Panelists question fabless model viability

GRENOBLE — Is fabless still fabulous? In a panel session at the IP-ESC 2009 Conference this week in Grenoble, France, panelists discussed the evolution of semiconductor business models and confronted views on whether the fabless model is dead or alive and kicking.

The semiconductor business model has evolved, from the IDM model to pure-play foundry, fabless and IP provider, design services business models. Many of these models are undergoing severe issues. "We are talking of a disaggregation of the full model," said Paul Slaby, president and CEO of Kaben Wireless Silicon Inc., wondering what is coming next.

Paul Slaby, president and CEO of Kaben Wireless Silicon Inc., proposed a break-up of the fabless model. "Time has come to break it down into pieces and get to a semi-fabless model."

This model consists of a development organization —IP-based design house, outsourced R&D operation, strength in specialized R&D and product development capabilities— and a delivery organization —product-to-market with a sales channel and outsourced product delivery with an infrastructure and a pipeline to market.

According to Slaby, the benefits of a semi-fabless model are the tradeoffs between license-NRE-Royalties.

On the development organization side, he noted that this model avoids raising huge amounts of capital, lowers risks in R&D, market and infrastructure, brings new business schemes such as private labeling, branding and licensing. It also brings scales due to built-in royalties and is investment-worthy.

On the delivery organization side, the semi-fabless model lowers up-front costs, improves financial performances, minimizes risks and expands the product portfolio.

Slaby pointed to alternative approaches from publishing, pharmaceutical and Hollywood movie production models. In the publishing industry, for instance, IC developers are the authors, supply managers/fabless are the publishers and the foundry is the print shop. Another example is the Hollywood movie production that creates, finances and distributes. "Would something like this work in the semi industry?" he questioned.