Fabless chip vendors see glitches: Analyst

LONDON: Both fabless chip vendors and followers of fab-lite manufacturing strategies are in for trouble, according to Malcolm Penn, principal analyst with Future Horizons, based in Sevenoaks, England.

While some firms could under-perform, there is a possibility that others will get driven out of business in a market that should be flourishing for them. This is because these companies have “lost control of manufacturing,” Malcolm Penn says.

In the opinion of Penn, the fab-lite business model is financially flawed, structurally deceitful, and operationally faulty.”

Malcolm Penn said in a speech at a seminar on ‘the state of the global semiconductor market’ held in London that chip companies which outsource will either see wafer prices going up or they may miss market windows because of shortage of chips.

Penn’s assessment is based on the fact that, with a shortage of investment in manufacturing capacity over the last 3 years, ASPs will rise at the same time as the general economy is recovering.

He argues that the global chip market is set for a growth of over 20 per cent over the next two years. The growth could even reach 30 per cent in a single year.

Many majors in the semiconductor industry, including STMicroelectronics and Texas Instruments, are opting for fab-lite. For many companies, this would mean continuing to make older and analog products in legacy fabs and, at the same time, avoiding the huge costs of investing in a new wafer fab.