Electronic Design

Design Outsourcing: Are Companies Doing Too Much?

When the semiconductor industry was young, every company that created semiconductors had its own fabrication facility, design center, mask shop, etc. But over the years, the cost of supporting and building fabrication plants, making masks, and many other aspects of chip creation have risen to the point that only a large handful of companies can afford to build billion-dollar facilities and still have enough throughput to justify internally providing all other necessary support functions.

The high costs associated with manufacturing the chips caused many would-be chip manufacturers to come up with a new foundry manufacturing model that today is well established. The "foundry" is the chip manufacturer, but the company that purchases manufacturing service typically does all of the design and test. Most foundries, however, have partnership agreements with service providers that can perform packaging and test functions, as well as with tool providers that have prequalified their tools for the process parameters. Presently, several hundred foundries and fabless chip companies offer a diverse range of processes and products, and there's no letup in sight as new companies start almost on what seems an hourly basis.

Even the large chip manufacturers view the foundries as a way to outsource some production capability, especially for older-generation products. Once qualified, a foundry can do an excellent job of manufacturing a product that doesn't test the edges of production tolerances. But even the foundries are changing. Many can now offer leading-edge process technologies that rival what the major chip makers employ for their leading-edge chips.

In the chip industry, many other chip-related services have also been "farmed out." For instance, the big traditional companies, such as Texas Instruments, Motorola, and Intel, no longer grow their own silicon. Furthermore, most, but not all of the masks used are created by outside suppliers. The same holds true for most of the chemicals and gases used by the companies.

The design side of the industry also seems to be moving in the same direction. With various service organizations offering consulting services for design, testing, packaging, etc., companies embarking on new projects could, therefore, hire contracted design teams. This scenario is starting to play out as a new London, U.K.-based service supplier, Dataworkforce, opens its dot.com doors. It can supply the telecom industry with a "virtual workforce" selected from over 400 contractors in 53 nations.

But, is this distribution of services hollowing out companies too much? What affect will it have on corporate culture or enthusiasm? Are companies becoming so specialized on only one or two aspects of the picture that they begin to lose the global view of what must be done? Do you see this as a positive or negative step. I'd like to know.

TAGS: Intel
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