Evert A. Wolsheimer

Best Practices for Fabless Companies

This chapter outlines the operations processes and practices that must be addressed at emerging fabless companies to position them as a leading or best-in-class fabless company. Because managing cash flow is a very important aspect of life as a start-up, operations processes and practices must be in place during the various stages of development and production ramp. The foundry operations managers contribution to the value-chain of a fabless company is extensive and overarching, resulting in improved product development and supply management efficiencies. The emergence of the fabless semiconductor market segment has largely been a result of the opportunity for rapid entry into markets where premiums are associated with being the first to market at high volume. Manufacturing execution systems (MES) fits the foundry model and the traditional fab, with the added benefit of managing a virtual manufacturing chain. MES systems that are designed to manage fab, test and assembly production do have those necessary features. Consequently, MES is being used as part of a solution that also includes supply chain Advanced Planning and Scheduling (APS), and business applications such as enterprise resource planning (ERP).

Electronic Design Automation

This chapter provides an overview of electronic design automation (EDA), its selection process, and physical design. EDA is a collection of software tools used for chip design, verification, and validation. It helps to facilitate and automate the process of electronic design. The selection process is based on both business and technical criteria, depending on the type of design. Determining factors can include whether the design is analog, digital, or mixed-signal; the complexity of the design; and whether they are designing the package, the board, or the system. Nvidia has one of the best physical design flows in the industry. It has a great team, leading-edge tools and yet, even at Nvidia, every tapeout is a major accomplishment. Automation can be used to capture best-in-class practices and make them available to all. Automation can also be used to remove manpower bottlenecks on critical portions of the chip design process. Automation has the potential to eliminate manpower constraints and has the added advantage of being able to deploy best-in-class practices across the entire industry. The fabless semiconductor industry will greatly benefit from a software-driven, physical design outsourcing solution.

Building the Right Partnerships

This chapter provides a checklist of aspects to consider when selecting a supplier, both from operational and legal points of view. The subcontractor is now an integral part of the semiconductor supply chain. By most surveys and analyst estimates, outsourcing will grow faster than the semiconductor market in general, indicating how crucial subcontractors are to the success of most semiconductor companies. The subcontractor will educate the manufacturer about various solutions to their back-end requirements. The products and services offered are viewed as the facilitator of the solution and not the solution itself. The subcontractor, with an understanding of the manufacturers end customer, actually suggests strategic packaging direction and opportunities. The value of this relationship is increased market share as well as a competitive advantage for both. The subcontractor, in effect, becomes more than a vendor to the manufacturer; however, the subcontractor has become a virtual extension of the manufacturers business in an enduring symbiotic relationship.

More than a Decade of Transition in the Semiconductor Industry

This chapter explains the transitioning of fabless semiconductor business model from opportunistic tactics to a strategic imperative. The model began to emerge in the 1980s, as the scale necessary to create and build an integrated device manufacturer (IDM) business from the ground up became prohibitive from a cost and resource perspective. Financial Services Authority (FSA) has more than 500 corporate members, and many smaller fabless companies are continuing to drive significant innovation and growth. Companies such as Chips & Technologies, Altera, Cirrus Logic, and Xilinx emerged and were able to take full advantage of the excess capacity held by the vertically integrated Japanese technology companies. Despite the cyclicality inherent in the overall semiconductor industry and fabless sector, FSA forecasts that fabless revenues will continue to grow faster than the overall semiconductor industry during the next decade. In addition to the semiconductor product companies, the foundries make their business model that of performing 100% semiconductor manufacturing services for all of the product companies. In general, a greater degree of specialization in memory and general purpose logic chips can be seen in Asia, and more specialization in MPU/MCU/DSPs in North America.

Quality and Reliability

This chapter explains the quality and reliability (Q&R) management in the fabless environment. The lack of direct control of supply chain resources by fabless companies requires that they develop a sense of trust in their suppliers while keeping sufficient controls in place to ensure Q&R. The chapter provides outline of front-end Q&R, which is defined as activities and systems intended to ensure and improve Q&R of the semiconductor products. A brief overview of back-end Q&R is also given, which is defined as those activities and systems which deal with Q&R issues after products have been shipped to the customer. In fabless companies, environment, health, and safety (EHS) systems are typically much more limited in scope than those at integrated device manufacturers (IDMs). The ISO14001 environmental management system, as part of the overall EHS system, is meant to develop and maintain a systematic management approach to the environmental concerns of an organization. The goal of this approach is continual improvement in environmental management. Environmental management at fabless companies is usually somewhat limited, but can cover important issues such as recycling of paper, glass, and plastic and reduction of energy usage.

Fabless Semiconductor Manufacturing

This chapter explains that as the fabless business model becomes the preferred model for semiconductor product companies, the foundries are not only keeping pace with the manufacturing capacity, but also are starting to lead in adopting the next process technology node at par with their integrated device manufacturer (IDM) competitors. Foundry revenue growth has consistently outpaced the growth of the semiconductor industry and is a good measure of the success of the fabless business model. Back-end manufacturing services can range from packaging characterization, substrate design, wafer bumping, wafer sort to assembly and final test, and may also include flip chip bumping services. Very few IDMs perform 100% of the packaging themselves, as the number of packaging types in the industry numbers in the multihundreds and most IDMs are unwilling to invest in all the necessary equipment. The foundries and back-end manufacturers are dependent on their semiconductor equipment suppliers for setting up their manufacturing lines.

Chapter 13 – Building the Right Relationships with the Board and VCs

This chapter discusses the importance of building the right board of directors and maintaining good relationships as the company grows. It also discusses the value that venture capitalists (VCs) bring to the fabless company from a network and relationships points of view in addition to the venture capital that they bring. Although many semiconductor companies, both fabless and integrated device manufacturers (IDMs), currently possess highly effective boards, many semiconductor company boards probably would not make anyones “top ten” list. Companies must attract and retain board members who have sufficient time available to do a first-rate job. Fabless company boards must assimilate information quickly and react rapidly. They must be attuned to the market; have close relationships with their foundry and assembly/test partners; and have multiple links to sources of capital. A VCs general business and transactional experience may be useful to the entrepreneur in a variety of circumstances. A VC with an impressive Rolodex will benefit the company only if he or she is willing to use it on behalf of the firms portfolio companies. Open and honest communication between the entrepreneur and the VC is the key to a successful, long-term relationship.

Qualities of Successful Fabless Companies

This chapter discusses the fabless semiconductor industry environment in terms of what the reader can expect from individuals and the fabless community as a whole. The rise of fabless semiconductor companies and corresponding foundries started in the mid-1980s. At the same time, the industry shifted away from vertically integrated manufacturing toward a focus on core competencies. Successful fabless companies flawlessly execute a succession of enthusiastically adopted high-margin products. Their execution methodology effectively uses the optimum technology that wafer foundries can offer. The rise of the Internet in the mid-1990s enabled the growth of networking application-focused fabless semiconductor companies as well as the acquisition of many fabless start-up companies. Understanding market requirements often equals understanding the system needs of major players in their respective markets. The fabless model will continue to thrive as long as fabless companies leverage the model to focus on the key qualities for success. The model gives them the best opportunity to deliver the right products at the right time and meet the challenge of thriving in a fluid market that presents an ever-increasing amount of uncertainty and promise.

Semiconductor Manufacturing Basics

This chapter describes the semiconductor manufacturing processes in specialized factories or wafer fabrication facilities. Fabless companies outsource this process to wafer foundries, which own fabs equipped to manufacture a fabless companys chips that are developed on the wafers. Complimentary metal oxide semiconductor (CMOS) is the most used semiconductor design process type in production today. When connected to a power source, compound semiconductors can perform highly specialized functions, especially those involving certain compounds more suited to specific types of applications, such as high-speed communications or power management and amplification. Semiconductor manufacturing steps include wafer production, wafer processing, dicing, assembly packaging, and test. Moving to larger wafer sizes includes equipping fabs with new equipment, which can be costly to a fabrication facility. Both direct and indirect costs must be considered when owning and maintaining a fab. More companies currently owning fabrication facilities are finding that it makes sense to outsource the fabrication process to pure-play foundries instead of equipping and maintaining older fabs with expensive, state-of-the-art equipment.

Chapter 7 – Intellectual Property

Publisher Summary This chapter explains the semiconductor intellectual property (SIP) overview, business environment, sourcing products, evaluating business models, product enablers, licensing products, and the provider and buyer perspectives. SIP has existed since the advent of the semiconductor industry. SIP business practices include elements similar to those found in the traditional semiconductor or application-specific integrated circuit (ASIC), electronic design automation (EDA), and design services markets. Outsourcing is unlikely if the SIP product is seen by the potential buyer as a core competency or a key differentiator in its product, or if its use requires third-party access to the buyers patents or trade secrets. SIP License Agreements may require a significant effort depending upon the business objectives of the parties, the intended use of the SIP Product, the nature of the SIP product, and the risks associated with using the SIP product in the end application. The scope of license, warranty, indemnity, and limitation of liability provisions usually consume the majority of the effort in negotiating an SIP License Agreement. However, IC developers are finding more low-cost solutions at their fingertips, and the semiconductor supply chain has become increasingly stratified.