Fabless manufacturing

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Fabless manufacturing is 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, but not exclusively, located in China and Taiwan[1][2][3][4] because of the generally low cost of labor. Thus, 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. Xilinx, founded in 1984, was the first to "truly" separate the design of chips from their manufacture.[5]


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 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 integrated circuits (IC) design companies focused on innovative chip solutions.[citation needed]

As with most technology-intensive industries, the silicon manufacturing process presents high barriers to entry into the market, especially for small start-up companies. At the same time, Integrated Device Manufacturers (IDMs) had excess production capacity. The smaller companies began relying on IDMs to manufacture the chips they were designing.

These conditions underlay the birth of the fabless business model. Companies were manufacturing 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.

In December 2007, the FSA transitioned to the GSA, the Global Semiconductor Alliance.[6] 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.

Industry growth and success[edit]

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. 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 Apple Inc., Freescale, Infineon 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[citation needed]. The same year GSA tracked 10 separate fabless companies that had each surpassed $1 billion in annual revenues.

Sales leaders[edit]

The top 5 sales leaders for fabless companies in 2013 were:[7]

Rank Company Country of origin Revenue (million US$)
1 Qualcomm USA 17,200
2 Broadcom USA 8,200
3 AMD USA 5,300
4 MediaTek Taiwan 4,600
5 Nvidia USA 3,900

The top 5 sales leaders for fabless companies in 2011 were:[8]

Rank Company Country of origin Revenue (million US$)
1 Qualcomm USA 9,910
2 Broadcom USA 7,160
3 AMD USA 6,568
4 Nvidia USA 3,939
5 Marvell USA 3,445

The top 5 sales leaders for fabless companies in 2010 were:[9]

Rank Company Country of origin Revenue (million US$)
1 Qualcomm USA 7,098
2 Broadcom USA 6,540
3 AMD USA 6,460
4 MediaTek Taiwan 3,610
5 Marvell USA 3,602

The top 5 sales leaders for fabless companies in 2003 were:

Rank Company Country of origin Revenue (million US$)
1 Qualcomm USA 2,398
2 NVIDIA USA 1,716
3 Broadcom USA 1,610
4 ATI Technologies Canada 1,401
5 Xilinx USA 1,300

See also[edit]


  1. ^ "The UK manufacturer taking on China". BBC Online. 2012-05-07. Archived from the original on 2014-10-03. 
  2. ^ Henry Blodget (2012-01-22). "This Article Explains Why Apple Makes iPhones In China And Why The US Is Screwed". Business Insider. Archived from the original on 2014-06-24. 
  3. ^ Jim Pinto. "Global Manufacturing – The China Challenge". Archived from the original on 2012-01-12. 
  4. ^ Rounak Jain (2012-01-22). "Why Does Apple Manufacture iPhone in Asia?". iphonehacks.com. Archived from the original on 2013-04-01. 
  5. ^ Markoff, John (2004-06-19). "Bernard Vonderschmitt, 80, Semiconductor Designer, Dies". New York Times. Archived from the original on 2012-11-07. Retrieved 2013-02-12. 
  6. ^ "About the Global Semiconductor Alliance". GSA. Archived from the original on 2013-02-19. 
  7. ^ David Manners (2014-05-08). "Fastest growing fabless companies". electronicsweekly. 
  8. ^ Peter Clarke (2012-04-12). "Spreadtrum, Dialog, MegaChips shine in fabless rankings". EE Times. 
  9. ^ "13 Fabless IC Suppliers Forecast to Top $1.0 Billion in Sales in 2010!". icinsights.com. 2010-12-21.