Telecom, chips and data centers
Fabless
A chip company that designs chips but has them made by someone else.
Last reviewedWhat does Fabless mean?
A fabless chip company designs and sells semiconductors but does not own a fabrication plant (a fab). It pays a foundry to make the chips. NVIDIA, AMD, Qualcomm, Broadcom and MediaTek are fabless. The model avoids the huge cost of building fabs, which can exceed 10 billion US dollars each for leading-edge plants, so fabless companies have low capex intensity and can focus on design and software. The trade-off is depending on a few foundries for capacity. The opposite is an integrated device manufacturer (IDM), such as Intel or Samsung, which designs and makes its own chips. Example: a fabless firm that sells a chip for 100 might pay a foundry 30 to make it and spend much of the rest on design, software and profit.
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Related terms
- FoundryA company that manufactures chips designed by other firms.
- Capex intensityCapital spending as a share of revenue.
- Vertical integrationOwning more stages of your own supply chain.
- Value chainThe activities a firm performs to create and deliver value.
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- Take-up rateThe share of homes or customers who could buy a service that actually do.
- Yield (manufacturing)The share of units made that come out good enough to sell.
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