Fab vs Fabless Model
It has been two months now that I joined Qualcomm, the largest fabless company on earth after nearly 7 years at Intel, the largest semiconductor company in world. At Intel I worked first as a packaging engineer and then as a test engineer and in Qualcomm I am in the packaging group. However, that’s where the similarities in the job roles end. In this blog I would like to highlight some of the fundamental differences in the business process of the two companies, in other words between a fab and a fabless company. I would like to focus only on the manufacturing aspect of the two companies. The thoughts expressed in this blog are entirely my personal with the goal of highlighting the two different kind of models prevalent in the semiconductor industry. It is not a reflection of the performance of the two companies in terms of revenues and profits.
At the outset it has to be understood that Intel and Qualcomm’s product portfolio are strikingly different. While Intel is the most dominant player in servers and personal computing business, Qualcomm is a world leader in mobile chip. There is not a lot of overlap in the product roadmap of the two companies. At the same time, both companies are trying to venture into new growth areas such as internet of things, automotive and a host of other applications beyond their primary product portfolio. Intel’s processers run on its own x86 architecture while Qualcomm chips are based on the ARM architecture. The three components for any semiconductor chip irrespective of whether server or mobile are fab process, assembly, and back end test before the device manufacturers mount them on their mother boards or sockets as is the case. Intel follows a vertically integrated model for its manufacturing. Its state of the art fabrication facilities makes the silicon, religiously shrinking transistor node sizes every two years following Moore’s law coined after one of its founder, Gordon Moore. The silicon is then packaged and tested in Intel’s very own factories spread across the globe. I was fortunate enough to work in both assembly and test operations at Intel. In case of Qualcomm, the model is very different is more horizontally integrated. Qualcomm defines how the chip would be packaged or tested based on customer requirements and then works with its suppliers to deliver it based on the schedule. It therefore “manufactures” integrated circuits without owning a fabrication plant. In this case, fabrication, assembly and testing is outsourced to suppliers mostly in Asia. In semiconductor parlance such fabrication facilities are termed as “foundry” and assembly and test sites as “OSATs”. Foundries are a key component of the fabless model and serve as a noncompetitive manufacturing partner for Qualcomm. While Intel defines and owns its own product roadmap following recommendations from its product and marketing team based on customer inputs, Qualcomm has to work in a close partnership with its external suppliers to meet the product deliverables.
Both business processes have their own unique set of challenges. In case of Intel it has to manage its own fab process, assembly process and software and finally marketing. On the other hand for every product launched by Qualcomm, it has to manage different foundries and SATs across different countries. One interesting aspect of Intel’s business is that it owns about 80% of market share in the PC business and about 99% of data center business which mostly require moderate to high power density chips and with increasing number of cores. By shrinking transistor nodes every two years, Intel is able to increase transistor density at the same rate and therefore meet the ever increasing power requirement of it chips. Hence every couple of years Intel has to invest significant resources to get to the next silicon node. Understandably with every shrink in node sizes, the fabrication operations become more challenging and complex. Mobile phones on the other hand do not require chips to be power hungry but high on functionalities. As such Qualcomm can launch different products at different transistor nodes based on customer requirements which do not have to follow Moore’s law. Qualcomm’s supply chain decides who will be the foundry and assembly/test houses for every product. For an engineer it is a very unique experience to work in both companies. In Intel, one can witness issues and react to them first hand since it houses its own production facility. For Qualcomm, the SATs are the eyes and ears for any engineer and lot of important decisions are made based on the feedback from the process engineers working at those locations. A fundamental difference in the two models lies in the process technology development. In case of Intel it has to continuously invest in cutting edge tools to meet cost and performance of its packages. Qualcomm on the other hand lets its SATs define their own technology roadmaps. Its role is to fit the customer requirements with the technology that is available at the different SATs. It is a testament to the efficient management and some of the smartest people working in these two companies that both Qualcomm and Intel occupy pole position in their respective product markets inspite of such different business models.