Fabless Tales Make Me Nervous
by Paul McGoldrick
Anybody who knows me also knows that I have serious misgivings about completely
fabless semiconductor vendors…and, this week, in discussions with more
conventional analog companies, I am even more convinced that fabless is
brainless.
The large vendors all have agreements for the portions of their production that goes to outside fabs - most of it for the finer geometry products, some for high-voltage processes they don't want to invest in - but the smaller vendors have no such contracts and that makes them extremely vulnerable. Not that they wouldn't like such contracts…they just cannot get them.
The world is an unstable place, politically and socially, and there are many events that could put the availability of fab capacity at a premium. The location of much capacity in Taiwan is subject to the whims of earthquakes, or political problems with the PRC across the straits. In the fabs of the PRC itself the wise vendor holds back on putting any kind of novel device through fabs in a country that is generally regarded as an unwise place to let your IP be distributed. That leaves Singapore and some capacity in the US - not a lot of wiggle room left there.
The wise fabless companies have made sure that they do have wiggle room. The arrangements, for example, made between SiGe Semiconductor (in Ottawa) and IBM are an eye-opener as to what can be done. Getting a mainstream investor who is also a conventional manufacturer - as Wolfson Microelectronics has done with TI - is also a wise alternative, as well as setting up the first stage of the end game for your start-up.
Even if disaster does not strike, of course, we could see the capacity of fabs maxing out within a couple of years. They are so expensive to build that going ahead with a new plant is going to be less and less on a speculative basis. If fab capacity does max out those who have agreements will be first in line while the contract-free fabless companies will be at the bottom of the pecking order.
One has to wonder how any investor would put money into a fabless house
that has no back-up plans, but investors still do. That should make the
investors nervous too.