Foundry model

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. It was first conceived by Morris Chang, the founder of the Taiwan Semiconductor Manufacturing Company Limited (TSMC).

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, 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.

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. 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). 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 Pure-play semiconductor foundry is a company that does not offer a significant amount of IC products of its own design, but instead operates semiconductor fabrication plants focused on producing ICs for other companies. Integrated device manufacturer (IDM) semiconductor foundry is where companies such as Texas Instruments, IBM, and Samsung join in to provide foundry services as long as there is no conflict of interest between relevant parties.

2023 +As of 2023, the top semiconductor foundries were:RankCompanyFoundry typeCountry/Territory of originRevenue (million USD) 2023 Q4 2023 Q3 2023 1TSMC Pure-playTaiwan 19,660 17,2492Samsung SemiconductorIDMKorea3,6193,690 3GlobalFoundries Pure-playUnited States 1,854 1,852 4UMC Pure-playTaiwan 1,727 1,801 5SMIC Pure-playChina 1,678 1,6206Hua Hong SemiconductorPure-playChina657766 7Tower Semiconductor Pure-playIsrael 352 358 8PowerChip IDMTaiwan 330 3059NexchipPure-playChina308283 10Vanguard (VIS) Pure-playTaiwan 304 333 2017 +As of 2017, the top semiconductor foundries were:RankCompanyFoundry typeCountry/Territory of originRevenue (million USD) 2017 2017 2016 1TSMC Pure-playTaiwan 32,040 29,437 2GlobalFoundries Pure-playUnited States 5,407 4,999 3UMC Pure-playTaiwan 4,898 4,587 4Samsung Semiconductor IDMKorea 7,398 4,284 5SMIC Pure-playChina 3,099 2,914 6TowerJazz Pure-playIsrael 1,388 1,249 7PowerChip IDMTaiwan 1,035 870 8Vanguard (VIS) Pure-playTaiwan 817 801 9 Hua Hong Semiconductor Pure-playChina 807 721 10 Dongbu HiTek Pure-playKorea 676 666

2016–2014 + As of 2016, the top pure-play semiconductor foundries were:RankCompanyFoundry typeCountry/Territory of originRevenue (million USD) 2016 2015 2016 2015 2014 1 1 TSMC Pure-play Taiwan 29,488 25,574 25,138 2 2 GlobalFoundries Pure-play United States 5,545 5,019 4,355 3 3 UMC Pure-play Taiwan 4,582 4,464 4,331 4 4 SMIC Pure-play China 2,921 2,236 1,970 5 5 PowerChip Pure-play Taiwan 1,275 1,268 1,291 6 6 TowerJazz Pure-play Israel 1,249 961 828 8 8 Vanguard (VIS) Pure-play Taiwan 800 736 790 9 9 Hua Hong Semi Pure-play China 712 650 665 10 10 Dongbu HiTek Pure-play Korea 672 593 541 11 12 X-Fab Pure-play Germany 510 331 330 Others Pure-play 2,251 2,405 2,280

2013 + As of 2013, the top 13 semiconductor foundries were: 2013 Rank 2012 Rank Company Foundry Type Country/Territory of origin Revenue (million $USD) 1 1 TSMC Pure-play Taiwan 19,850 2 2 GlobalFoundries Pure-play United States 4,261 3 3 UMC Pure-play Taiwan 3,959 4 4 Samsung Semiconductor IDM Korea 3,950 5 5 SMIC Pure-play China 1,973 7 8 PowerChip Pure-play Taiwan 1,175 8 9 Vanguard (VIS) Pure-play Taiwan 713 9 6 Huahong Grace Pure-play China 710 10 10 Dongbu Pure-play Korea 570 11 7 TowerJazz Pure-play Israel 509 12 11 IBM IDM United States 485 13 12 MagnaChip IDM Korea 411 14 13 Win Semiconductors Pure-play Taiwan 354

2011 + As of 2011, the top 14 semiconductor foundries were:semimd.com: 2011 Major IC Foundries . Rank Company Foundry type Country/Territory of origin Revenue (million USD) 1 TSMC Pure-play Taiwan 14,600 2 UMC Pure-play Taiwan 3,760 3 GlobalFoundries Pure-play United States 3,580 4 Samsung Semiconductor IDM Korea 1,975 5 SMIC Pure-play China 1,315 6 TowerJazz Pure-play Israel 610 7 Vanguard (VIS) Pure-play Taiwan 519 8 Dongbu HiTek Pure-play Korea 500 9 IBM IDM United States 445 10 MagnaChip IDM Korea 350 11 SSMC Pure-play Singapore 345 12 Hua Hong NEC Pure-play China 335 13 Win Semiconductors Pure-play Taiwan 300 14 X-Fab Pure-play Germany 285

2010 + As of 2010, the top 10 semiconductor foundries were:dongbuhitek.com: 2010 Foundry Ranking (citing Gartner) (PDF). Rank Company Foundry Type Country/Territory of origin Revenue (million USD) 1 TSMC Pure-play Taiwan 13,332 2 UMC Pure-play Taiwan 3,824 3 GlobalFoundries Pure-play United States 3,520 4 SMIC Pure-play China 1,554 5 Dongbu HiTek Pure-play Korea 512 6 TowerJazz Pure-play Israel 509 7 Vanguard (VIS) Pure-play Taiwan 505 8 IBM IDM United States 500 9 MagnaChip IDM Korea 410 10 Samsung Semiconductor IDM Korea 390

2009–2007 As of 2009, the top 17 semiconductor foundries were:IC Insights, "2009 Major IC Foundries" March 2009.

RankCompanyFoundry typeCountry/Territory of originRevenue (million USD)20092009200820071TSMC Pure-play Taiwan8,98910,5569,8132UMC Pure-play Taiwan2,8153,0703,4303Chartered(1) Pure-play Singapore1,5401,7431,4584GlobalFoundries Pure-play USA1,101005SMIC Pure-play China1,0751,3531,5506Dongbu Pure-play South Korea3954905107Vanguard Pure-play Taiwan3825114868IBM IDM USA3354005709Samsung IDM South Korea32537035510Grace Pure-play China31033531011HeJian Pure-play China30534533012Tower Semiconductor Pure-play Israel29225223113HHNEC Pure-play China29035033514SSMC Pure-play Singapore28034035915Texas Instruments IDM USA25031545016X-Fab Pure-play Germany22336841017MagnaChip IDM South Korea220290322 (1) Now acquired by GlobalFoundries

2008–2006 As of 2008, the top 18 pure-play semiconductor foundries were:.

RankCompanyCountry/Territory of originRevenue (million USD)20082008200720061TSMC Taiwan10,5569,8139,7482UMCTaiwan3,4003,7553,6703CharteredSingapore1,7431,4581,5274SMICChina1,3541,5501,4655VanguardTaiwan5114863986DongbuSouth Korea4905104567X-FabGermany4004102908HHNECChina3503353159HeJianChina34533029010SSMCSingapore34035032511GraceChina33531022712Tower SemiconductorIsrael25223118713Jazz SemiconductorUnited States19018221314SilterraMalaysia17518015515ASMCChina14915517016Polar SemiconductorJapan1101059517Mosel-VitelicTaiwan10010515518CR Micro (1)China-143114Others140167180Total20,98020,57519,940 (1) Merged with CR Logic in 2008, reclassified as an IDM foundry

2007–2005 As of 2007, the top 14 semiconductor foundries include:IC Insights, "2007 Major IC Foundries".