Fabless semiconductor company
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A fabless semiconductor company specializes in the design and sale of hardware devices implemented on semiconductor chips. It achieves an advantage by outsourcing the fabrication of the devices to a specialized semiconductor manufacturer called a semiconductor foundry which may have several fabrication facilities, or "fabs". The credit for pioneering the fabless concept is given to Bernie Vonderschmitt of Xilinx and Gordon A. Campbell of Chips and Technologies.
A fabless company concentrates its research and development resources on the end market without investing capital resources to stay current in semiconductor process technology. In other words, they are fab-less, and do not own a fab or fabrication facility - instead they rely on pure-play semiconductor foundries to manufacture their semiconductor chips on their behalf.
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. [1]
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 executive from those regions that serve as advisers to 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.
[edit] History
Prior to the 1980s, the semiconductor industry was vertically integrated. Semiconductor companies owned and operated their own silicon wafer fabrication facilities and developed their own process technology for manufacturing their chips. These companies also performed assembly and test for their chips.
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 was and is cost-prohibitive, especially for these small start-up companies. These companies relied on using excess capacity from Integrated Device Manufacturers (IDMs) to manufacture the chips they were designing.
This was the birth of the fabless business model. Companies were manufacturing integrated circuits (ICs) without the need to own an internal fabrication plant. Simultaneously, the foundry industry was established by Dr. Morris Chang with the founding of Taiwan Semiconductor Manufacturing Corporation (TSMC). The foundry industry would become the cornerstone of the fabless model - providing a non-competitive manufacturing supply chain partner for these innovative and pioneering fabless companies.
The fabless business model was sharply criticized as an opportunitistic "tool" soon after it was established in the 1980s[citation needed]. During the 1990s, however, industry pundits acknowledged the financial success of fabless companies, such as Nvidia, Broadcom, and Xilinx, and such companies as Cyrix produced competitively-priced products, benefitting consumers and driving the global market for computing devices. As of 2007, the fabless model is the preferred business model for the semiconductor industry[citation needed].
When FSA was established in 1994, there were only three fabless companies - Cirrus Logic, Adaptec and Xilinx - each with revenues in excess of $250 million. Today in 2007, GSA tracks 10 separate fabless companies that have each surpassed $1 billion in annual revenues.
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.
