Fabless start-up companies face myriad operational challenges

By Ron Das, Siliconaire Inc.
CommsDesign.com, Jan 26, 2006     
 
Increasing packing density and performance at higher GHz-range frequencies, enabled by leading-edge nanotechnologies, has accelerated the pace of full system-level integration system-on-a-chip (SoC). At the same time, the semiconductor supplier core competency community (key suppliers offering a range of specialized technical skills and services) is disintegrating under the fabless model, making it difficult to manage outsourcing. This is even more acutely felt given that new innovators are system architects with limited global semiconductor infrastructure familiarity.

To deal with these new realities, fabless startup companies often hire high-cost semiconductor operations personnel at an early stage, thereby risking higher cash burn rates. Outsourcing semiconductor product development and manufacturing operations mitigates this, but at an even higher cost—the loss of product margins at a stage when they really count.

The shape, form, and role of fabless semiconductor companies has changed dramatically over the last few years (see the figure). Emerging chip vendors are increasingly morphing into systems companies in terms of their place in the overall food chain. They're doing the heavy lifting for their traditional customers, the systems companies, in terms of defining and developing the end product. Take any market, consumer electronics, networking, communications, wireless, and you find the bulk of the solution is now on one chip. So the chip company is becoming the R&D and technical implementer, while the traditional systems companies are becoming branding and marketing companies. In other words, the traditional system product manufacturers are fast becoming industrial-design, marketing, and distribution companies.

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