# Computing Power Chips Are Steel

**Thesis:** Computing power chips (memory, commodity semiconductors) follow steel industry dynamics — winners are determined by cost discipline, process innovation, vertical integration, scale, and yield. This is distinct from leading-edge logic fabrication and lithography equipment, which follow railroad dynamics (cornered supply, near-impossible to replicate).

**Date:** 2026-03-12
**Author:** Junwon Park

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## Steel Dynamics in Semiconductors

How steel winners won historically, and how it maps to chips:

**Cost discipline and process innovation.** Carnegie dominated by adopting the Bessemer process faster than competitors, then moving to open-hearth furnaces when they proved superior. He obsessively tracked costs per ton when rivals didn't even keep proper books. The winner wasn't the one with the best steel — it was the one who could produce acceptable-quality steel at the lowest cost.

**Vertical integration.** Carnegie owned his iron ore mines, coke ovens, and the railroads that connected them. He controlled input costs that competitors had to buy at market rates. Samsung's advantage here is real — they make their own DRAM, NAND, and now HBM in-house with proprietary packaging. SK Hynix is more of a pure-play, which means higher margins when demand is hot but more exposure when it's not.

**Scale and yield.** Steel was a volume game with thin margins. The producer who could run furnaces at higher utilization with fewer defects won. This maps directly to semiconductor fab yield rates — whoever gets HBM yields up faster on each new generation captures the margin window before the other catches up.

## Disruption Risk

Nucor broke the model by using mini-mills and scrap steel — a structural cost advantage the incumbents couldn't match without cannibalizing themselves. Worth watching for whether a similar disruption could hit memory (new architectures, new materials, or a shift away from HBM entirely).

## The Split

The semiconductor landscape is probably split:

- **Memory and commodity chips are steel** — cost, yield, scale determine winners. Samsung and SK Hynix competing to supply HBM to Nvidia is textbook steel dynamics. The route isn't cornered — multiple producers can serve the same customer, and switching costs are manageable.
- **Leading-edge logic fabrication (TSMC) and lithography equipment (ASML) are railroads** — cornered supply, near-impossible to replicate.

The mistake is treating the whole semiconductor stack as one thing.