Industry Expert Blogs

This is the third part of a series answering the most frequently asked questions I get from Wall Street. Please read the previous two articles on Intel's Manufacturing Lead and Intel's SoC Challenge before flaming me in the comment section. First let’s look at why there is a foundry business and go from there.

The big semiconductor companies are the ones who started the foundry business in the 1980’s by renting out excess capacity to help pay for manufacturing costs. Unfortunately for them this unleashed a new era of semiconductor innovation and hundreds of fabless companies to compete with.

It all began when Dr. Morris Chang worked on a project for TI where manufacturing was done by IBM. This was one of the early semiconductor foundry relationships. Morris also noticed that top TI engineers were leaving and forming their own semiconductor companies. Unfortunately the capital requirement of semiconductor manufacturing was a gating factor. The cost back then was $5-10M to start a semiconductor company without manufacturing and $50-100M to start one with manufacturing.

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