Oligopoly Equilibrium: why semiconductor markets settle at ~3 players
BenBajarin · x · 2026-09-09
A Chipstrat essay explains why most semiconductor markets — EDA, memory, leading-edge foundry, GPU, CPU, litho — settle at two or three players. The main driver is fixed cost: buy-in is enormous and rises every generation, mirroring the dynamics of frontier model labs.
The author offers a toy model: N ≈ market size / breakeven scale. Leading-edge foundry: TSMC's 2025 revenue was $122B, 74% from advanced nodes ($90B), implying a $100B+ market; a sub-2nm fab costs $20-30B. As breakeven share rises, players exit — the same logic that birthed the fabless/merchant-foundry split.
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