Fabless semiconductor company
Encyclopedia
A fabless semiconductor company specializes in the design and sale of hardware
devices and semiconductor
chips
while outsourcing
the fabrication
or "fab" of the devices to a specialized manufacturer called a semiconductor foundry
. Foundries are typically located in countries with lower cost of labor, so fabless companies can benefit from lower capital costs while concentrating their research and development
resources on the end market. The credit for pioneering the fabless concept is given to Bernie Vonderschmitt
of Xilinx
and Gordon A. Campbell of Chips and Technologies
. The first fabless semiconductor company, the Western Design Center
, was founded in 1978.
. Semiconductor companies owned and operated their own silicon wafer fabrication facilities and developed their own process technology for manufacturing their chips. These companies also carried out the assembly and testing of their chips, the fabrication.
Meanwhile, with the help of private-equity funding, smaller companies began to form, with experienced engineers exercising their entrepreneurial prowess by establishing their own IC design companies focused on innovative chip solutions.
As with most technology-intensive industries, the silicon manufacturing process presents high barriers to entry
into the market, especially for small start-up companies. These companies relied on using excess capacity from Integrated Device Manufacturers (IDMs)
to manufacture the chips they were designing.
These conditions underlay the birth of the fabless business model
. Companies were manufacturing integrated circuits (ICs) without owning a fabrication plant. Simultaneously, the foundry industry was established by Dr. Morris Chang with the founding of Taiwan Semiconductor Manufacturing Corporation (TSMC)
. Foundries became the cornerstone of the fabless model – providing a non-competitive manufacturing partner for fabless companies.
In 1994, Jodi Shelton – along with a half a dozen CEOs of fabless companies – established the Fabless Semiconductor Association (FSA) to promote the fabless business model globally. Eventually, the FSA became the global voice for the fabless ecosystem, with over 500 corporate members in 25 countries.
In December 2007, the FSA transitioned to the GSA – the Global Semiconductor Alliance
.
The organizational transition reflected the role FSA had played as a global organization that collaborated with other organizations to co-host international events. Additionally, the GSA leadership is composed of regional leadership councils with executives from those regions who serve as advisers to the GSA Board of Directors on global and regional issues. Those leadership councils are the Asia-Pacific Leadership Council and the Europe, Middle East and African (EMEA) Leadership Council. The transition also highlights GSA's membership and mission expansion beyond fabless to include the entire semiconductor supply chain.
, Adaptec
, and Xilinx
– each with revenues in excess of $250 million. During the 1990s, industry pundits acknowledged the financial success of fabless companies, such as Nvidia
, Broadcom
, and Xilinx
, and such companies as Cyrix
produced competitively-priced products, benefiting consumers and driving the global market for computing devices.
The model has been further validated by the conversion of major IDMs to a completely fabless model, including (for example) Conexant Systems, Semtech
, and most recently, LSI Logic. Today most major IDMs including Freescale, Infineon, Texas Instruments
and Cypress Semiconductor
have adopted the practice of outsourcing chip manufacturing as a significant manufacturing strategy. As of 2007, the fabless model is the preferred business model for the semiconductor industry. The same year GSA tracked 10 separate fabless companies that had each surpassed $1 billion in annual revenues.
Hardware
Hardware is a general term for equipment such as keys, locks, hinges, latches, handles, wire, chains, plumbing supplies, tools, utensils, cutlery and machine parts. Household hardware is typically sold in hardware stores....
devices and semiconductor
Semiconductor
A semiconductor is a material with electrical conductivity due to electron flow intermediate in magnitude between that of a conductor and an insulator. This means a conductivity roughly in the range of 103 to 10−8 siemens per centimeter...
chips
Microprocessor
A microprocessor incorporates the functions of a computer's central processing unit on a single integrated circuit, or at most a few integrated circuits. It is a multipurpose, programmable device that accepts digital data as input, processes it according to instructions stored in its memory, and...
while outsourcing
Outsourcing
Outsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...
the fabrication
Semiconductor fabrication
Semiconductor device fabrication is the process used to create the integrated circuits that are present in everyday electrical and electronic devices. It is a multiple-step sequence of photolithographic and chemical processing steps during which electronic circuits are gradually created on a wafer...
or "fab" of the devices to a specialized manufacturer called a semiconductor foundry
Foundry (electronics)
In the microelectronics industry a semiconductor fabrication plant is a factory where devices such as integrated circuits are manufactured....
. Foundries are typically located in countries with lower cost of labor, so fabless companies can benefit from lower capital costs while concentrating their research and development
Research and development
The phrase research and development , according to the Organization for Economic Co-operation and Development, refers to "creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of...
resources on the end market. The credit for pioneering the fabless concept is given to Bernie Vonderschmitt
Bernie Vonderschmitt
Bernard V. Vonderschmitt was an electrical engineer, most noted as a co-founder of leading FPGA producer Xilinx.-Biography:Vonderschmitt graduated with a BSEE from Rose Polytechnic Institute in 1944...
of Xilinx
Xilinx
Xilinx, Inc. is a supplier of programmable logic devices. It is known for inventing the field programmable gate array and as the first semiconductor company with a fabless manufacturing model....
and Gordon A. Campbell of Chips and Technologies
Chips and Technologies
Chips and Technologies was the first fabless semiconductor company, a model developed by its founder Gordon Campbell. Founded by Dado Banatao.Its first product was an EGA IBM compatible graphics chip...
. The first fabless semiconductor company, the Western Design Center
Western Design Center
The Western Design Center , located in Mesa, Arizona, USA, is a company developing and manufacturing MOS 65xx-based microprocessors, microcontrollers , and related support chips...
, was founded in 1978.
History
Prior to the 1980s, the semiconductor industry was vertically integratedVertical integration
In microeconomics and management, the term vertical integration describes a style of management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or service, and the products combine to...
. Semiconductor companies owned and operated their own silicon wafer fabrication facilities and developed their own process technology for manufacturing their chips. These companies also carried out the assembly and testing of their chips, the fabrication.
Meanwhile, with the help of private-equity funding, smaller companies began to form, with experienced engineers exercising their entrepreneurial prowess by establishing their own IC design companies focused on innovative chip solutions.
As with most technology-intensive industries, the silicon manufacturing process presents high barriers to entry
Barriers to entry
In theories of competition in economics, barriers to entry are obstacles that make it difficult to enter a given market. The term can refer to hindrances a firm faces in trying to enter a market or industry - such as government regulation, or a large, established firm taking advantage of economies...
into the market, especially for small start-up companies. These companies relied on using excess capacity from Integrated Device Manufacturers (IDMs)
Integrated device manufacturer
An integrated device manufacturer is a semiconductor company which designs, manufactures, and sells integrated circuit products. As a classification, IDM is often used to differentiate between a company which handles semiconductor manufacturing in-house, and a fabless semiconductor company, which...
to manufacture the chips they were designing.
These conditions underlay the birth of the fabless business model
Business model
A business model describes the rationale of how an organization creates, delivers, and captures value...
. Companies were manufacturing integrated circuits (ICs) without owning a fabrication plant. Simultaneously, the foundry industry was established by Dr. Morris Chang with the founding of Taiwan Semiconductor Manufacturing Corporation (TSMC)
TSMC
Taiwan Semiconductor Manufacturing Company, Limited or TSMC is the world's largest dedicated independent semiconductor foundry, with its headquarters and main operations located in the Hsinchu Science Park in Hsinchu, Taiwan.-Overview:...
. Foundries became the cornerstone of the fabless model – providing a non-competitive manufacturing partner for fabless companies.
In 1994, Jodi Shelton – along with a half a dozen CEOs of fabless companies – established the Fabless Semiconductor Association (FSA) to promote the fabless business model globally. Eventually, the FSA became the global voice for the fabless ecosystem, with over 500 corporate members in 25 countries.
In December 2007, the FSA transitioned to the GSA – the Global Semiconductor Alliance
Global Semiconductor Alliance
The Global Semiconductor Alliance is a non-profit semiconductor organization, which was founded in 1994 , to support the worldwide adoption of the fabless semiconductor business model...
.
The organizational transition reflected the role FSA had played as a global organization that collaborated with other organizations to co-host international events. Additionally, the GSA leadership is composed of regional leadership councils with executives from those regions who serve as advisers to the GSA Board of Directors on global and regional issues. Those leadership councils are the Asia-Pacific Leadership Council and the Europe, Middle East and African (EMEA) Leadership Council. The transition also highlights GSA's membership and mission expansion beyond fabless to include the entire semiconductor supply chain.
Industry growth and success
When FSA was established in 1994, there were only three fabless companies – Cirrus LogicCirrus Logic
Cirrus Logic is a fabless semiconductor supplier specializing in analog, mixed-signal, and audio DSP integrated circuits . They are presently headquartered in Austin, Texas. Their audio processors and audio converters are found in many professional audio and consumer entertainment products,...
, Adaptec
Adaptec
Adaptec is a computer hardware brand owned by PMC-Sierra that is used on some of its host adapters for connecting storage devices to computers. The production line of Adaptec is in Indonesia. Products are made to interface with SCSI, Serial ATA, and Serial attached SCSI. Some of its host adapters...
, and Xilinx
Xilinx
Xilinx, Inc. is a supplier of programmable logic devices. It is known for inventing the field programmable gate array and as the first semiconductor company with a fabless manufacturing model....
– each with revenues in excess of $250 million. During the 1990s, industry pundits acknowledged the financial success of fabless companies, such as Nvidia
NVIDIA
Nvidia is an American global technology company based in Santa Clara, California. Nvidia is best known for its graphics processors . Nvidia and chief rival AMD Graphics Techonologies have dominated the high performance GPU market, pushing other manufacturers to smaller, niche roles...
, Broadcom
Broadcom
Broadcom Corporation is a fabless semiconductor company in the wireless and broadband communication business. The company is headquartered in Irvine, California, USA. Broadcom was founded by a professor-student pair Henry Samueli and Henry T. Nicholas III from the University of California, Los...
, and Xilinx
Xilinx
Xilinx, Inc. is a supplier of programmable logic devices. It is known for inventing the field programmable gate array and as the first semiconductor company with a fabless manufacturing model....
, and such companies as Cyrix
Cyrix
Cyrix Corporation was a microprocessor developer that was founded in 1988 in Richardson, Texas as a specialist supplier of high-performance math coprocessors for 286 and 386 microprocessors. The company was founded by former Texas Instruments staff members and had a long but troubled relationship...
produced competitively-priced products, benefiting consumers and driving the global market for computing devices.
The model has been further validated by the conversion of major IDMs to a completely fabless model, including (for example) Conexant Systems, Semtech
Semtech
Semtech Corporation is a supplier of analog and mixed-signal semiconductors. The company sells proprietary solutions and breakthrough technology in power management, protection, advanced communications, human interface, test & measurement, as well as wireless and sensing products...
, and most recently, LSI Logic. Today most major IDMs including Freescale, Infineon, Texas Instruments
Texas Instruments
Texas Instruments Inc. , widely known as TI, is an American company based in Dallas, Texas, United States, which develops and commercializes semiconductor and computer technology...
and Cypress Semiconductor
Cypress Semiconductor
Cypress Semiconductor Corporation is a Silicon Valley-based semiconductor design and manufacturing company founded by T. J. Rodgers and others from Advanced Micro Devices. It was formed in 1982 with backing by Sevin Rosen and went public in 1986. The company initially focused on the design and...
have adopted the practice of outsourcing chip manufacturing as a significant manufacturing strategy. As of 2007, the fabless model is the preferred business model for the semiconductor industry. The same year GSA tracked 10 separate fabless companies that had each surpassed $1 billion in annual revenues.
See also
- Semiconductor sales leaders by year
- Semiconductor foundry sales leaders by year
- Semiconductor equipment sales leaders by yearSemiconductor equipment sales leaders by yearThis article lists the top 15 largest equipment semiconductor companies by sales leaders since 2006.An IC equipment supplier's revenue is classified as sales of systems used to manufacture semiconductors, thin-film heads, MEMs, integrated circuits, as well as service, support, and retrofitted systems...
- Foundry modelFoundry modelIn microelectronics, the foundry model refers to the separation of a semiconductor fabrication plant operation from an integrated circuit design operation, into separate companies or business units.-Overview:...
- Semiconductor consolidationSemiconductor ConsolidationSemiconductor consolidation is the recent trend of semiconductor companies collaborating in order to come to a practical synergy with the goal of being able to operate in a business model that can sustain profitability.-History:...
- Semiconductor device fabrication
- Rock's lawRock's lawRock's law or Moore's Second Law, named for Arthur Rock, says that the cost of a semiconductor chip fabrication plant doubles every four years...