Foundry? Fabless? Learn about the Semiconductor Ecosystem All at Once!

“Foundry,” “fabless,” and “design houses.” These words appear often on any semiconductor-related news. They refer to semiconductor business models. As semiconductors require a great deal of complex technologies, many corporations cooperate to build a “semiconductor ecosystem.” Today, let us take a look at the semiconductor businesses in this ecosystem.

Semiconductors go through the designing, production, assembly & quality control, and manufacturing processes before going out into the market. Among corporations, there are IDM companies that take charge of all of these processes, and others like foundry and fabless companies that are in charge of specific tasks in the whole process. 1) Integrated Device Manufacturer (IDM)

“Integrated Device Manufacturer (IDM)” refers to corporations that handles all processes in manufacturing semiconductors. This means one corporation has the fab*, the wafer-producing facility, and also takes charge in designing the semiconductors, wafer processing, packaging, and testing.

※What is a fab? It is short for “fabrication facility” and refers to the wafer-production facility. Constructing a fab requires huge investments of billions of dollars, so big corporations usually take this on.

2) IP (Intellectual Property) Companies

IP companies, like a fabless, specifically take charge of designing semiconductors. But the revenue model is slightly different here than for a fabless. IP companies provide specific designs called a “cell library” to a fabless, IDM, or foundry and receive licensing fees or royalties on the IP use. That is why they are referred to as “intellectual property” companies. In summary, a fabless designs their own product and outsources the production while an IP company only sells its design licenses and does not manufacture products of its own brand. 3) Fabless

A fabless specializes in designing semiconductors. Everything other than designing, like wafer production, packaging, and testing are outsourced. But the possession and the business rights to the manufactured chips from the outsourced companies belong to the fabless. Therefore, it sells products under its own brand name. A fabless is a business model that can focus on designing semiconductors without factories that require huge investments. Without any semiconductor-manufacturing facilities, they focus on coming up with unrivaled ideas and developing semiconductor chips with their best chip-designing technology. Hence, companies that produce a wide range of products but in small amounts and keep technological diversity tend to be fabless. 4) Design House

A design house is a bridge that connects a fabless (designing) and a foundry (producing). It optimizes a fabless company’s design so that it is suitable for the production facilities at a foundry. In other words, it converts the semiconductor design from a fabless company into one for manufacturing purposes. Fabless companies often receive services from a design house to leave the back-end designs like layout inspections to them.

This was mentioned on Episode 2 of “Hello, Chips” as well. To make it easier to understand, let us compare the semiconductor-manufacturing process to that of baking. The one that comes up with the recipe would be a fabless (designing) and the one baking the recipe would be a foundry (producing). Now, it’s time to bake the bread. It would make things much easier if the dough was made in a perfect ratio, right? Making production easier by liaising between a fabless and a foundry is what a design house does.

5) Foundry

Now, we know there are companies that specialize in “designing,” so let us look at foundries that specialize in “producing.” A foundry is in charge of the production process. Instead of producing their own products, they mostly take in orders from other companies. In other words, although a foundry has all the production facilities, instead of designing its own products, it profits by producing designs from its clients. Foundries sometimes build their own IP companies or form an alliance with IP companies to refer their clients to them when needed. The main clients of foundries, which are in charge of production, are fabless and system semiconductor companies. Producing semiconductors requires billions of dollars in investment and extremely complex production technologies, so it is difficult for every semiconductor company to do it on their own. So, foundries become the production facility for all of these fabless companies. 6) OSAT(Outsourced Semiconductor Assembly And Test)

An OSAT(Outsourced Semiconductor Assembly And Test) takes clients in to package and test semiconductors. It is also called an assembling company or a packaging company. Basically, it takes care of the back-end processes. In semiconductor manufacturing, the back-end processes usually consist of packaging and testing. Say that there are hundreds of chips on semiconductor wafers produced through the fab process. But these chips cannot exchange electric signals with anything external and are highly susceptible to damage from external shocks. “Packaging” is a process in which these chips are individually cut and packed to go on the boards or electronic devices. Packaging companies specialize in packaging these semiconductor chips. A semiconductor that has gone through the fab and packaging processes then must be checked for perfect quality and reliability. As it is an essential part in expensive electronic gadgets, high reliability is imperative. IDMs and foundries outsource the testing process to companies that specialize in this to increase productivity and gain expert feedback. Today, we looked into the different types of companies and their roles in the semiconductor ecosystem. With the advancement in the IT industry, semiconductors are gaining more importance as they expand into other industries. As semiconductors require complex technologies, different types of companies create this ecosystem to create a synergy through division of labor and collaboration. Please give lots of support to the different kinds of semiconductor companies that are contributing their expertise to reach the collective goal of making Korea a strong total semiconductor manufacturer!