A Brief History of the Fabless Semiconductor Ecosystem

Clearly the fabless semiconductor ecosystem is driving the semiconductor industry and is responsible for both the majority of the innovation and the sharp decline in consumer electronics costs we have experienced. By definition, a fabless semiconductor company does not have to spend the time and money on manufacturing related issues and can focus research and development efforts on specific market segments much more quickly. Seriously, without the fabless semiconductor revolution would we even have the mobile devices we depend on today? Given that, what does the future hold for the traditional semiconductor integrated device manufacturer (IDM)?

An integrated device manufacturer (IDM) is asemiconductorcompany which designs, manufactures, and sellsintegrated circuit(IC) products. As a classification, IDM is often used to differentiate between a company which handlessemiconductor manufacturingin-house, and afabless semiconductor company, whichoutsourcesproduction to a third-party. Due to the dynamic nature of thesemiconductor industry, the term IDM has become less accurate than when it was coined (Wikipedia).

Depending on whom you ask, either Xilinx or Chips and Technologies was officially the first fabless semiconductor company and from the stories I have heard both companies mentioned building a fab in their business plans in order to get funding while neither actually planned on doing it. The rest is history with the legions of fabless semiconductor companies that followed and today dominate the industry.

The fabless semiconductor ecosystem went professional in 1994 with the founding of the Fabless Semiconductor Association (FSA) later renamed the Global Semiconductor Association (GSA). Why didn’t the fabless leadership join Wilf Corrigan (LIS Logic), Robert Noyce (Intel), Jerry Sanders (AMD), Charles Sporck (National Semicondctor), and John Welty (Motorola) at the industry leading Semiconductor International Association (SIA)? Because they were not allowed to that’s why! Back then the fabless business model was dismissed with the infamous catch phrase, “Real men have fabs.”

The Global Semiconductor Alliance (GSA) mission is to accelerate the growth and increase the return on invested capital of the global semiconductor industry by fostering a more effective ecosystem through collaboration, integration and innovation. It addresses the challenges within the supply chain including IP, EDA/design, wafer manufacturing, test and packaging to enable industry-wide solutions. Providing a platform for meaningful global collaboration, the Alliance identifies and articulates market opportunities, encourages and supports entrepreneurship, and provides members with comprehensive and unique market intelligence. Members include companies throughout the supply chain representing 25 countries across the globe.

The FSA started with forty charter members of which only a handful remain due to acquisitions and attrition. Currently more than five hundred companies participate in five different member segments: Semiconductor Members, Supplier Partner Members, Service Partner Members, Industry Partner Members, and Organizations / Associations / Government & Educational Partner Members. Today this is called crowdsourcing, a commonly accepted practice enabled by the internet and social media. Back in the 1990’s however this type of collaboration within the semiconductor industry was unheard of and publicly lambasted by the IDMs. Fortunately the founding FSA members were comfortable with disruptive business models and the fabless semiconductor ecosystem was born.

It is interesting to see how the top semiconductor companies have evolved financially based on the top 10 company ratings over the last 25 years. According to Gartner Dataquest and later iSupply, Japan dominated the semiconductor industry in 1987 with Intel barely making the top 10:

[TABLE] cellspacing=”3″
|-
| Rank
1987
|
| Company
| Country of origin
| Revenue
(million
$ USD)
|-
| 1
|
| NEC Semiconductors
| Japan
| 3 368
|-
| 2
|
| Toshiba Semiconductor
| Japan
| 3 029
|-
| 3
|
| Hitachi Semiconductors
| Japan
| 2 618
|-
| 4
|
| Motorola Semiconductors
| USA
| 2 434
|-
| 5
|
| Texas Instruments
| USA
| 2 127
|-
| 6
|
| Fujitsu Semiconductors
| Japan
| 1 801
|-
| 7
|
| Philips Semiconductors
| Netherlands
| 1 602
|-
| 8
|
| National Semiconductor
| USA
| 1 506
|-
| 9
|
| Mitsubishi Semiconductors
| Japan
| 1 492
|-
| 10
|
| Intel Corporation
| USA
| 1 491
|-

Five years later it is really just a re-ordering with Intel as #1 and National Semiconductor being replaced by Matsushita (Panasonic) :

[TABLE] cellspacing=”3″
|-
| 1
| 3
| Intel Corporation
| USA
| 5 091
|-
| 2
| 1
| NEC Semiconductors
| Japan
| 4 869
|-
| 3
| 2
| Toshiba Semiconductor
| Japan
| 4 675
|-
| 4
| 4
| Motorola Semiconductors
| USA
| 3 634
|-
| 5
| 5
| Hitachi Semiconductors
| Japan
| 3 851
|-
| 6
| 6
| Texas Instruments
| USA
| 3 087
|-
| 7
| 7
| Fujitsu Semiconductors
| Japan
| 2 553
|-
| 8
| 8
| Mitsubishi Semiconductors
| Japan
| 2 213
|-
| 9
| 10
| Philips Semiconductors
| Netherlands
| 2 113
|-
| 10
| 9
| Matsushita Semiconductors
| Japan
| 1 942
|-

Five years later Samsung continues the climb to the top as the Japanese semiconductor companies begin to decline and consolidate. Consolidation also brought SGS-Thompson to the top 10.

[TABLE] cellspacing=”3″
|-
| Rank
1997
| Rank
1996
| Company
| Country of origin
| Revenue
(million
$ USD)
|-
| 1
| 1
| Intel Corporation
| USA
| 21 746
|-
| 2
| 2
| NEC Semiconductors
| Japan
| 10 222
|-
| 3
| 3
| Motorola Semiconductors
| USA
| 8 067
|-
| 4
| 6
| Texas Instruments
| USA
| 7 352
|-
| 5
| 4
| Toshiba Semiconductor
| Japan
| 7 253
|-
| 6
| 5
| Hitachi Semiconductors
| Japan
| 6 298
|-
| 7
| 7
| Samsung Semiconductors
| South Korea
| 5 856
|-
| 8
| 9
| Philips Semiconductors
| Netherlands
| 4 440
|-
| 9
| 8
| Fujitsu Semiconductors
| Japan
| 4 622
|-
| 10
| 10
| SGS-Thomson
| France Italy
| 4 019
|-

Another five years and it’s more of the same with Samsung quickly climbing to #2 and SGS-Thompson being renamed STMicro Electronics.

[TABLE] cellspacing=”3″
|-
| Rank
2002
| Rank
2001
| Company
| Country of origin
| Revenue
(million
$ USD)
|-
| 1
| 1
| Intel Corporation
| USA
| 23 700
|-
| 2
| 5
| Samsung Electronics
| South Korea
| 8 750
|-
| 3
| 3
| Toshiba Semiconductor
| Japan
| 6 420
|-
| 4
| 2
| STMicroelectronics
| France Italy
| 6 380
|-
| 5
| 4
| Texas Instruments
| USA
| 6 350
|-
| 6
| 8
| Infineon Technologies (Semiconductor spin-off from Siemens)
| Germany
| 5 370
|-
| 7
| 7
| NEC Semiconductors
| Japan
| 5 320
|-
| 8
| 6
| Motorola Semiconductors
| USA
| 4 810
|-
| 9
| 9
| Philips Semiconductors
| Netherlands
| 4 360
|-
| 10
| 12
| Hitachi Semiconductors
| Japan
| 4 210
|-

Five more years and the shuffling continues with fewer Japanese semiconductor companies and one more from South Korea. Interesting note, Hyundai Electronics merged with LG Semiconductor and was renamed Hynix, now SK Hynix after being merged with the SK Group, the 3rd largest conglomerate in South Korea.

[TABLE] cellspacing=”3″
|-
| Rank
2007
| Rank
2006
| Company
| Country of origin
| Revenue
(million
$ USD)
| 2007/2006 changes
| Market share
|-
| 1
| 1
| Intel Corporation
| USA
| 33 995
| +7.8%
| 12.6%
|-
| 2
| 2
| Samsung Electronics
| South Korea
| 19 691
| -0.8%
| 7.3%
|-
| 3
| 3
| Texas Instruments
| USA
| 12 275
| -2.6%
| 4.6%
|-
| 4
| 4
| Toshiba Semiconductor
| Japan
| 12 186
| +20.2%
| 4.5%
|-
| 5
| 5
| STMicroelectronics
| France Italy
| 10 000
| +1.5%
| 3.7%
|-
| 6
| 7
| Hynix
| South Korea
| 9 047
| +15.0%
| 3.4%
|-
| 7
| 6
| Renesas Technology
| Japan
| 8 001
| 1.3%
| 3.0%
|-
| 8
| 15
| Sony
| Japan
| 7 974
| +55.5%
| 3.0%
|-
| 9
| 14
| Infineon Technologies
| Germany
| 6 201
| +21.1%
| 2.3%
|-
| 10
| 8
| AMD
| USA
| 5 918
| -21.2%
| 2.2%
|-
| 11
| 10
| NXP
| Netherlands
| 5 746
| +0.7%
| 2.1%
|-

Qualcomm was the first fabless semiconductor company to reach the top 10 in 2009 and in 2011 sits at #6 with fellow fabless company Broadcom at #10.

[TABLE] cellspacing=”3″
|-
| Rank
2011
| Rank
2010
| Company
| Country of origin
| Revenue
(million
$ USD)
| 2011/2010 changes
| Market share
|-
| 1
| 1
| Intel Corporation(1)
| USA
| 49 685
| +23.0%
| 15.9%
|-
| 2
| 2
| Samsung Electronics
| South Korea
| 29 242
| +3.0%
| 9.3%
|-
| 3
| 4
| Texas Instruments(2)
| USA
| 14 081
| +8.4%
| 4.5%
|-
| 4
| 3
| Toshiba Semiconductor
| Japan
| 13 362
| +2.7%
| 4.3%
|-
| 5
| 5
| Renesas Electronics
| Japan
| 11 153
| -6.2%
| 3.6%
|-
| 6
| 9
| Qualcomm(3)
| USA
| 10 080
| +39.9%
| 3.2%
|-
| 7
| 7
| STMicroelectronics
| France Italy
| 9 792
| -5.4%
| 3.1%
|-
| 8
| 6
| Hynix
| South Korea
| 8 911
| -14.2%
| 2.8%
|-
| 9
| 8
| Micron Technology
| USA
| 7 344
| -17.3%
| 2.3%
|-
| 10
| 10
| Broadcom
| USA
| 7 153
| +7.0%
| 2.3%
|-

According toIC Insights, semiconductor R&D spending will hit a record high of $53.4B in 2012 which is 16.2% of the total $329.9B semiconductor industry sales. It is interesting to note that 7 of the top 12 semiconductor R&D spenders are fabless. Another interesting number would be total fabless R&D dollars spent per year which would include all companies that are part of the fabless semiconductor ecosystem. Even if you just took ARM, ARM customers, and the foundries that make the ARM based products it would probably be greater than one trillion dollars as compared to Intel’s $8.3B R&D spend in 2011.

What’s in store for the semiconductor industry over the next 5-10 years? Clearly more consolidation, more fabless semiconductor companies in the top 10, and fewer fabs being built by even fewer companies. The old guard semiconductor IDMs are closing fabs left and right and going fab-lite or like AMD, completely fabless. Moving forward, the majority of the leading edge fabs will be built by Intel, Samsung, and TSMC. Intel and Samsung have even opened their semiconductor manufacturing doors to the fabless market as boutique foundries focusing on select customers in target markets (FPGA and Mobile) in order to fill excess capacity so we have come full circle yet again.

A Brief History of Semiconductors
A Brief History of Moore’s Law
A Brief History of ASICs
A Brief History of Programmable Devices
A Brief History of the Fabless Semiconductor Industry
A Brief History of TSMC
A Brief History of EDA
A Brief History of Semiconductor IP
A Brief History of SoCs

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