Differences, cooperation and competition between IDM, Fabless and Foundry models

1. Core definitions of the three major models

1. IDM vertical integration model

• Advantages: Strong process synergy, strict quality control, stable delivery, adaptable to automotive/industrial high-reliability scenarios;
• Disadvantages: Huge investment in production lines, high depreciation costs, high production expansion risks, and high return pressure on investment in advanced processes;
• Representative companies: TI Texas Instruments, Infineon, STMicroelectronics, NXP, Intel, Samsung.

2. Fabless design model

• Advantages: light assets, high flexibility, concentrated R&D investment, and fast iteration speed;
• Disadvantages: Highly dependent on foundry production capacity and processes, the core shortage cycle is prone to production capacity being stuck and forced to increase prices, and yield and delivery are not under independent control;
• Representative companies: Qualcomm, MediaTek, AMD, Apple, HiSilicon, Broadcom.

3. Foundry pure wafer foundry model

• Advantages: professional process iteration, significant scale effect, and multi-customer sharing of R&D costs;
• Disadvantages: Completely dependent on downstream design customer needs, industry cycle fluctuations have obvious impact;
• Representative companies: TSMC, Samsung Foundry, SMIC, and GlobalFoundries.

2. Industrial Division of Labor and Interconnections

1. Specialized division of labor

   Fabless focuses on front-end innovative design; Foundry specializes in manufacturing process upgrades; IDM relies on the advantages of the entire chain to develop simulation, power, and automotive chips.Refined division of labor reduces overall industrial costs and improves overall operating efficiency.
2. IDM is gradually moving towards Fab-lite

   The cost of research and development of advanced processes has soared, and most traditional IDMs no longer develop and produce the entire process themselves.

   High-end processes below 40nm and MCU/processor chips within 28nm are generally outsourced to foundries such as TSMC. Only mature processes and specialty process production lines are retained to balance costs and production capacity.
3. Advanced processes are highly concentrated

   Cutting-edge processes within 10nm are basically dominated by Foundry;

   In the era of 3nm and below AI chips, TSMC has outstanding advantages in technology, yield rate, and production capacity, and it monopolizes high-end computing chip foundry orders.

3. Cooperation

1. Fabless × Foundry: Strong binding cooperation

   Fabless design companies are completely dependent on foundries, and are bound to long-term process routes and production capacity quotas. They are the core cooperation combination of the industry chain.
2. IDM × Foundry: complementary collaboration

   IDMs such as ST, NXP, ADI, and Microchip outsource advanced processes and niche high-end chips, retaining the in-house production of mature power and analog devices, sharing factory construction risks and shortening the research and development cycle.
3. Cross-mode collaborative upgrade

   The explosive demand for AI, HPC, and third-generation semiconductors has promoted in-depth linkage of design, manufacturing, and packaging and testing. Process customization and packaging integration have become industry trends.

4. Industry competition landscape

1. Foundry: The strong will always be strong, and the head gap will widen.

• TSMC: Leading in 3nm/2nm, with stable yield and production capacity, monopolizing high-end orders from Nvidia, AMD, and Apple;
• Samsung: Insufficient advanced yield, loss of customers, and falling into a vicious cycle of technology iteration;
• Intel: Cross-border foundry started late, with insufficient ecology and experience, and the progress of the foundry business is slow.

2. Differentiated competition in subdivided track mode

• Advanced logic chip: Fabless + head Foundry is the mainstream;
• Analog, power, automotive chips: IDM model still dominates, relying on vertical integration to ensure reliability;
• Third-generation semiconductor (SiC/GaN): IDMs such as ST and ON Semiconductor insist on vertical integration and self-research on the entire chain from substrate, wafer to device to build technical barriers.

3. The game between production capacity and technology is normalized
   Mature process production capacity is overcapacity and price competition is intensifying; advanced process production capacity is in short supply and premiums continue;
   There is a long-term game between design factories, foundries, and IDMs around production capacity allocation, process iteration, and cost pricing.

5. Summary