LONDON The fabless chip vendors and pursuers of fab-lite manufacturing strategies are about to get a shock, according to Malcolm Penn, principal analyst with Future Horizons (Sevenoaks, England). Some companies could under-perform, others could be driven out of business in a market that should be booming for them and all because they have lost control of manufacturing.
According to Penn the fab-lite business model is: structurally deceitful, operationally faulty, and financially flawed. "Fab-lite is yet another bean-counting financial analyst deception, just like the disgraced private-equity 'debt is good' business model. Going IDM to fabless does not solve the underlying problems. It is simply dicing with death," Penn told attendees at a one day seminar on the state of the global semiconductor market.
Penn pointed out that outsourcing chip companies will, at the very least see wafer prices increasing. At worst they may miss market windows for lack of chips. "In many ways allocation is a bigger problem than prices increasing," said Penn.
The background to Penn's commentary is that, with a lack of investment in manufacturing capacity over the last three years, ASPs are set to rise at the same time as the general economy is recovering. It is Penn's contention that the worldwide chip market is set for two years of more than 20 percent growth and could even hit more than 30 percent growth in a single year (see Future Horizons sees 30% chip market boom).
"The only people building fabs are Intel, Samsung and a few foundries," said Penn, highlighting one reason why he believes the semiconductor industry is about to go into short supply.
The fact is that a whole swathe of the semiconductor industry, including such giants as Texas Instruments and STMicroelectronics are opting to go fab-lite. For many companies that means continuing to manufacture older and analog products in legacy fabs but avoiding the massive cost of investing in a new wafer fab. For leading-edge digital CMOS these companies must therefore outsource their needs to one of relatively few foundry sources.