Special Report: The Tech Investment of the Century: Semiconductors 101

We're constantly looking for new ways to make yesterday’s tech trash into tomorrow’s innovation. But what most people don’t realize is that this is usually done by improving upon older materials.

It’s not just building a base on what’s already there — it’s taking technology constants (things that have worked in the past and still hold up today) and making them better.

And this is why today, we’re looking at an old material with increasingly impressive designs: semiconductors.

Not to be confused with super-capacitors, semiconductors are materials with electrically conductive properties that lay in the middle of the spectrum between conductive metals and nonconductive insulators.

Semiconductors also react to heat differently than conductive metals. As metals heat up, they lose conductivity. But heated semiconductors lose resistance and thus increase their conductivity.

Semiconductor devices (or semiconductors with makeups that have been somewhat altered) can have varying levels of conductivity or even stronger conductivity in one direction than the other.

Moreover, the conductivity of a semiconductor can be altered either by being physically mixed with more or less conductive materials or by being stimulated with electric currents, magnetic fields, or different levels of heat and light.

You can imagine that these unique properties have some unique uses. In fact, you’re probably using a few of them right now.

Your Local Semiconductor

Semiconductors are used in a wide range of electrical operations and have replaced semi-conductive vacuum components in a number of devices that we use today. The solid state of a semiconductor makes it both safer and more durable for use in everyday electronics.

Some of the most used semiconductor materials to date are gallium arsenide, germanium, and silicon — the last of which is by far the most common.

Of course, semiconductors can’t just be placed into electronics as is.

Normally, they are altered into semiconductor devices or components of an electronic device made with semiconductors that have been altered to have a specific reaction to energy passing through them.

Your laptop, tablet, and phone all use batteries with semiconductor devices in them. These components are used to make sure that your rechargeable battery doesn’t overcharge and explode, a very real possibility as shown by last year’s Samsung Galaxy fiasco.

phone remains

Of the semiconductor component, which I'm going to explain soon, a faulty semiconductor can be just as dangerous.

There are two basic types of semiconductor devices: p-type and n-type.

The letters indicate whether the device reacts with a positive or negative charge. Essentially, which direction the device will allow energy to flow.

Both types are created by “doping” semiconductor materials.

Doping a semiconductor means mixing another material into it to make it more or less conductive. Often, this doesn’t even involve changing the structure of the semiconductor; a thin film of the other material will do. In some cases, a wafer of the semiconductor material is “grown” onto another surface, and the additional material is grown with it to give the entire device a consistent mix of the two.

Any errors in this stage can make the semiconductor dangerous to use or even unusable altogether.

But when all goes according to plan, this process results in some pretty useful devices!

One common semiconductor component is called a diode, which allows electricity to flow in only one direction within a device.

This is done by combining both a p-type and an n-type semiconductor device side by side, which creates something that looks a bit like this image:

p-type n-type


Look familiar? It’s shaped like a battery for a reason. These one-way diodes are why you can only install a battery into a device in one direction. They protect electronics from overcharging and short-circuiting.

Diodes have another use that you may be familiar with…

In today’s flashy world of computerized messaging, you have almost certainly come into contact with a light-emitting diode before. They’re more commonly referred to as LEDs or, a little redundantly, LED lights.

These lights function the same way as a diode. But instead of simply transferring energy, they release it in the form of light.

The first LEDs were used to transmit infrared light and are still used that way in modern remote controls. Other forms of LEDs are often used to create colorful displays. They can be designed to create light across visible and ultraviolet spectrums in addition to infrared.

But wait, there’s more.

Two semiconductor devices together are quite impressive. But three can do even bigger things…

When combined with either a PNP or NPN formation, three semiconductor devices together create a transistor, which can either amplify an electrical flow or switch its direction at will.

These have been called the most important inventions of the 20th century and for good reason.

Many transistors can be combined to create what are called “logic gates,” an essential component of the digital circuits that makes practically everything electronic function nowadays.

The integrated circuits of everything from electronic children’s toys to the most advanced computers in the world run using transistors, which act as switches that can turn on or switch off energy flow across circuits.

One of the more recent innovations in semiconductor use has been larger lithium batteries, specifically those for electric vehicles (EVs).

Tesla, Inc. (previously known as Tesla Motors) announced in 2015 that it was working to replace the graphite anodes in its battery designs with silicon. This design, still being explored by battery expert Jeff Dahn, would increase the capacity to nearly 10 times that of batteries using graphite.

Unfortunately, the same process that allows this also changes the volume of the silicon as lithium ions pass through it, meaning the battery itself would have to be flexible enough to handle all that shape-shifting.

It’s a work in progress, but Tesla isn’t alone in introducing more of the world’s best semiconductor into its battery designs.

As the world’s demand for better energy storage technology grows, so too will the demand for silicon anodes and for high-grade semiconductor devices in general.

Even more impressive are the developments that we’re beginning to see in semiconductor devices.

Synthetic semiconductors are being used to create powerful solar panels that could collect light from all directions, making every panel exponentially more productive.

Semiconductor adhesives are also being explored. These could be useful in the assembly of devices that conduct electricity since this process can weaken and deteriorate many common adhesives we use today.

These innovations may be some time in the making, but they signal one thing that we as investors need to pay attention to — the continued and even growing demand for commercial semiconductor applications.

Market Makers

If you’ve ever had to fix a computer, you know how difficult it can be to get the right part.

This is because most companies create their own components, design their own devices, and require specialized parts to make their “new, improved, unique!” devices work properly.

Semiconductor components are no different…

So, predictably, the biggest producers of the essential electronic bits are tech companies, mostly those that make computers and cell phones for consumer use.

As of 2016, the top 20 companies by sales accounted for about 68% of the enormous $357.1 billion semiconductor market, according to IC Insights.

The top moneymaker in this industry is a name you’re probably familiar with — Intel Corp. (NASDAQ: INTC). Intel offers internationally integrated microprocessor chips in addition to a number of software platforms and cloud computing services.

The company boasts that it doubles the number of transistors on its microprocessors every 24 months, which it claims both improves the chip’s performance and reduces the cost per transistor.

Of course, reducing the size of the transistor won’t bring the value of semiconductor materials down one bit. As the technology improves, more companies will want to use it for more devices and demand will just keep climbing.

Economies of scale like this are why commodities take off in the first place, and Intel is focused on staying ahead of the pack.

Meanwhile, another American company is seeing even bigger growth in the same market.

NVIDIA Corp. (NASDAQ: NVDA) is another major computer company with business alongside brands all over the world.

The company’s chips are often seen in high-performing personal computers that are built for gaming, design, and data research. Its chips have a processing power that's high enough to be used in research for artificial intelligence (AI) operations in drones, robots, and even cars!

NVIDIA credits itself with the creation of the first graphics processing unit (GPU) for computers in 1999. These devices are used not only in gaming computers but also technical design computers, home computers, smartphones, and gaming consoles.

GPUs use embedded transistors to do the billions of calculations necessary to make electronic signals into digital images on a screen.

With the growth not only of digital media but virtual reality (VR) applications, you can imagine the impact NVIDIA has had, and still has, on the electronics market. The stock has seen more than a 186% growth in the past year. And with applications like this, that trend is looking good to continue.

And finally, there’s Samsung (OTC: SSNLF)(KRX: 005930).

Yes, it had a major setback with the Galaxy Note 7 when an alleged manufacturing error caused the phones to overheat and explode — sometimes while charging, sometimes randomly.

But that didn’t take the company down for long. The stock has grown more than 80% in a year, and the company is still expanding.

Samsung has a hand in a number of semiconductor applications, from the chips in its phones to the LEDs in its TVs. It’s also the pioneer of OLED technology, which creates a flat surface upon which visuals can be displayed. These are already being used on a number of smartphones, tablets, laptops, digital cameras, and in developing VR headsets.

Samsung’s reach across the consumer electronics market makes it an impressive company by any standard. As for semiconductors, its ever expanding line of high-tech devices will no doubt be a major boon to an already massive market.

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