With projected IC revenue of $1.2 billion this year, Avago Technologies came in 10th in a 2010 ranking of fabless semiconductor vendors published Tuesday (Dec. 21) by market research firm IC Insights Inc.
It was a pretty strong showing for Avago, a provider of analog and mixed-signal chips. Except that Avago is not a fabless company. The firm maintains three small compound semiconductor fabs—one each in Colorado, Singapore and Malaysia.
Avago's inclusion in the fabless chip vendor ranking was not an oversight. IC Insights says it counts any company that receives the majority of its finished wafer supply from foundries as a fabless company.
No disrespect intended here to IC Insights. The firm's research and forecasts are as valuable and on the money as any market researcher. And all such firms bend and morph classifications in order to generate meaningful comparisons, feeding our competitive human nature by enabling us to see definitively who were the winners and losers in the great race for success in any endeavor. IC Insights' point is that a chip firm that maintains only a very small portion of its manufacturing in-house has more in common with fabless firms than with IDMs, even those with fab-lite models.
It's just that, in an industry chock full of nebulous terms, "fabless" is a welcome oasis of clarity. It's one of those words that defines itself at its face. In the English language, the suffix "less" means "without." Thus, a penniless man has no pennies. A worthless document has no worth. A spotless floor has no spots. And so on.
Bill McClean, principal analyst at IC Insights, says there is precedent for flexibility with the term fabless. According to McClean, Zarlink has a small compound semi fab but is considered a fabless company. McClean maintains that it is a rare case that calls for a company that is not strictly fabless to be lumped in with the fabless camp. It mostly involves companies with small compound semiconductor fabs that are not producing ICs, McClean said, adding that it makes no sense for a company to attempt to produce a large amount of CMOS devices that represent less than 10 percent of its total sales.
Of course, times change, and classifications often have to change along with them. IC Insights bending the definition of fabless might well portend things to come. Certainly, if current trends continue, most—if not all—of the IDMs that have moved to fab-lite models in recent years will eventually buy more wafers from foundries than they will produce in-house. And let's say that, through merger or other circumstance, a company comes into existence that has 95 percent of its products build by TSMC and the like but for some proprietary technology reason maintains a single small fab to produce specialized parts. What would you consider that?
It may be time to start thinking about a new class of hybrid firm. We've got the soup-to-nuts IDMS, the fab-lite companies that run their own fabs but outsource some manufacturing to foundries, and fabless companies (until very recently self explanatory). Perhaps there is room for, and need for, a new term to describe a hybrid approach where a company outsources the bulk of manufacturing but keeps just a little bit for itself.