"Real men have fabs." AMD founder Jerry Sanders made the point—in blunt, politically incorrect fashion—that maintaining control over IC manufacturing was crucial for a top-tier semiconductor company. The fabless semiconductor community heartily disagrees. In fact, proponents of the fabless business model often quote Sanders to highlight the folly of not following their strategy. Even Sander's own AMD eventually spun out its manufacturing capability with the "asset light" or "asset smart" strategy that led to the creation of Globalfoundries.
Except for Intel and the memory vendors, semicos who didn't take up the fabless or at least fab-light mantra were ridiculed. Process technology began to be viewed as commoditized and unable to provide a competitive advantage. Continuing down the integrated device manufacturer path was a sure path to bankruptcy. At least that became the conventional wisdom.
Few would argue that Intel is a successful company. Their status as a semiconductor superpower can be attributed to their commitment to taking a longer term view. Intel leadership prefers innovation over cost cutting. They simply don't depend on suppliers or even partners to develop future technology platforms to manufacture their processors. Intel might be one of only a handful of entities that can actually afford to build new fabs, but they face the same temptation to dump chip manufacturing and pocket the savings as everyone else.
A company like Intel that continues to invest the resources required to build next generation fabs in parallel with development of future nodes is obviously taking a different view. The company has been around a while. There have been lots of chances to cut and run. Management had many opportunities to mortgage the company's future by maximizing current profit levels through shortsighted cost cutting. Instead, they chose to reinvest in continued technology development.
But Intel was not alone in shunning the fab-light trend. Many Japanese IDMs have maintained their manufacturing capability. That strategy was covered in the June edition of EE Times Confidential. Junko Yoshida's article, "Surviving the New Semiconductor Cycle," considered the possibility that the Japanese semicos might be well positioned compared to companies that felt safer in the fabless herd. As Yoshida pointed out in her article, the Japanese were "pilloried in the press and the markets for having avoided the tough choices." Despite not building out capacity for the latest nodes, the Japanese IDMs stuck around and maintained the development and manufacturing capability that will allow them to jump back into the game.
Faced with the multi-billion dollar price tag, building a new manufacturing facility is not even a choice for many companies. So what lies ahead for fabless chip companies? In perhaps overly simplistic terms, the landscape appears like this: A relatively small engineering team can assemble blocks of off-the-shelf IP and have their design manufactured by an Asian foundry. Can companies survive as chip vendors working like this? It seems doubtful if they plan to differentiate on hardware alone.