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Fabless firms outpace IDMs in costs, gross margins

Posted: 21 Mar 2005 ?? ?Print Version ?Bookmark and Share

Keywords:integrated device manufacturing? idm? counterparts? asps? pld?

Fabless chip makers in the "core silicon space" are enjoying lower costs and much higher gross margins than their integrated device manufacturing (IDM) counterparts, according to a report from iSuppli Corp.

In the market for core siliconof which iSuppli (El Segundo) defines as consisting of application specific integrated circuits (asics), application specific standard products (ASSPs) and programmable logic devices (PLDs)fab ownership no longer appears to be a prerequisite for success.

"In fact, with the transition to 90nm silicon built on 300mm wafers, fabless core-logic suppliers will enjoy some added benefits that will propagate throughout their financial results, from increased sales to higher margins," according to iSuppli. "Integrated device manufacturers (IDMs) and foundries will benefit as well, but likely to a somewhat lesser extent."

iSuppli compared the gross margin performance by four fabless core-silicon providersAltera, Broadcom, Qualcomm and nVidiawith two IDMs, STMicroelectronics and LSI Logic. Taiwan Semiconductor Mfg Co. Ltd, the leading foundry, is also included for comparison purposes.

In general, the fabless companies show substantially higher gross margins than the IDMs. This margin gap reflects the fact that a finished semiconductor product is really the sum of many smaller products, including the intellectual property (IP).

"The value of this IP is usually much higher in core silicon applications than the chip itself and other physical components such as packaging and test, and consequently commands a higher margin," according to iSuppli.

- EE Times

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