The semiconductor market is awash in fabs for sale, and right now someone in China, India or other emerging technology hub is rubbing his hands at the prospect of picking up expensive equipment cheaply.
With component prices frequently under pressure, and in a market where product offerings must be refreshed almost every three months, few companies can invest huge sums in R&D and still run old fabs profitably. A convincing case can thus be made for closing old fabs and turning to foundries for wafer supplies. But doesn't that put the industry at risk?
Supply chain strategies driven by the need to cut costs on a short-term basis have been the bane of this industry, and I fear the current trend will concentrate wafer production in a few hands.
Capital expenditures will decline at AMD, STMicroelectronics and other chip companies adopting the asset-lite strategy. As a result, their operating expenses will fall, net income will likely rise and investors will be happy.
Let's hope, however, that someone is scanning the horizon and preparing for the clouds building up ahead.