Silicon Sunk Costs: The Semiconductor Industry's Reliance on Obsolete Technologies

Research Article
Open access

Silicon Sunk Costs: The Semiconductor Industry's Reliance on Obsolete Technologies

Yanran Fu 1*
  • 1 Business School, University of Leeds, Leeds, UK    
  • *corresponding author 2913728230@qq.com
AEMPS Vol.191
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-189-1
ISBN (Online): 978-1-80590-190-7

Abstract

Moore's Law has long driven the semiconductor industry's pursuit of miniaturization, yet firms continue investing in mature nodes (e.g., 28nm/200mm fabs) due to the powerful sunk cost fallacy. This phenomenon distorts rational decision-making, trapping companies in outdated technologies despite the availability of more advanced alternatives. This paper develops a framework that integrates technical rigidity, behavioural commitment, and institutional lock-in to explain this paradox, challenging conventional market-demand narratives. By introducing the Sunk Cost Escalation Multiplier (SCEM), this research identifies critical thresholds where continued investment transitions from strategic to irrational. The analysis highlights how industry structure and cognitive biases interact to sustain technological lock-in, presenting significant policy implications for capital reallocation and technology transition roadmaps. It further illustrates how sunk costs create self-reinforcing cycles: specialized equipment with long lifespans, such as 200mm fabs, becomes economically obsolete yet remains physically operational. Additionally, policy incentives like subsidies often inadvertently perpetuate these inefficiencies, hindering innovation and progress.

Keywords:

Sunk cost fallacy, semiconductor, decision-making, technological obsolescence

Fu,Y. (2025). Silicon Sunk Costs: The Semiconductor Industry's Reliance on Obsolete Technologies. Advances in Economics, Management and Political Sciences,191,33-39.
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References

[1]. Bass, T., & Weigand, H. (2018). The Evolution of Moore's Law. IEEE Transactions on Components, Packaging and Manufacturing Technology, 8(6), 919-927.

[2]. News highlights. (2024, July 11). TechInsights: Americas' chip suppliers continue to dominate R&D spending. Retrieved April 13, 2025, from DIGITIMES website: https://www.digitimes.com/news/a20240711PR200.

[3]. Milpitas. (2023, September 19). Global 200mm Fabs to Reach Record High Capacity by 2026, SEMI Reports. SEMI. https://www.semi.org/en/news-media-press-releases/semi-press-releases/global-200-mm-fabs-to-reach-record-high-capacity-by-2026-semi-reports

[4]. Thaler, R. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior & Organization, 1(1), 39–60. https://doi.org/10.1016/0167-2681(80)90051-7

[5]. Arkes, H. R., & Blumer, C. (1985). The psychology of sunk cost. Organizational Behavior and Human Decision Processes, 35(1), 124–140. https://doi.org/10.1016/0749-5978(85)90049-4

[6]. Düsseldorf, C. G., & Liu, Z. (2024, September 25). 200mm Fab Outlook to 2027. SEMI. https://www.semi.org/en/products-services/market-data/200mm-fab-outlook

[7]. Chen, H., & Chen, Y. (2020). GlobalFoundries and the Strategic Shift in Semiconductor Manufacturing. Journal of Strategic Innovation, 5(3), 45-62.

[8]. GlobalFoundries. (2023, September 12). GlobalFoundries Officially Opens US$4 Billion Expansion Facility in Singapore, Creating 1,000 New Jobs. GlobalFoundries. https://gf.com/gf-press-release/globalfoundries-officially-opens-us4-billion-expansion-facility-in-singapore-creating-1000-new-jobs/

[9]. winniewei. (2025, April 1). Breaking news! It is rumored that Grofond will merge with UMC! https://www.eetrend.com/content/2025/100590096.html

[10]. Cheng, T. (2025, March 31). GlobalFoundries weighs merger with No. 2 Taiwan chipmaker UMC: sources. https://asia.nikkei.com/Business/Tech/Semiconductors/GlobalFoundries-weighs-merger-with-No.-2-Taiwan-chipmaker-UMC-sources

[11]. Lapedus, M. (2016, July 21). 200mm Equipment Shortfall. Semiconductor Engineering. https://semiengineering.com/200mm-equipment-shortfall/

[12]. Linzi. (2021, March 2). Chinese manufacturers are snapping up used semiconductor equipment, and used lithography machines have tripled in price--Chip Intelligence. Icsmart. https://www.icsmart.cn/43518/

[13]. Hualin Kona Semiconductor Equipment Manufacturing. (2022, May 26). The technical challenge of transitioning from 300mm to 450mm wafer sizes-Today's Headlines. Elecfans.https://www.elecfans.com/news/1841205.html

[14]. Xinkehui. (2024, July 3). 300mm Silicon wafer A 12-inch (300mm) silicon wafer is a fou. Sapphire Wafer_Silicon Wafer_SIC Wafer_GaAs Substrate_ZnSe Windows_Quartz Glass. https://www.sic-wafers.com/300mm-silicon-wafer-a-12-inch-300mm-silicon-waf/

[15]. Shintake, T., Naulleau, P. Low-cost energy-efficient EUV lithography for advanced semiconductor manufacturing. Nat Rev Electr Eng 2, 2–3 (2025).

[16]. News, T. (2019, July 19). Intel Acknowledges It Was “Too Aggressive” With Its 10nm Plans. Prosyscom Tech. https://www.prosyscom.tech/computing/intel-acknowledges-it-was-too-aggressive-with-its-10nm-plans/?utm_source=chatgpt.com

[17]. Rau, D., & Bromiley, P. (2025). A review of congnitive biases in strategic decision making. Long Range Planning, 102529.

[18]. Robinson, D. (2022, January 28). You're fabbing it wrong: Chip shortages due to lack of investment in the right factories, says IDC. Retrieved April 14, 2025, from Theregister.com website: https://www.theregister.com/2022/01/28/idc_chip_shortages/

[19]. Moreno-Casas, V. (2024). A coevolutionary approach to institutional lock-in. Review of Evolutionary Political Economy, 1-15.

[20]. Zhang, J., & Pan, C. (2020, August 5). South China Morning Post. South China Morning Post. https://www.scmp.com/tech/policy/article/3096131/china-unveils-major-tax-incentive-policy-encourage-innovation-domestic

[21]. Cao, A. (2023, May 7). China gave 190 chip firms US$1.75 billion in subsidies in 2022. South China Morning Post. https://www.scmp.com/tech/tech-war/article/3219697/china-gave-190-chip-firms-us175-billion-subsidies-2022-it-seeks-semiconductor-self-sufficiency

[22]. Cao, A. (2023, May 7). China gave 190 chip firms US$1.75 billion in subsidies in 2022. South China Morning Post. https://www.scmp.com/tech/tech-war/article/3219697/china-gave-190-chip-firms-us175-billion-subsidies-2022-it-seeks-semiconductor-self-sufficiency

[23]. Dillinger, T. (2025, March 11). EU Cyber Acts Conference 2025. Semiwiki. https://semiwiki.com/semiconductor-manufacturers/intel/298674-intels-emib-packaging-technology-a-deep-dive/

[24]. Wernerfelt, B. (1984). A resource‐based view of the firm. Strategic management journal, 5(2), 171-180.

[25]. Aeneas. (2023, January 5). EU Chips Act, the debate goes on- Priorities: finding the balance. Retrieved April 22, 2025, from Aeneas website: https://aeneas-office.org/2023/01/05/eu-chips-act-the-debate-goes-on-priorities-finding-the-right-balance/

[26]. Manners, D. (2022, June 29). Welcome To Zscaler Directory Authentication. Electronicsweekly. https://www.electronicsweekly.com/news/business/foundry-capacity-grow-14-2022-2022-06/

Cite this article

Fu,Y. (2025). Silicon Sunk Costs: The Semiconductor Industry's Reliance on Obsolete Technologies. Advances in Economics, Management and Political Sciences,191,33-39.

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About volume

Volume title: Proceedings of ICEMGD 2025 Symposium: The 4th International Conference on Applied Economics and Policy Studies

ISBN：978-1-80590-189-1(Print) / 978-1-80590-190-7(Online)
Editor：Florian Marcel Nuţă , Xuezheng Qin
Conference website: https://www.icemgd.org/
Conference date: 20 September 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.191
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Bass, T., & Weigand, H. (2018). The Evolution of Moore's Law. IEEE Transactions on Components, Packaging and Manufacturing Technology, 8(6), 919-927.

[2]. News highlights. (2024, July 11). TechInsights: Americas' chip suppliers continue to dominate R&D spending. Retrieved April 13, 2025, from DIGITIMES website: https://www.digitimes.com/news/a20240711PR200.

[3]. Milpitas. (2023, September 19). Global 200mm Fabs to Reach Record High Capacity by 2026, SEMI Reports. SEMI. https://www.semi.org/en/news-media-press-releases/semi-press-releases/global-200-mm-fabs-to-reach-record-high-capacity-by-2026-semi-reports

[4]. Thaler, R. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior & Organization, 1(1), 39–60. https://doi.org/10.1016/0167-2681(80)90051-7

[5]. Arkes, H. R., & Blumer, C. (1985). The psychology of sunk cost. Organizational Behavior and Human Decision Processes, 35(1), 124–140. https://doi.org/10.1016/0749-5978(85)90049-4

[6]. Düsseldorf, C. G., & Liu, Z. (2024, September 25). 200mm Fab Outlook to 2027. SEMI. https://www.semi.org/en/products-services/market-data/200mm-fab-outlook

[7]. Chen, H., & Chen, Y. (2020). GlobalFoundries and the Strategic Shift in Semiconductor Manufacturing. Journal of Strategic Innovation, 5(3), 45-62.

[8]. GlobalFoundries. (2023, September 12). GlobalFoundries Officially Opens US$4 Billion Expansion Facility in Singapore, Creating 1,000 New Jobs. GlobalFoundries. https://gf.com/gf-press-release/globalfoundries-officially-opens-us4-billion-expansion-facility-in-singapore-creating-1000-new-jobs/

[9]. winniewei. (2025, April 1). Breaking news! It is rumored that Grofond will merge with UMC! https://www.eetrend.com/content/2025/100590096.html

[10]. Cheng, T. (2025, March 31). GlobalFoundries weighs merger with No. 2 Taiwan chipmaker UMC: sources. https://asia.nikkei.com/Business/Tech/Semiconductors/GlobalFoundries-weighs-merger-with-No.-2-Taiwan-chipmaker-UMC-sources

[11]. Lapedus, M. (2016, July 21). 200mm Equipment Shortfall. Semiconductor Engineering. https://semiengineering.com/200mm-equipment-shortfall/

[12]. Linzi. (2021, March 2). Chinese manufacturers are snapping up used semiconductor equipment, and used lithography machines have tripled in price--Chip Intelligence. Icsmart. https://www.icsmart.cn/43518/

[13]. Hualin Kona Semiconductor Equipment Manufacturing. (2022, May 26). The technical challenge of transitioning from 300mm to 450mm wafer sizes-Today's Headlines. Elecfans.https://www.elecfans.com/news/1841205.html

[14]. Xinkehui. (2024, July 3). 300mm Silicon wafer A 12-inch (300mm) silicon wafer is a fou. Sapphire Wafer_Silicon Wafer_SIC Wafer_GaAs Substrate_ZnSe Windows_Quartz Glass. https://www.sic-wafers.com/300mm-silicon-wafer-a-12-inch-300mm-silicon-waf/

[15]. Shintake, T., Naulleau, P. Low-cost energy-efficient EUV lithography for advanced semiconductor manufacturing. Nat Rev Electr Eng 2, 2–3 (2025).

[16]. News, T. (2019, July 19). Intel Acknowledges It Was “Too Aggressive” With Its 10nm Plans. Prosyscom Tech. https://www.prosyscom.tech/computing/intel-acknowledges-it-was-too-aggressive-with-its-10nm-plans/?utm_source=chatgpt.com

[17]. Rau, D., & Bromiley, P. (2025). A review of congnitive biases in strategic decision making. Long Range Planning, 102529.

[18]. Robinson, D. (2022, January 28). You're fabbing it wrong: Chip shortages due to lack of investment in the right factories, says IDC. Retrieved April 14, 2025, from Theregister.com website: https://www.theregister.com/2022/01/28/idc_chip_shortages/

[19]. Moreno-Casas, V. (2024). A coevolutionary approach to institutional lock-in. Review of Evolutionary Political Economy, 1-15.

[20]. Zhang, J., & Pan, C. (2020, August 5). South China Morning Post. South China Morning Post. https://www.scmp.com/tech/policy/article/3096131/china-unveils-major-tax-incentive-policy-encourage-innovation-domestic

[21]. Cao, A. (2023, May 7). China gave 190 chip firms US$1.75 billion in subsidies in 2022. South China Morning Post. https://www.scmp.com/tech/tech-war/article/3219697/china-gave-190-chip-firms-us175-billion-subsidies-2022-it-seeks-semiconductor-self-sufficiency

[22]. Cao, A. (2023, May 7). China gave 190 chip firms US$1.75 billion in subsidies in 2022. South China Morning Post. https://www.scmp.com/tech/tech-war/article/3219697/china-gave-190-chip-firms-us175-billion-subsidies-2022-it-seeks-semiconductor-self-sufficiency

[23]. Dillinger, T. (2025, March 11). EU Cyber Acts Conference 2025. Semiwiki. https://semiwiki.com/semiconductor-manufacturers/intel/298674-intels-emib-packaging-technology-a-deep-dive/

[24]. Wernerfelt, B. (1984). A resource‐based view of the firm. Strategic management journal, 5(2), 171-180.

[25]. Aeneas. (2023, January 5). EU Chips Act, the debate goes on- Priorities: finding the balance. Retrieved April 22, 2025, from Aeneas website: https://aeneas-office.org/2023/01/05/eu-chips-act-the-debate-goes-on-priorities-finding-the-right-balance/

[26]. Manners, D. (2022, June 29). Welcome To Zscaler Directory Authentication. Electronicsweekly. https://www.electronicsweekly.com/news/business/foundry-capacity-grow-14-2022-2022-06/

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