn.com/blog/1470000147/

post/650052465.html?nid=2431&rid=16641388.

124 Hsiao-wen Wang, “Why TSMC Showed Mercy,” CommonWealth Magazine, 

February 4, 2010. 
Chuck Howe

118

125 Mark LaPedus, “Analysis: Is IBM turning over key IC tech to China?” EE 

Times Asia, October 21, 2009, http://www.eetasia.com/ART_8800587281_480200_

NT_55620e65.HTM.

126 Mark LaPedus, “Freescale expands Chengdu design center,” EE Times Asia, 

June 7, 2010, http://www.eetimes.com/electronics-news/4199969/Freescale-expandsChengdu-design-center.

127 “Intel Capital and China Investment Corporation Announce Collaboration 

Agreement,” Semiconductor International, February 12, 2010.

128 Keith Bradsher, “China Drawing High-Tech Research from U.S.,” New York 

Times, March 17, 2010, http://www.nytimes.com/2010/03/18/business/global/

18research.html?sq=Applied%20Materials%2 &st=nyt&adxnnl=1&scp=2&adxnnlx

=1309464261-clRhmw1kjIyyEagvJFAo7A.

129 Ibid.

130 Thomas L. Friedman, “A Word from the Wise,” New York Times, March 2, 2010, 

http://www.nytimes.com/2010/03/03/opinion/03friedman.html?ref=intelcorporation.

131 “Elpida Plans China, Taiwan Factories to Meet Demand,” Business Week, June 

7, 2010.

132 Rob Spiegel, “Manufacturing trending away from China,” Electronics Design

Network, October 13, 2009, http://www.edn.com/article/CA6701633.html.

133 Personal notes from SEMI ISS Blue Chip Panel, SEMI Industry Strategic 

Symposium, Half Moon Bay, CA, January 2010.

134 Gary Nevison, “China REACH to take effect in October,” Electronics Design Network, February 26, 2010, http://www.edn.com/blog/570000257/post/1300052930.

html?nid=3351&rid=16641388.

 135 “Barriers restrict China PV market growth,” EE Times India, March 10, 2010, 

http://www.eetindia.co.in/ART_8800600232_1800008_NT_5347451b.HTM.

136 Research in China, “China Polysilicon Industry Report, 2009” in “China Looks 

to Control Polysilicon Oversupply, Quality,” PV Society, December 3, 2009 (reprinted with permission).

137 “Portable medical electronics see big market in China,” EE Times Asia, January 18, 

2010, http://www.eetasia.com/ART_8800595589_499495_NT_d3e66dac.HTM.

138 Ian Bremmer, The End of the Free Market (New York: Portfolio, 2010), 149.

139 The economics of industry is being highlighted here; based on the 2009 NIS, 

the intelligence community is adept at analyzing monetary policy, exchange rates, 

capital flows, and other major macroeconomic trends.
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

119

140 Bremmer, The End of the Free Market, 23.

141 Sperling, “Why the Chartered Semiconductor Acquisition Matters.”

142 Bremmer, The End of the Free Market, 5.

143 Ibid., 175.

144 Ibid., 199.

145 Adapted from Robert E. Hoskisson, Michael A. Hitt, and R. Duane Ireland, 

Competing for Advantage (Mason, OH: Thomson South-Western, 2004), Figure 3.1 

(adapted with permission).

146 IC Insights, “Glossary of Terms, 2002–2008,” http://www.icinsights.com/search

/?q=Glossary+of+Terms+2002-2008.

147 Semiconductor Industry Association, “What is a Semiconductor?,” May 20, 

2014, http://semiconductors.org/faq/questions/.

148 Jack Bogdanski, “Obsolescence Management: Another Perspective,” Military 

Embedded Systems, January/February 2009, http://www.mil-embedded.com/articles/

id/?3747. 

149 Brown and Linden, Chips and Change, 9.

150 Visualizations of this common industry process can be found in Top-Alternative-energy-sources.com, “The Czochralski Process,” May 20, 2014, http://www.

top-alternative-energy-sources.com/Czochralski-process.html; and in corporate websites, 

for example, SUMCO Corporation, “The Next Generation Wafer,” May 17, 2010, 

http://www.sumcosi.com/english/products/next_generation/breakthrough.html. 

151 NOVA Electronic Materials, “Common Wafer Terminology,” May 20, 2010, 

http://www.novawafers.com/resources-wafer-terminology.html. 

152 Microwave Encyclopedia, “Growing Semiconductor Boules,” July 3, 2005, 

http://www.microwaves101.com/encyclopedia/boules.cfm.

153 SEMATECH, “Acronyms and Abbreviations,” http://www.sematech.org/

publications/acronyms/index.htm.

154 Definition of integrated circuit is adapted from TechTerms.Com, May 21, 

2010, http://www.techterms.com/definition/integratedcircuit.

155 Intel, “Moore’s Law: Raising the Bar,” 2005, http://www.bandwidthco.com/

whitepapers/hardware/cpu/moore/Moores%20Law%20-%20Raising%20the%20Bar.

pdf?.

156 Adapted (with permission) from Mentor Graphics, “Reduced Memory Cost 

Drives New Architecture and Applications,” in “Is consolidation the new game 
Chuck Howe

120

for the IC industry?,” EE Times India, April 7, 2010, http://www.eetindia.co.in/

ART_8800603040_1800007_NT_b69fec09.HTM.

157 Semiconductor Industry Association, The International Technology Roadmap for Semiconductors, 2009 Edition. International SEMATECH: Austin, TX 

(2009). http://www.itrs.net/Links/2009ITRS/Home2009.htm (adapted and reprinted 

with permission).

158 Northwestern University, Nanoscale Science and Engineering Center, “How 

Small Is Small?,” DiscoverNano, 2005, http://www.discovernano.northwestern.edu/

whatis/index_html/howsmall_html (reprinted with permission from Northwestern 

University and Dennis Kunkel Microscopy, Inc.); Anna M. Waldron and Carl A. Batt, 

“How Small Am I? The Science of Nanotechnology,” PBS NewsHour Extra, 2010, 

http://www.pbs.org/newshour/extra/teachers/lessonplans/science/nanotechnology.html (reprinted with permission from PBS NewsHour/MacNeil-Lehrer Productions).

159 “Where Electronics Begin,” EDA Consortium, http://www.edac.org/Video/

ElectronicsBegins/electronics_begins.jsp.

160 For a good overview of the process, see “From Sand to Circuits: How Intel 

makes integrated circuit chips,” Intel, May 21, 2010, http://www.intel.com/Assets/

PDF/General/308301003.pdf. 

161 Integrated Circuit Engineering Corporation, “Cost Effective IC Manufacturing 1998–1999,” Smithsonian Chip Collection, 1997, 7-4, http://smithsonianchips.

si.edu/ice/cd/CEICM/TITLE.pdf.

162 Personal notes from SEMI Industry Strategic Symposium Blue Chip Panel, 

Half Moon Bay, CA, January 12, 2010.

163 Bob Bruck, “Economics and Collaboration Panel,” presentation at SEMI Industry Strategic Symposium, Half Moon Bay, CA, January 2010.

164 World Semiconductor Trade Statistics, http://www.wsts.org.

165 Graphic based on data from World Semiconductor Trade Statistics, “WSTS 

Semiconductor Market Forecast Autumn 2009,” November 17, 2009, http://

www.wsts.org/PRESS/PRESS-ARCHIVE/WSTS-Semiconductor-Market-Forecast-Autumn-2009 (adapted and data used with permission). 

166 IC Insights, “Glossary of Terms,” 2002–2008, http://www.icinsights.com/

search/?q=Glossary+of+Terms+2002-2008; Jerzy Ruzyllo, “Semiconductor Glossary,” 

2001–2009, http://www.semi1source.com/glossary/default.asp?whichpage=default.

167 Semico Research, “Is consolidation the new game for the IC industry?,” EE 

Times India, April 7, 2010, http://www.eetindia.co.in/ART_8800603040_1800007_

NT_b69fec09.HTM (reprinted with permission).
USING INDUSTRY ANALYSIS FOR STRATEGIC INTELLIGENCE

121

168 Gartner, Inc., “Top 10 Semiconductor Vendors by Revenue Estimates, 2009,” 

in Peter Clarke, “Winners, Losers in 2009 Chip Vendor Ranking,” EE Times 

Asia, March 31, 2010, http://www.eetasia.com/ART_8800602399_480200_

NT_72aebd89.HTM (adapted and reprinted with permission).

169 IC Insights, Company Reports, “Top 10 Semiconductor Industry Capital 

Spenders,” in “IC Insights: Top 10 to Spend Aggressively in 2010,” Semiconductor 

International, February 24, 2010 (adapted and reprinted with permission from IC 

Insights).

170 Clair Brown and Greg Linden, Chips and Change: How Crisis Reshapes the 

Semiconductor Industry (Cambridge, MA: MIT Press, 2009).

171 Michael H. Siam-Heng, “Development of China’s Semiconductor Industry: 

Prospects and Problems,” in Elspeth Thomson and Jon Sigurdson, China’s Science 

and Technology Sector and the Forces of Globalization (Singapore: World Scientific 

Publishing, 2008), 219.

172 National Academies, http://www.nationalacademies.org/.

173 U.S. Bureau of Industry and Security, www.bis.doc.gov/.

174 As a side note, many companies are using file names with random hexadecimal 

code on YouTube, thereby allowing their video clips to “hide in plain sight.” Source: 

Phil Britton, “Integrating Web 2.0 Tools in Your Intelligence Process,” Washington, 

DC: Strategic and Competitive Intelligence Professionals Conference, 2010. Comment during lecture.

175 UBM Electronics, “Enjoy the Show,” image screenshot, EE Times Virtual Conference: Medical System Design, May 20, 2010, http://www.eetimes.com/medical/

(reprinted with permission).

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ABOUT THE AUTHOR

Charles (Chuck) Howe serves as Deputy Director 

to the Assistant Deputy Director of National 

Intelligence Acquisition organization, which is 

part of the Acquisition, Technology & Facilities 

organization within the Office of the Director 

of National Intelligence. Before joining the 

Intelligence Community, Mr. Howe served in the 

United States Air Force for 27 years, retiring with 

the rank of Colonel. He has a long association 

with the aerospace industry, and capped off his 

military career teaching at the Industrial College 

of the Armed Forces (now Dwight D. Eisenhower 

School for National Security).