S&T | Emerging Trends in the IC Industry : Foundry Business Model

S&T | Emerging Trends in the IC Industry : Foundry Business Model

By Samar K. Saha


Image Attribute: Researchers in work suits look out monitors at Samsung Electronics' Giheung semiconductor plant, southeast of Seoul / Source: koreajoongangdaily.joins.com

Image Attribute: Researchers in work suits look out monitors at Samsung Electronics' Giheung semiconductor plant, southeast of Seoul / Source: koreajoongangdaily.joins.com

This article discusses one of the emerging trends in the major business segments of the integrated circuit industry - Foundry Business Model. As the integrated circuit technology approaches its ultimate scaling limit, the different segments of the industry are evolving continuously by adopting new business strategies to gain competitive advantage: the manufacturing is persistently releasing next generation technologies, like the dedicated foundries are transitioning in to complete product development solution providers.

The Integrated Circuit (IC) foundry business is driven by fabless companies. In the conventional, “pure-play” manufacturing only, foundry business model, the foundries  provide only wafer fabrication services to their customers as shown in Figure 2(a). However, with the increase in the complexities and cost of system-on-chip (SoC) design, the emerging trends in the foundry business model is to providing complete manufacturing solutions to fabless companies.   

Typically, the fabless companies design advanced products using third party electronic design automation (EDA) tools in-house and outsource front-end manufacturing to foundries and packaging to dedicated back-end manufacturing vendors to assemble the final products. Due to the increase in the cost and complexities of SoC design, the fabless companies, also, outsource design activities to vendors or corporate partners as shown in Figure 1(a). Thus, in order to take advantage of this tremendous business opportunity, some of the foundries are transitioning to complete IC new product development solution providers to their customers. In this business model, the foundries provide necessary new product development support to their customers including chip design, layout design and verifications, process customization, manufacturing, wafer test, assembly and test, and logistics for on time delivery of final chips to fabless companies as shown in Figure 1(b) .

The transition of a foundry to a complete new product development solution provider is achieved by acquiring the necessary core competencies and product development technologies (PDTs) in-house or establishing partnership with different foundries or vendors with complementary competencies. The additional core competencies required to support customers’ new product development include expertise in complex SoC design, technology customization, product testing and characterization, and packaging. The major PDTs include : 
  • Technology computer-aided-design (CAD) software;   
  • Modeling and characterization hardware and software;   
  • CAD tools for circuit analysis and design such as process-design-kit;   
  • Semiconductor Assembly and Test infrastructure.   


Figure 1. Foundry business model then and now: (a) early “pure-play” manufacturing only foundry operation; (b) emerging trends in the foundry business showing foundries as complete IC product development solution providers. (DFM refers to design for manufacturing and CRM refers to customer relationship management).

Figure 1. Foundry business model then and now: (a) early “pure-play” manufacturing only foundry operation; (b) emerging trends in the foundry business showing foundries as complete IC product development solution providers. (DFM refers to design for manufacturing and CRM refers to customer relationship management).   

In-house competency in Technology CAD is crucial to support technology development and technology customization, device characterization and modeling are critical for generating accurate models for SoC design, and Semiconductor Assembly and Test capabilities are critical to offer customers introducing new products within the “strategic window” of marketing. The detailed description of PDTs such as Technology CAD, characterization and modeling, and circuit CAD has been reported by Saha. The advanced foundries are transitioning by acquiring core competencies in all the relevant areas of PDT to support fabless customers’ manufacturing as well as new product development.

The core competencies described above are organized in a dedicated customer support team described as the PDT group (PDTG) as shown in Figure 2. The functionalities of each PDT are set in different subgroups with ultimate objective of efficient customer support and customer relationship management. The inner-circle of Figure 3 shows the core competencies of PDTG whereas the outer circle shows PDTG establishing an extensive partnership network for “research and development” and information flow. The PDTG supports in-house technology development and characterization. It provides design and manufacturing solutions to customers, develops and maintains intellectual properties, and manages relationship with vendors, corporate partners, and academia for research and development of emerging technologies and products. Thus, in the foundry business model, the PDTG plays a critical role to support in-house technology development, provide complete new product development solutions to customers, and establish a link to the outside world for information flow and feedback as shown in Figure 3. The critical role of PDTG to support complete IC new product development is reported in the literature. The PDTG is an important organization in the transitioning foundry business model from the pure-play manufacturing only to turn-key new product development solution provider in the microelectronics industry.   

 Figure 2. Integrated customer support team, PDTG to support different emerging roles of a transitioning foundry in providing complete IC product development solution provider.


Figure 2. Integrated customer support team, PDTG to support different emerging roles of a transitioning foundry in providing complete IC product development solution provider.

In the longer term, the foundry business has evolved over the last two decades. New 2015 Foundry Almanac by GSA and IC insights reports 37% of IC sales now come from foundry capacity. Although earlier it competed on factor cost advantages, productivity gains, and operational excellence, it now depends on true technology leadership, scale advantages, and superior ecosystem for product design as shown in Figure 2(b). 

This is an excerpt from a technical article, titled “Emerging Business Trends in the Microelectronics Industry”, published at Open Journal of Business and Management Vol.04 No.01(2016), Article ID:62830,9 pages  10.4236/ojbm.2016.41012 , under the Creative Commons Attribution International License (CC BY).  http://creativecommons.org/licenses/by/4.0/     

References:  

[1] Taiwan Semiconductor Manufacturing Company (TSMC). http://www.tsmc.com/  

[2] United Microelectronics Corporation (UMC). http://www.umc.com/  

[3] Silterra Malaysia (Silterra). http://www.silterra.com/  Globalfoundries. http://www.globalfoundries.com/  

[4] Saha, S.K. (2001) Semiconductor-Foundries for Customer-Specific IC Manufacturing Technology Development. Proceedings of the IEMC’01, 124-129.http://dx.doi.org/10.1109/iemc.2001.960496

[5] Saha, S.K. (2010) The Role of Product Development Technology Group in the Global Semiconductor Foundry Business Model. Proceedings of PICMET’10, Technology Management for Global Economic Growth (PICMET), Phuket, 18-22 July 2010, 1-4.  

[6] Saha, S.K. (2012) The Role of Semiconductor Foundries in Advanced Integrated Circuit Product Development. 2012 IEEE International Technology Management Conference (ITMC), Dallas, 25-27 June 2012, 32-35.http://dx.doi.org/10.1109/itmc.2012.6306393  

[7] Vagues, M.V. and Kumar, S. (2012) Transitioning Semiconductor Foundry Business Model to Complete IC Manufacturing Turnkey Solution Provider. Proceedings of PICMET’12, Technology Management for Emerging Technologies (PICMET), Vancouver, 29 July-2 August 2012, 2754-2757.  
[8] Naehrer, U., Suzuki, S. and Wiseman, B. (2011) The Evolution of Business Models in a Disrupted Value-Chain. http://www.mckinsey.com/client_service/semiconductors/latest_thinking/the_evolution_of_business_models_in_a_disrupted_value_chain  

[9] Tseng, F.C. (1996) Foundry Technologies. International Electron Devices Meeting, IEDM ’96, San Francisco, 8-11 December 1996, 19 http://dx.doi.org/10.1109/iedm.1996.553030  

[10] Sun, J.Y.-C. (1998) Foundry Technology Trend. Proceedings of SPIE, 3506, 19-24.http://dx.doi.org/10.1117/12.323970  

[11] Saha, S.K. (2013) Emerging Business Trends in the Semiconductor Industry. Proceedings of PICMET’13, Technology Management in the IT-Driven Services (PICMET), San Jose, 28 July-1 August 2013, 2744-2748.

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