Can anyone besides Nvidia make big bucks from chips?

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Subscribe to enjoy similar stories. Adam Smith would be baffled by microelectronics. When the great economist died in 1790 James Watt’s two-cylinder steam engine passed for the height of technological sophistication.

If he recognised the prefix “nano"—a fair bet for a precocious classicist proficient in dead languages by 14—it would be as a derivation of the Greek word for “dwarf", not as a reference to the billionths of a metre in which modern semiconductors are measured. The word “billion" had entered the English language by Smith’s time but the number it denotes would have seemed unfathomable. Some 200bn transistors etched onto a few halfpennies in Nvidia’s latest Blackwell artificial-intelligence (AI) chip? Black magic, even for an enlightened Scottish rationalist.

The man who observed that “the division of labour is limited by the extent of the market" would, though, be on familiar ground seeing the global chip industry. Stripped of modern jargon, the semiconductor supply chain is Smith’s insight in action. As the market’s extent has swelled, from sales of $45bn in 1979 (in today’s money) to perhaps $600bn in 2024 and, forecasters reckon, over $1trn by the early 2030s, labour has been divvied up accordingly.

Gone are the integrated chip giants of the 1970s that, like America’s Intel back in the day, did everything themselves. This is the era of hyperspecialisation. Nvidia and other designers prepare the blueprints.

“Foundries" like TSMC of Taiwan turn these into physical products by feeding silicon from one set of firms into machines assembled by another. These in turn contain gubbins from even more specialised providers, and so on. What has not been split as finely is the AI windfall.