Material Insights · Understanding the Material World

Computers and electronics and Silicon

Every chip in a phone, PC or server is built on a silicon wafer, but chips use only a sliver of world silicon output: most silicon metal goes to aluminium alloys and silicones, and the ultra-pure grades for chips and solar are refined from a base that China dominates.

Computers and electronics (industry) and Silicon (commodity): 4 relationships.

How they are linked

1. Industry input

Physical flow · Strong · Silicon to computers and electronics

Chips are etched onto thin slices of single-crystal silicon, so wafer supply sets how many processors and memory chips can be made; the site rates silicon 5 of 5 on criticality for chip and memory suppliers.

  • 5 of 5 criticality for chip and memory suppliers
  • 12,973 MSI world silicon wafer shipments, 2025
  • US$11.4 billion world silicon wafer revenue, 2025

Wafer shipments rose 5.8% in 2025 while revenue slipped 1.2%, a sign of volume led by AI logic and high-bandwidth memory but soft pricing as mature-node inventories normalised. Device assemblers rarely buy silicon directly: they feel wafer tightness through chip lead times and prices.

Enterprise types that depend on it:

  • Chip and memory suppliers: wafer base (criticality 5 of 5)

Sources: Material Insights; SEMI

2. Metallurgical to electronic grade

Physical flow · Medium · Silicon metal is refined into semiconductor-grade silicon for chips

Silicon metal is smelted from quartz and mostly sold to aluminium alloy and silicone makers; only part is refined further into the ultra-high-purity grades used for chips and solar cells.

  • almost 80% China's share of world silicon materials output, 2025

Because chips take a small share of silicon metal, wafer costs are driven mainly by purification, crystal growth and polishing rather than by the silicon metal price, which fell in 2025 on oversupply and weak demand. The concentration risk sits upstream: China produced almost 80% of silicon materials in 2025, and the United States relied on imports for more than half its silicon metal.

Sources: USGS

3. Chips and solar share a chain

Shared risk · Asymmetric · Solar and electronics draw on the same polysilicon and wafer technology

Solar cells and chips both start from purified polysilicon grown into ingots and sliced into wafers; solar takes far larger volumes at lower purity, so policy and capacity in solar shape the industrial base around chip-grade silicon.

  • almost 95% China's expected share of PV polysilicon, ingot and wafer output, 2022 outlook
  • 40% Xinjiang's share of world polysilicon making, 2022
  • over 40% electricity share of polysilicon production cost

The IEA's figures cover PV-grade material, not the smaller chip-grade segment, so they overstate China's hold on chip wafers but show how far it dominates the wider silicon refining base. Electricity is over 40% of polysilicon cost, which helps explain why output clusters where power is cheap, as in Xinjiang, which held about 40% of world polysilicon making in 2022.

Sources: IEA

4. Compound semiconductors

Substitution · Weak · Gallium arsenide and germanium can replace silicon in some devices

Gallium arsenide and germanium are the main substitutes for silicon in semiconductor and infrared uses, chosen for speed, light emission or infrared sensing, not to save cost.

These materials serve radio-frequency, optical and infrared niches; mainstream logic and memory remain on silicon. Substitution therefore shifts exposure to other concentrated metals, gallium and germanium, rather than removing material risk.

Sources: USGS

For investors

Key learnings

  1. Silicon matters to electronics through wafers, not through the silicon metal price: wafer revenue fell 1.2% in 2025 even as shipments rose 5.8%.
  2. AI logic and high-bandwidth memory led wafer demand in 2025, so data-centre spending has become a main driver of wafer volumes alongside consumer devices.
  3. China produced almost 80% of silicon materials in 2025 and dominates PV polysilicon, so trade measures on solar silicon can spill over into the wider silicon base.

What to track

  • Silicon wafer shipments (MSI) and revenue: Rising volume with falling revenue means oversupply in mature nodes; both rising means tight supply (Quarterly · SEMI Silicon Manufacturers Group)
  • Silicon metal and polysilicon prices: Oversupply in China lowers upstream costs; a squeeze signals capacity cuts or policy curbs (Weekly · SMM, OPIS, Bernreuter)
  • Chip lead times for mature-node parts: Lengthening lead times warn of assembly delays for device makers (Monthly · distributor and industry surveys)

For policymakers

Key learnings

  1. India's electronics assembly runs mainly on imported chips, so its silicon exposure arrives embedded in components rather than as wafers bought at home.
  2. India's solar policy is building the nearest domestic silicon capability: ALMM List-III will require domestic ingots and wafers in covered solar projects from 1 June 2028.
  3. Upstream silicon is concentrated in China at almost 80% of 2025 output, so diversification needs cheap, firm power as much as technology.

What to track

  • Ingot and wafer capacity enlisted under ALMM List-III: Shows whether India's wafer base will be ready for the June 2028 start (Quarterly · MNRE)
  • Approvals and output of India Semiconductor Mission fabs: Signals when domestic demand for chip-grade wafers will begin (Quarterly · MeitY, PIB)
  • China's share of silicon materials output: A falling share shows diversification of the upstream base (Annual · USGS Mineral Commodity Summaries)

India

India's electronics assembly relies mainly on imported chips, so its silicon dependence is embedded in components; its first domestic wafer capacity is coming through solar, where ALMM List-III takes effect on 1 June 2028 and makers such as Premier Energies still import all their solar wafers.

Sources

  1. Computers and electronics: materials, Material Insights (2026)
  2. SEMI reports 2025 annual worldwide silicon wafer shipments and revenue results, SEMI (2026)
  3. Mineral Commodity Summaries 2026: Silicon, USGS (2026)
  4. Solar PV Global Supply Chains: executive summary, IEA (2022)
  5. MNRE extends ALMM to solar wafers and ingots, to be effective from June 1, 2028, Energetica India (2026)