More than a Decade of Transition in the Semiconductor Industry
$300,000
$60,000
Fabless Industry
$49,581
$250,000
$247,700
$50,000
$204,400
$200,000
$40,000
$150,000
$30,000
$101,900
$16,983
$100,000
$20,000
$50,000
)M$( selaS sselbaF
)M$( selaS rotcudnocimeS llarevO
Semi Industry
$10,000
$3,248
$0
$0
6002
5002
4002
3002
2002
1002
0002
9991
8991
7991
6991
5991
4991
3991
2991
1991
0991
9891
8891
7891
Source: FSA
Figure 1.4 Fabless versus Overall Semiconductor Growth
sector, FSA forecasts that fabless revenues will continue to grow faster than the overall
semiconductor industry during the next decade.
1.4 Semiconductor Business Models
Depending on their manufacturing strategy, semiconductor product companies can be
segmented into two categories:
•
Integrated Device Manufacture. IDMs have their own semiconductor manufacturing
plants and resources and thus have direct control over their capacity, processes and
resources. Examples include Intel, Samsung and most Japanese semiconductor
companies.
•
Fabless. These companies outsource all semiconductor manufacturing to foundries
like TSMC, UMC, Chartered Semiconductor and SMIC. Examples of fabless
companies are: Broadcom, Nvidia, Xilinx and TranSwitch.
•
Hybrids. These are typically IDMs who outsource some of their manufacturing
requirements to foundries when they need some additional capacity or some other
processes not available in-house. This hybrid strategy allows the IDMs to bypass or
delay additional capital expenditures.
In addition to the semiconductor product companies, the foundries make their business model
that of performing 100% semiconductor manufacturing services for all of above product
companies. As such, foundries do not design or market products under their brand name, and
thus are not viewed as competitors by their customers.
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Chapter 1
1.4.1 Integrated Device Manufacturer
Companies like Intel and Samsung have traditionally been categorized as Integrated Device
Manufacturers or IDMs. The IDMs have total ownership and control of all the required
resources for semiconductor manufacturing: design automation tools, process libraries,
process technology, fabrication and assembly equipment, test equipment, and all the necessary
facilities and infrastructure resources. Thus, IDMs need to constantly be preoccupied with
capital expenditures for their increasing production demands, technology changes, and undercapacity utilization costs in times of declining demand.
It can be said that every minute that
an IDM
CEO spends in discussing the company’s internal
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manufacturing capital expenditures requirements, is a minute not spent discussing the next
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INC. TERMSnot
OF SERVICE
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product generation roadmap
or MEDIA,
a minute
spent
with
a prospective customer, thus in a
way, taxing critical resources throughout the company. On the other hand, some IDMs have
pursued this manufacturing strategy due to the belief that they can differentiate themselves
in terms of a leading edge semiconductor fabrication or packaging process or technology.
This differentiation is becoming less of a reason as the leading foundries are catching up in
bringing leading edge technology at par with the IDMs.
1.4.2
Fabless
Unlike IDMs, fabless semiconductor design companies do not own any manufacturing
facilities and thus are totally focused in the design, marketing and sales of their products.
Fabless companies are not “distracted” by the worries of intensive manufacturing capital
investments and the associated internal resources required to keep the manufacturing facilities
in operation. Fabless companies are at freedom to select any of the foundries that fit their
needs in terms of technology, price, service or location for example. This selection freedom
allows them to negotiate the best value to meet their needs and thus they are not “tied” down
to a single supplier like in the case of the IDMs.
Figure 1.5 shows the top 20 fabless vendors by 2006 revenue. Total fabless revenue was nearly
$50 billion in 2006, with a 12-year CAGR of 25 percent, compared to 8 percent for IDMs.
Rank
Company Exchange
Stock
Ticker
Symbol
1
QUALCOMM (QCT Division)
NASDAQ
CY2006 Revenue
($000)
QCOM
$4,331,000
2
Broadcom
NASDAQ
BRCM
$3,667,818
3
SanDisk Corpor ation
NASDAQ
SNDK
$3,257,525
4
NVIDIA Corpor ation
NASDAQ
NVDA
$3,068,771
5
6
Marvell Technology Group Ltd.
LSI Logic
NASDAQ
NYSE
MRVL
LSI
$2,237,596
$1,982,148
Figure 1.5 Top 20 Fabless Companies by 2006 Revenues
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More than a Decade of Transition in the Semiconductor Industry
Rank
Company Exchange
Stock
Ticker
Symbol
CY2006 Revenue
($000)
7
Xilinx, Inc.
NASDAQ
XLNX
$1,871,604
8
MediaTek Incorporated
TSEC
2454
$1,624,486
9
Avago Technologies
Private
Private
$1,576,000
10
Altera
NASDAQ
ALTR
$1,285,535
11
Conexant Syst ems
NASDAQ
CNXT
$985,615
12
NovaTek
TSEC
3034
$964,314
13
Himax Technologies
NASDAQ
HIMX
$744,518
14
Cambridge Silicon Radio (CSR)
LSE
CSR.L
$704,700
15
VIA Technologies, Inc.
TSEC
2388
$657,901
16
QLogic Corporation
NASDAQ
QLGC
$570,051
17
OmniVision Technologies, Inc.
NASDAQ
OV TI
$540,741
18
Zoran Corpor ation
NASDAQ
ZRAN
$495,846
19
Silicon Laboratories
NASDAQ
SLAB
$464,597
20
Silicon Storage Technology, Inc. (SST)
NASDAQ
SS TI
$452,092
$24,902,483
2006 Top 20 Fabless – Tot al Revenue
Percent of Total Fabless Revenue 2006
50.21%
Source: FSA
Figure 1.5 (Continued)
1.4.3
Hybrids
Hybrid manufacturing strategies are primarily used by IDMs for any or all of the following
reasons:
•
Complement their internal capacity constraints in times of up demand cycles, thus
avoiding or delaying additional capital expenditures.
•
As a strategy for benchmarking their internal operations and cost performance against
the foundries.
•
To gain access to manufacturing technologies not yet developed in house or with no
plans to be developed in house.
•
To get additional revenues off of their excess capacity in down demand cycles while
still retaining their IDM model.
•
To differentiate themselves with their own innovative semiconductor fabrication or
packaging processes. However, with logic processes fast becoming commodities, the
real differentiator is in the integrated circuit (IC) design itself, not the manufacturing.
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Chapter 1
Figure 1.6 A Look Inside a Fab (Courtesy of UMC)
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