The surge in orders from fabs makes the IDM model stand up again

The core shortage problem has developed into a major problem affecting the global economy.

During this period, the market’s demand for semiconductors far exceeded expectations, but in fact, many fabs have been in full operation during this period, but the market demand for integrated circuits has always been higher than that of fabs operating at full capacity. Supply capacity.

There is a huge contrast between revenue demand growth and expectations

According to estimates by the semiconductor Industry Association (SIA), in January 2021, global semiconductor sales reached 40 billion U.S. dollars, an increase of 13.2% from the 35.3 billion U.S. dollars in January 2020.

In 2020, the global semiconductor industry sales were 439 billion U.S. dollars, an increase of 6.5% compared to 2019.

The automotive industry has been hit particularly hard, because most automakers predicted that the demand for new cars would decline in the early stages of the epidemic, and cancelled or reduced orders for parts and components.

But completely different from the expected results, consumer demand rebounded, orders surged, and manufacturers are now facing a serious shortage of parts.

Facing the huge order demand, almost all fabs around the world have resumed full-load operation, but the market demand still greatly exceeds the maximum limit that the factory can supply.

IDM model eases shortage pressure

From the perspective of the operating mode of semiconductors, the semiconductor chip industry has three main operating modes, namely IDM (integrated equipment manufacturing), Fabless (fabless semiconductor company) and Foundry (fab, foundry) mode.

IDM mode is a design and production mode in the chip field. From chip design, manufacturing, packaging to testing, a company covers the entire industrial chain.

That is, the entire process of chip design to finished product is the responsibility of the manufacturer. This model can ensure the integration of the product from design to manufacturing.

IDMs integrate design, manufacturing, packaging and testing, and sales of their own-brand chips. They have their own factories, mostly in specific Electronic fields.

Owning its own factory can make IDM more flexible. This rapid action can ensure supply before shortages occur, speed up the time to market, and seize opportunities.

Therefore, if a company has the production capacity of the entire industry chain, that is, IDM mode, from chip design, manufacturing and packaging and testing are all done by themselves, then it can continue to benefit.

IDM may become mainstream in the future

In the past few years, Fabless has rapidly risen in China and its market share has increased rapidly. Local semiconductor design companies including Ziguang Zhanrui, Huawei HiSilicon, Allwinner Technology and Cambrian have been born.

According to data from the research institute IC Insight, as of June last year, the global market share of fabless semiconductors in China and Taiwan reached 13% and 16%, respectively.

However, local foundries in mainland China are showing slow but steady growth. The largest foundries in China include SMIC, Huali Microelectronics under Hua Hong, and Wuhan Xinxin under Unisplendour.

Some experts predict that IDM will become the mainstream in the development of third-generation semiconductors. Foundry still has the opportunity, but it needs the design company to find a chip factory that can cooperate for a long time.

The advantages and disadvantages of IDM are more obvious

Generally speaking, IDM is large in scale, high in operating expenses, and low in return on capital.

However, there is a view that IDM has synergy advantages in design, manufacturing and other links. With the increase of investment in the domestic semiconductor industry, IDM manufacturers will gradually increase.

The IDM model is compared with the Fabless (factoryless) and Foundry (foundry) models. The advantage is that the design, manufacturing and other links are collaboratively optimized, which helps to fully explore the technological potential; it can be the first to experiment and implement new semiconductor technologies.

However, due to the improvement of the entire industry chain, the disadvantage of the IDM model is that the scale will be larger and the management and operation costs will be higher. In addition, due to the long industrial chain involved, the rate of return on capital is low.

Although the IDM model is not easy to do, it can be said to be the best choice in terms of resisting external risks and meeting industry opportunities.

Whether it is in traditional application scenarios such as automobiles, aerospace, transportation, home appliances, agriculture, etc., IDM has an absolute advantage in a mature supply chain.

The new IDM model emerges under the IoT

10 years ago, IDM-mode sensing companies only involved the design, manufacturing, packaging, testing and other industrial chain links of sensor chips, but now, IoT provides these IDM manufacturers with a richer product and business imagination.

IDM manufacturers are involved in IoT downstream terminal products, solutions and projects, and the added value they obtain is beyond the reach of chip shipments.

Under the influence of IoT, the price, performance, and cost-effectiveness of sensor chips may not be an absolute standard for measuring market feedback from a sensor company. IoT projects based on terminal matching capabilities and solution universal capabilities will be an important issue for IDM sensor companies. One of the standards.

In the IoT era, the “new IDM model” of sensor manufacturers has emerged, from chip materials, modules, terminals, platforms, sensor networks, solutions, and scene projects.

This new model and new mode will always run through the road of IoT to meet the complex needs of the scene and fragmentation of the Internet of Everything.

With the development of 5G, AI, IoT, big data and other technologies, the algorithm upgrade of smart sensors, the multi-sensor fusion algorithm, and the establishment of technical barriers, the IDM model can be calmly dealt with.

On the other hand, although 80-90% of domestic sensor chips are imported, we can completely convert the market share occupied by most foreign companies into domestic market share. There will be many factors here. , Such as the sharp reduction of foreign production capacity, the familiarity of domestic customer demand, and the perfect supply chain.

Part of the information reference: Winbond Electronics: “In the era of core shortage, IDM advantages are highlighted”, IOT Media: “IoT redefines IDM mode, domestic sensors may usher in a historical turning point.”

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