Telecom, chips and data centers
Foundry
A company that manufactures chips designed by other firms.
Last reviewedWhat does Foundry mean?
A foundry makes semiconductors to order for chip designers, especially fabless companies. TSMC is the largest; others include Samsung Foundry, GlobalFoundries, UMC and SMIC. Foundry economics are driven by very high fixed costs: a fab costs billions to build and its equipment ages fast, so profit depends on keeping utilization and yield high. Example: a fab with capacity for 100,000 wafer starts a month runs at 90 percent utilization, using 90,000. If demand drops to 70 percent, most costs stay the same while revenue falls by more than a fifth, so profit falls much further. This is operating leverage.
Where does it come up in case interview prep?
- How the chip, electronics, and data center value chain worksLesson in Semiconductors, electronics, and data centers
- Chip and data center economics: utilization, yield, and powerLesson in Semiconductors, electronics, and data centers
- Semiconductors and data centers: players, trends, regulation, and how to crack the casesLesson in Semiconductors, electronics, and data centers
Related terms
- FablessA chip company that designs chips but has them made by someone else.
- Yield (manufacturing)The share of units made that come out good enough to sell.
- Capacity utilizationActual output as a share of the most that could be produced.
- Operating leverageHow much profit swings when revenue changes, because of fixed costs.
- SpectrumThe radio frequencies mobile operators license from governments to carry signals.
- Capex intensityCapital spending as a share of revenue.
- Take-up rateThe share of homes or customers who could buy a service that actually do.
- PUE (power usage effectiveness)Total data center power divided by the power used by the computing equipment.