Foundry model

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The foundry model is a microelectronics engineering and manufacturing business model consisting of a semiconductor fabrication plant, or foundry, and an integrated circuit design operation, each belonging to separate companies or subsidiaries. [1] [2] [3] [4] It was first conceived by Morris Chang, the founder of the Taiwan Semiconductor Manufacturing Company Limited (TSMC). [5]

Contents

Integrated device manufacturers (IDMs) design and manufacture integrated circuits. Many companies, known as fabless semiconductor companies, only design devices; merchant or pure play foundries only manufacture devices for other companies, without designing them. Examples of IDMs are Intel, Samsung, and Texas Instruments, examples of pure play foundries are GlobalFoundries, TSMC, and UMC, and examples of fabless companies are AMD, Nvidia, and Qualcomm.

Integrated circuit production facilities are expensive to build and maintain. Unless they can be kept at nearly full use, they will become a drain on the finances of the company that owns them. The foundry model uses two methods to avoid these costs: fabless companies avoid costs by not owning such facilities. Merchant foundries, on the other hand, find work from the worldwide pool of fabless companies, through careful scheduling, pricing, and contracting, keep their plants in full use.

History

Companies that both designed and produced the devices were originally responsible for manufacturing microelectronic devices. These manufacturers were involved in both the research and development of manufacturing processes and the research and development of microcircuit design.

The first pure play semiconductor company is the Taiwan Semiconductor Manufacturing Corporation founded by Morris Chang, a spin-off of the government Industrial Technology Research Institute, which split its design and fabrication divisions in 1987, [6] a model advocated for by Carver Mead in the U.S., but deemed too costly to pursue. The separation of design and fabrication became known as the foundry model, with fabless manufacturing outsourcing to semiconductor foundries. [7]

Fabless semiconductor companies do not have any semiconductor fabrication capability, instead contracting with a merchant foundry for fabrication. The fabless company concentrates on the research and development of an IC-product; the foundry concentrates on manufacturing and testing the physical product. If the foundry does not have any semiconductor design capability, it is a pure-play semiconductor foundry.

An absolute separation into fabless and foundry companies is not necessary. Many companies continue to exist that perform both operations and benefit from the close coupling of their skills. Some companies manufacture some of their own designs and contract out to have others manufactured or designed, in cases where they see value or seek special skills. The foundry model is a business model that seeks to optimize productivity.

MOSIS

The very first merchant foundries were part of the MOSIS service. The MOSIS service gave limited production access to designers with limited means, such as students, university researchers, and engineers at small startups. [8] The designer submitted designs, and these submissions were manufactured with the commercial company's extra capacity. Manufacturers could insert some wafers for a MOSIS design into a collection of their own wafers when a processing step was compatible with both operations. The commercial company (serving as foundry) was already running the process, so they were effectively being paid by MOSIS for something they were already doing. A factory with excess capacity during slow periods could also run MOSIS designs to avoid having expensive capital equipment stand idle.

Under-use of an expensive manufacturing plant could lead to the financial ruin of the owner, so selling surplus wafer capacity was a way to maximize the fab's use. Hence, economic factors created a climate where fab operators wanted to sell surplus wafer-manufacturing capacity and designers wanted to purchase manufacturing capacity rather than try to build it.

Although MOSIS opened the doors to some fabless customers, earning additional revenue for the foundry and providing inexpensive service to the customer, running a business around MOSIS production was difficult. The merchant foundries sold wafer capacity on a surplus basis, as a secondary business activity. Services to the customers were secondary to the commercial business, with little guarantee of support. The choice of merchant dictated the design, development flow, and available techniques to the fabless customer. Merchant foundries might require proprietary and non-portable preparation steps. Foundries concerned with protecting what they considered trade secrets of their methodologies might only be willing to release data to designers after an onerous nondisclosure procedure.

Dedicated foundry

In 1987, the world's first dedicated merchant foundry opened its doors: Taiwan Semiconductor Manufacturing Company (TSMC). [9] The distinction of 'dedicated' is in reference to the typical merchant foundry of the era, whose primary business activity was building and selling of its own IC-products. The dedicated foundry offers several key advantages to its customers: first, it does not sell finished IC-products into the supply channel; thus a dedicated foundry will never compete directly with its fabless customers (obviating a common concern of fabless companies). Second, the dedicated foundry can scale production capacity to a customer's needs, offering low-quantity shuttle services in addition to full-scale production lines. Finally, the dedicated foundry offers a "COT-flow" (customer owned tooling) based on industry-standard EDA systems, whereas many IDM merchants required its customers to use proprietary (non-portable) development tools. The COT advantage gave the customer complete control over the design process, from concept to final design.

Foundry sales leaders by year

2023

As of 2023, the top semiconductor foundries were: [11]
RankCompanyFoundry typeCountry/Territory of originRevenue (million USD)
2023Q4 2023Q3 2023
1 TSMC Pure-playTaiwan19,66017,249
2 Samsung Semiconductor IDMKorea3,6193,690
3 GlobalFoundries Pure-playUnited States1,8541,852
4 UMC Pure-playTaiwan1,7271,801
5 SMIC Pure-playChina1,6781,620
6 Hua Hong Semiconductor Pure-playChina657766
7 Tower Semiconductor Pure-playIsrael352358
8 PowerChip IDMTaiwan330305
9 Nexchip Pure-playChina308283
10 Vanguard (VIS)Pure-playTaiwan304333

2017

As of 2017, the top pure-play semiconductor foundries were: [12]
RankCompanyFoundry typeCountry/Territory of originRevenue (million USD)
201720172016
1 TSMC Pure-playTaiwan32,04029,437
2 GlobalFoundries Pure-playUnited States5,4074,999
3 UMC Pure-playTaiwan4,8984,587
4 Samsung Semiconductor IDMKorea7,3984,284
5 SMIC Pure-playChina3,0992,914
6 TowerJazz Pure-playIsrael1,3881,249
7 PowerChip IDMTaiwan1,035870
8 Vanguard (VIS)Pure-playTaiwan817801
9 Hua Hong Semiconductor Pure-playChina807721
10 Dongbu HiTek Pure-playKorea676666

2016–2014

As of 2016, the top pure-play semiconductor foundries were: [13] [14]
RankCompanyFoundry typeCountry/Territory of originRevenue (million USD)
20162015201620152014
11 TSMC Pure-playTaiwan29,48825,57425,138
22 GlobalFoundries Pure-playUnited States5,5455,0194,355
33 UMC Pure-playTaiwan4,5824,4644,331
44 SMIC Pure-playChina2,9212,2361,970
55 PowerChip Pure-playTaiwan1,2751,2681,291
66 TowerJazz Pure-playIsrael1,249961828
88 Vanguard (VIS)Pure-playTaiwan800736790
99Hua Hong SemiPure-playChina712650665
1010 Dongbu HiTek Pure-playKorea672593541
1112 X-Fab Pure-playGermany510331330
OthersPure-play2,2512,4052,280

2013

As of 2013, the top 13 semiconductor foundries were: [15]
2013 Rank2012 RankCompanyFoundry TypeCountry/Territory of originRevenue (million $USD)
11 TSMC Pure-playTaiwan19,850
22 GlobalFoundries Pure-playUnited States4,261
33 UMC Pure-playTaiwan3,959
44 Samsung Semiconductor IDMKorea3,950
55 SMIC Pure-playChina1,973
78 PowerChip Pure-playTaiwan1,175
89 Vanguard (VIS)Pure-playTaiwan713
96 Huahong Grace Pure-playChina710
1010 Dongbu Pure-playKorea570
117 TowerJazz Pure-playIsrael509
1211 IBM IDMUnited States485
1312 MagnaChip IDMKorea411
1413 Win Semiconductors Pure-playTaiwan354

2011

As of 2011, the top 14 semiconductor foundries were: [16]
RankCompanyFoundry typeCountry/Territory of originRevenue (million USD)
1 TSMC Pure-playTaiwan14,600
2 UMC Pure-playTaiwan3,760
3 GlobalFoundries Pure-playUnited States3,580
4 Samsung Semiconductor IDMKorea1,975
5 SMIC Pure-playChina1,315
6 TowerJazz Pure-playIsrael610
7 Vanguard (VIS)Pure-playTaiwan519
8 Dongbu HiTek Pure-playKorea500
9 IBM IDMUnited States445
10 MagnaChip IDMKorea350
11 SSMC Pure-playSingapore345
12 Hua Hong NEC Pure-playChina335
13 Win Semiconductors Pure-playTaiwan300
14 X-Fab Pure-playGermany285

2010

As of 2010, the top 10 semiconductor foundries were: [17]
RankCompanyFoundry TypeCountry/Territory of originRevenue (million USD)
1 TSMC Pure-playTaiwan13,332
2 UMC Pure-playTaiwan3,824
3 GlobalFoundries Pure-playUnited States3,520
4 SMIC Pure-playChina1,554
5 Dongbu HiTek Pure-playKorea512
6 TowerJazz Pure-playIsrael509
7 Vanguard (VIS)Pure-playTaiwan505
8 IBM IDMUnited States500
9 MagnaChip IDMKorea410
10 Samsung Semiconductor IDMKorea390

2009–2007

As of 2009, the top 17 semiconductor foundries were: [18]

RankCompanyFoundry typeCountry/Territory of originRevenue (million USD)
2009200920082007
1 TSMC Pure-playTaiwan8,98910,5569,813
2 UMC Pure-playTaiwan2,8153,0703,430
3 Chartered (1)Pure-playSingapore1,5401,7431,458
4 GlobalFoundries Pure-playUSA1,10100
5 SMIC Pure-playChina1,0751,3531,550
6 Dongbu Pure-playSouth Korea395490510
7 Vanguard Pure-playTaiwan382511486
8 IBM IDMUSA335400570
9 Samsung IDMSouth Korea325370355
10 Grace Pure-playChina310335310
11 HeJian Pure-playChina305345330
12 Tower Semiconductor Pure-playIsrael292252231
13 HHNEC Pure-playChina290350335
14 SSMC Pure-playSingapore280340359
15 Texas Instruments IDMUSA250315450
16 X-Fab Pure-playGermany223368410
17 MagnaChip IDMSouth Korea220290322

(1) Now acquired by GlobalFoundries

2008–2006

As of 2008, the top 18 pure-play semiconductor foundries were: [19]

RankCompanyCountry/Territory of originRevenue (million USD)
2008200820072006
1 TSMC Taiwan10,5569,8139,748
2 UMC Taiwan3,4003,7553,670
3 Chartered Singapore1,7431,4581,527
4 SMIC China1,3541,5501,465
5 Vanguard Taiwan511486398
6 Dongbu South Korea490510456
7 X-Fab Germany400410290
8 HHNEC China350335315
9 HeJian China345330290
10 SSMC Singapore340350325
11GraceChina335310227
12 Tower Semiconductor Israel252231187
13 Jazz Semiconductor United States190182213
14 Silterra Malaysia175180155
15 ASMC China149155170
16 Polar Semiconductor Japan11010595
17 Mosel-Vitelic Taiwan100105155
18 CR Micro (1)China-143114
Others140167180
Total20,98020,57519,940

(1) Merged with CR Logic in 2008, reclassified as an IDM foundry

2007–2005

As of 2007, the top 14 semiconductor foundries include: [20]

RankCompanyFoundry typeCountry/Territory of originRevenue (million USD)
2007200720062005
1 TSMC Pure-PlayTaiwan9,8139,7488,217
2 UMC Pure-PlayTaiwan3,7553,6703,259
3 SMIC Pure-PlayChina1,5501,4651,171
4 Chartered Pure-PlaySingapore1,4581,5271,132
5 Texas Instruments IDM United States610585540
6 IBM IDMUnited States570600665
7 Dongbu Pure-PlaySouth Korea510456347
8 Vanguard Pure-PlayTaiwan486398353
9 X-Fab Pure-PlayGermany410290202
10 Samsung IDMSouth Korea38575-
11 SSMC Pure-PlaySingapore350325280
12 HHNEC Pure-PlayChina335315313
13 HeJian Pure-PlayChina330290250
14 MagnaChip IDMSouth Korea322342345

For ranking in worldwide: [21]

RankCompanyCountry/Territory of originRevenue (million USD)2006/2005 changes
2006200520062005
67 TSMC Taiwan9,7488,217+19%
2122 UMC Taiwan3,6703,259+13%

2004

As of 2004, the top 10 pure-play semiconductor foundries were: [ citation needed ]

Rank 2004CompanyCountry/Territory of origin
1 TSMC Taiwan
2 UMC Taiwan
3 Chartered Singapore
4 SMIC China
5 Dongbu/AnamSouth Korea
6 SSMC Singapore
7 HHNEC China
8 Jazz Semiconductor United States
9 Silterra Malaysia
10 X-Fab Germany

Financial and IP issues

Like all industries, the semiconductor industry faces upcoming challenges and obstacles.

The cost to stay on the leading edge has steadily increased with each generation of chips. The financial strain is being felt by both large merchant foundries and their fabless customers. The cost of a new foundry exceeds $1 billion. These costs must be passed on to customers. Many merchant foundries have entered into joint ventures with their competitors in an effort to split research and design expenditures and fab-maintenance expenses.

Chip design companies sometimes avoid other companies' patents simply by purchasing the products from a licensed foundry with broad cross-license agreements with the patent owner. [22]

Stolen design data is also a concern; data is rarely directly copied, because blatant copies are easily identified by distinctive features in the chip, [23] placed there either for this purpose or as a byproduct of the design process. However, the data including any procedure, process system, method of operation or concept may be sold to a competitor, who may save months or years of tedious reverse engineering.

See also

Related Research Articles

<span class="mw-page-title-main">Semiconductor device fabrication</span> Manufacturing process used to create integrated circuits

Semiconductor device fabrication is the process used to manufacture semiconductor devices, typically integrated circuits (ICs) such as microprocessors, microcontrollers, and memories. It is a multiple-step photolithographic and physico-chemical process during which electronic circuits are gradually created on a wafer, typically made of pure single-crystal semiconducting material. Silicon is almost always used, but various compound semiconductors are used for specialized applications.

<span class="mw-page-title-main">TSMC</span> Taiwanese semiconductor foundry company

Taiwan Semiconductor Manufacturing Company Limited is a Taiwanese multinational semiconductor contract manufacturing and design company. It is the world's most valuable semiconductor company, the world's largest dedicated independent ("pure-play") semiconductor foundry, and Taiwan's largest company, with headquarters and main operations located in the Hsinchu Science Park in Hsinchu, Taiwan. Although the central government of Taiwan is the largest individual shareholder, the majority of TSMC is owned by foreign investors. In 2023, the company was ranked 44th in the Forbes Global 2000. Taiwan's exports of integrated circuits amounted to $184 billion in 2022, accounted for nearly 25 percent of Taiwan's GDP. TSMC constitutes about 30 percent of the Taiwan Stock Exchange's main index.

The semiconductor industry is the aggregate of companies engaged in the design and fabrication of semiconductors and semiconductor devices, such as transistors and integrated circuits. It's roots can be traced to the invention of the transistor by Shockley, Brattain, and Bardeen at Bell Labs in 1948. Bell Labs licensed the technology for $25,000, and soon many companies, including Motorola (1952), Schockley Semiconductor (1955), Sylvania, Centralab, Fairchild Semiconductor and Texas Instruments were making transistors. In 1958 Jack Kilby of Texas Instruments and Robert Noyce of Fairchild independently invented the Integrated Circuit, a method of producing multiple transistors on a single "chip" of Semiconductor material. This kicked off a number of rapid advances in fabrication technology leading to the exponential growth in semiconductor device production, known as Moore's law that has persisted over the past six or so decades. The industry's annual semiconductor sales revenue has since grown to over $481 billion, as of 2018.

Fabless manufacturing is the design and sale of hardware devices and semiconductor chips while outsourcing their fabrication to a specialized manufacturer called a semiconductor foundry. These foundries are typically, but not exclusively, located in the United States, mainland China, and Taiwan. Fabless companies can benefit from lower capital costs while concentrating their research and development resources on the end market. Some fabless companies and pure play foundries may offer integrated-circuit design services to third parties.

Wafer fabrication is a procedure composed of many repeated sequential processes to produce complete electrical or photonic circuits on semiconductor wafers in semiconductor device fabrication process. Examples include production of radio frequency (RF) amplifiers, LEDs, optical computer components, and microprocessors for computers. Wafer fabrication is used to build components with the necessary electrical structures.

A pure play company focuses solely on a particular product or activity. Investing in a pure play company can be considered as investing in a particular commodity or product of a company.

An integrated device manufacturer (IDM) is a semiconductor company which designs, manufactures, and sells integrated circuit (IC) products.

<span class="mw-page-title-main">United Microelectronics Corporation</span> Taiwanese semiconductor foundry

United Microelectronics Corporation is a Taiwanese company based in Hsinchu, Taiwan. It was founded as Taiwan's first semiconductor company in 1980 as a spin-off of the government-sponsored Industrial Technology Research Institute (ITRI).

Maxim Integrated Products, Inc., was an American semiconductor company that designed, manufactured, and sold analog and mixed-signal integrated circuits for the automotive, industrial, communications, consumer, and computing markets. Maxim's product portfolio included power and battery management ICs, sensors, analog ICs, interface ICs, communications solutions, digital ICs, embedded security, and microcontrollers. The company is headquartered in San Jose, California, and has design centers, manufacturing facilities, and sales offices worldwide. In 2021, the company was acquired by Analog Devices.

<span class="mw-page-title-main">Semiconductor fabrication plant</span> Factory where integrated circuits are manufactured

In the microelectronics industry, a semiconductor fabrication plant, also called a fab or a foundry, is a factory where integrated circuits (ICs) are manufactured.

<span class="mw-page-title-main">Multi-project wafer service</span>

Multi-project chip (MPC), and multi-project wafer (MPW) semiconductor manufacturing arrangements allow customers to share tooling and microelectronics wafer fabrication cost between several designs or projects.

The term die shrink refers to the scaling of metal–oxide–semiconductor (MOS) devices. The act of shrinking a die creates a somewhat identical circuit using a more advanced fabrication process, usually involving an advance of lithographic nodes. This reduces overall costs for a chip company, as the absence of major architectural changes to the processor lowers research and development costs while at the same time allowing more processor dies to be manufactured on the same piece of silicon wafer, resulting in less cost per product sold.

GlobalFoundries Inc. is a multinational semiconductor contract manufacturing and design company incorporated in the Cayman Islands and headquartered in Malta, New York. Created by the divestiture of the manufacturing arm of AMD, the company was privately owned by Mubadala Investment Company, a sovereign wealth fund of the United Arab Emirates, until an initial public offering (IPO) in October 2021.

<span class="mw-page-title-main">Semiconductor consolidation</span>

Semiconductor consolidation is the trend of semiconductor companies collaborating in order to come to a practical synergy with the goal of being able to operate in a business model that can sustain profitability.

<span class="mw-page-title-main">Vanguard International Semiconductor Corporation</span> Taiwanese semiconductor foundry, subsidiary of TSMC

Vanguard International Semiconductor Corporation (VIS) is a Taiwanese specialized IC foundry service provider, founded in December 1994 in Hsinchu Science Park by Morris Chang. In March 1998, VIS became a listed company on the Taiwan Over-The-Counter Stock Exchange (OTC) with the main shareholders TSMC, National Development Fund, Executive Yuan and other institutional investors.

Global Unichip Corporation (GUC) is a worldwide fabless ASIC design service company, with its headquarters located in the Hsinchu Science Park in Hsinchu, Taiwan.

<span class="mw-page-title-main">Tower Semiconductor</span> Integrated circuit manufacturer

Tower Semiconductor Ltd. is an Israeli company that manufactures integrated circuits using specialty process technologies, including SiGe, BiCMOS, Silicon Photonics, SOI, mixed-signal and RFCMOS, CMOS image sensors, non-imaging sensors, power management (BCD), and non-volatile memory (NVM) as well as MEMS capabilities. Tower Semiconductor also owns 51% of TPSCo, an enterprise with Nuvoton Technology Corporation Japan (NTCJ).

The semiconductor industry, including Integrated Circuit (IC) manufacturing, design, and packaging, forms a major part of Taiwan's IT industry. Due to its strong capabilities in OEM wafer manufacturing and a complete industry supply chain, Taiwan has been able to distinguish itself as a leading microchip manufacturer and dominate the global marketplace. Taiwan’s semiconductor sector accounted for US$115 billion, around 20 percent of the global semiconductor industry. In sectors such as foundry operations, Taiwanese companies account for 50 percent of the world market, with Taiwan Semiconductor Manufacturing Company (TSMC) the biggest player in the foundry market.

The Chinese semiconductor industry, including integrated circuit design and manufacturing, forms a major part of mainland China's information technology industry.

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