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What Drives Our Electronic Chemicals Business?

This is a great question and it’s one we hear regularly from the investment community. The simple answer is that our Electronic Chemicals business is directly influenced by global semiconductor production trends (excluding a small portion of our sales to other electronics markets). When production of semiconductor chips rises, demand for our high purity wet process chemicals typically increases. Conversely, when semiconductor production declines, demand for our chemicals typically decreases. In this blog post we’ll dive a little deeper to get a more comprehensive understanding of the growth drivers behind our Electronic Chemicals business.

Digital vs. Analog

In the semiconductor industry, there are two broad categories of semiconductors: digital and analog. (A third type, mixed-signal, combines digital and analog elements on the same chip.) In total, the global semiconductor market is estimated to grow 6.5% to US$325 billion in 2014, according to trade organization World Semiconductor Trade Statistics. Of that amount, approximately US$223 billion, or 69%, will be spent on digital chips, such as microprocessor, memory and logic integrated circuits (ICs). Digital ICs are used in numerous end markets, including computers, servers, tablets, mobile phones, consumer electronics and automobiles.

Although KMG supplies chemicals to the global semiconductor industry, including both digital and analog semiconductor manufacturers, our Electronic Chemicals business is influenced to a greater extent by production of digital ICs. That’s primarily because the manufacture of digital ICs tends to be more complex than that of analog ICs, requiring higher chemical purity and greater chemical usage throughout the production process.

Advances in Semiconductor Processing Technology

Within the digital IC market, semiconductor manufacturers continue to strive to increase the number of transistors on a single chip. To do this cost-effectively, they must reduce the size of the transistors on the chip, enabling one chip to contain millions, or even billions, of transistors. Generally speaking, higher transistor counts lead to increased microchip performance, enabling greater functionality while reducing overall manufacturing costs.

Many complex digital ICs are fabricated in layers, with each layer of the chip requiring wet chemical processing, including both etching and cleaning chemistries. From our perspective, the growth of advanced digital ICs is a distinctly positive trend, as growing semiconductor complexity demands the use of ever purer etching and cleaning chemicals. It is here that KMG’s expertise in chemical purification and blending, packaging, sourcing and quality control provide important manufacturing advantages for our semiconductor customers.

New Fabs and Fab Expansions

The expansion of production capacity in existing semiconductor fabrication facilities (often simply referred to as fabs), or the construction of new fabs, are important sources of growth for KMG. When manufacturers expand existing fab capacity or start-up new fabs, their demand for high-purity process chemicals rises. As the world’s leading supplier of these critical products, KMG is well positioned to benefit from expanding industry fab capacity. Our global reach and commitment to ensuring reliable supply make KMG a trusted partner to many of the world’s leading semiconductor manufacturers.

Global Leadership

Following our UPC acquisition in May 2013, KMG became the world’s largest and only global supplier of high purity process chemicals to the semiconductor industry, operating Electronic Chemicals manufacturing and distribution facilities in North America (USA), Europe (UK, France and Italy) and Asia (Singapore).

Our global leadership in the high purity process chemicals market expands our business opportunities, allowing us to grow with our customers wherever their global manufacturing facilities may be. Increasingly, semiconductor makers are looking for material suppliers who have the global capabilities to reliably and consistently supply materials anywhere in the world. KMG can do just that, thanks to our global distribution network and our unwavering commitment to providing the industry’s highest purity chemicals on time, every time.

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