Looking back at the development of the chip industry, at the beginning of the 1960s, industry players are using the IDM operation model, that is, chip design, manufacturing and packaging are done by themselves.

After years of development, with the rise of Foundry represented by TSMC, a new impact was brought to the industry model. In the past 20 years, the "Fabless+Foundry" model has become the main driver of the semiconductor industry development.

According to IC insights data, during 1999-2020, the total revenue of the top 50 Fabless vendors worldwide grew faster than that of IDM vendors, with an average annual growth rate of 13.0%. the market share and voice of Fabless vendors in their niche industries increased steadily.

The analog chip market, which is the mainstay of the IDM model, is also seeing new fluctuations.

Unlike digital chips in the continuous pursuit of advanced process and analytical processing capabilities, analog chips focus on the safe and precise implementation of a single function, more in pursuit of product stability.

As the analog chip affects the basic performance of signal processing, signal conversion and power regulation, in the electronic terminal, the analog chip can be compared to the lower foundation and the digital chip to the superstructure, that is: the digital chip determines the degree of high-end terminal equipment, while the analog chip affects the basic performance of the terminal equipment and the stability of the digital chip function implementation.

Therefore, in the production model, analog chips and digital chips are very different, compared to the Fabless + Foundry model of digital chip manufacturers, IDM is the analog chip manufacturers are more inclined to the model to TI, ADI, Renesas Electronics and ON Semiconductor, represented by the world's top ten analog manufacturers are using the IDM model.

IDM model, analog manufacturers can debug their own processes for product requirements, so that the design and process more closely integrated. In addition, IDM companies can also work on product design and process development simultaneously, and R&D design departments and manufacturing departments communicate quickly to shorten development time.

Today, with the IDM mode of operation, the cost of a significant increase and the rise of third-party foundries, the analog chip industry "woods" divided into two roads.

"Life is like a snowball, the important thing is to find wet snow and a very long slope", this popular Warren Buffett quote is held as a guideline and the key to wealth accumulation, many companies are looking for growth "long slope thick snow".

In the semiconductor field, if from the past decade or even a longer time span, TI's snowball is undoubtedly extremely successful, and this success stems from the foresight of its strategy.

As the current global market share of the first analog IDM, analog chip business has accounted for nearly 80% of TI's total semiconductor revenue, and from the point of view of its management repeatedly speak, analog chip will continue to become the main route of TI in the long future, and will even expand the revenue share with embedded processors.

According to the plan, TI plans to 2030 will be internally manufactured chips to bring revenue from 80% of total revenue in 2020 to more than 90% in 2030. ti also hopes that the proportion of internally packaged chips can be raised from 60% in 2020 to more than 90% in 2030, enabling it to better control the supply chain.

At the same time, in 2022, only 40% of TI's internal production of chips is produced by 300mm (12-inch) fab, but plans to increase this ratio to more than 80% by 2030.

It can be simply understood that TI will follow the IDM model in the future, continue to increase their own production capacity accounted for, and accelerate the transfer to 300mm wafer manufacturing.

The advantages of the IDM model is that it can integrate internal technical advantages, accumulated process experience; collaborative design and manufacturing to achieve rapid product iteration; IDM can reduce costs and enjoy higher value-added products and so on.

For the 12-inch production line, TI said that after the migration to 300mm wafers can bring 40% cost savings, at the same time, the company will also increase gross profit to 68%. This also explains why TI is so actively involved in this transition. Plus, TI has been cutting out distributors in the past few years and selling chips through direct sales, which will inevitably further enhance its product margin control.

And in order to achieve such a goal, TI continues to increase capital expenditure plans. In the face of the semiconductor industry cycle, unlike most industry companies, TI has no plans to reduce capital expenditures or slow down the construction of new factories.

On February 16, TI announced that it will invest $11 billion to build a second 300mm wafer fabrication plant in Lehi, Utah, U.S. Construction is expected to begin in the second half of 2023 and will be put into operation in 2026 at the earliest. It is reported that the plant is adjacent to Texas Instruments' existing 12-inch wafer fabrication facility LFAB in the region, and upon completion the two plants will be combined into one wafer fabrication facility for operations.

In December 2022, TI LFAB factory has begun production of analog and embedded products. The Leehaven, Utah fab originated from Texas Instruments' $900 million acquisition of Micron's 12-inch wafer fab in July 2021.

In September 2022, TI's newest 12-inch fab in Richardson, Texas, began initial production, expanding for several months to meet future growth in semiconductor demand for electronics. RFAB2 is connected to RFAB1, one of six new 12-inch wafer fabrication facilities added by Texas Instruments. RFAB1 went into production in 2009, when it was the world's* first 12-inch analog wafer fab.

In May 2022, TI's new 12-inch semiconductor wafer manufacturing site in Sherman, Texas, has officially broken ground on a total investment of $30 billion in the manufacturing site, the first factory is expected to begin production in 2025.

In fact, as early as 2009, TI bought 300mm production line from Qimonda to create the industry's first 12-inch analog wafer fab RFB1. planning for many years, TI has been in the field of 300mm wafer fab to establish a very high moat, there are now two 300mm wafer fab stable mass production, by 2030 this number will reach 8.

Taken together, TI continues to strengthen its own production scale, in contrast to many other IDM companies' increasing reliance on outsourced OEMs.

In the past 10 years, TI's profit margin has been maintained an upward trend. According to TI, creating high profit margins and they use 12-inch wafer fab production of analog chips, reducing costs.

High gross profit is an important factor for analog chip makers to remain competitive, and moving to 12 inches is one of the ways they can guarantee high gross profit and a profitable future.

After this series of operations, TI will not only be able to supply products and supply chain control in the future to master the initiative, in the product pricing will be more comfortable. Considering the long life of the analog chip process and TI's high gross profit, coupled with the funding brought by the U.S. Chip Act, TI is moving to a higher level.

        Compared with TI, with the change of industry development, ADI, ON Semiconductor, Renesas Electronics and other analog majors choose to outsource a significant part of their production capacity to foundries, from the traditional analog IDM gradually towards the Fablite model.

        Fablite model refers to the combination of IDM + Fabless, is a light wafer model, that is, IDM companies will be part of the manufacturing business by the collaborative manufacturers OEM, they retain a part of the manufacturing business.

        The Fablite model evolved from IDM and is a strategy for companies to reduce investment risk.

        In fact, the Fablite model has been proposed as early as 10 years ago. According to an IC Insights survey, in the five years prior to 2014, 72 fabs were closed worldwide, with 8-inch and 6-inch fabs accounting for 65% and 12-inch fabs accounting for 11%. This means that the global semiconductor industry is not willing to withstand the enormous capacity pressure and is moving toward Fablite or Fabless.

        At that time, European analog chip companies foresight, such as NXP, ST and Infineon, have started to implement Fablite strategy earlier. For example, after the acquisition of Freescale in 2015, NXP rarely launched other major acquisitions, more often than not, they continue to divest some businesses. ST and Infineon, etc. are also implementing the Fablite strategy, for profit maximization considerations will be part of the capacity outsourcing OEM.

        Japan has shut down a large number of fabs in the past few years. Last year Renesas Electronics announced that in 2022 will close the 6-inch wafer manufacturing plant in Yamaguchi Prefecture, Japan, will be able to transfer part of the 8-inch plant to other, part of the product discontinued. In fact, in 2020, Renesas has announced the closure of its 6-inch wafer fab located in Kochi Prefecture.

        Renesas executives Sailesh Chittipeddi said that while the company still adheres to the chip independent manufacturing plan, but the advanced process nodes will choose to outsource to foundries such as TSMC. He said, "In the long run, the more advanced nodes we will have to rely on third parties, and for any chip that is more advanced than the mature process of 40 nanometers, we will have to rely on foundry partners."

        Even after experiencing a global chip capacity shortage in 2021, Renesas Electronics said that even if the Japanese government pushes to revitalize local semiconductor manufacturing, it will still choose to outsource advanced process nodes to foundries such as TSMC to focus on cost control.

        Recently, Renesas Electronics highlighted its ongoing Fablite strategy at a media briefing, increasing the share of outsourcing for front-end and back-end processes. As of 2022, Renesas Electronics' self-production ratio is less than half, with 40% for both front-end and back-end processes.

Renesas Electronics President and CEO Hidetoshi Shibata said, "Renesas will continue to invest in its own factories, but in general will increase the proportion of foundry/OSAT outsourcing. Especially for front-end processes, we will make the positioning of our own factories and foundries easier to understand." For example, advanced processes use foundries. For more mature processes, a "hybrid model" of own plant and foundry will be used.

ON Semiconductor has also recently shifted its strategy from a traditional IDM model to a more flexible Fablite model. In recent years, ON Semiconductor has sold its 200mm wafer fabs in South Portland, Maine, Oudenaarde, Belgium, Pocatello, Idaho, and the Niigata plant in Japan.

At the same time, ON Semiconductor is gradually exiting its smaller fabs, shifting its focus to 300mm wafer capacity and increasing the flexibility of its general-purpose packaging back-end fabs to further increase external capacity in this segment, which has increased from 34% of its external capacity in 2021 to approximately 45% today.

This transformation, combined with the company's other strategic adjustments, has enabled ON Semiconductor to achieve good performance over the past few years. in fiscal 2022, ON Semiconductor's revenue grew 24% year-over-year to a record $8.3 billion, and gross margins also reached a record high.

Hassane EI-Khoury, president of ON Semiconductor, said that the main reason for choosing such a model is because the traditional way of expanding capacity on a large scale sometimes does not match the returns obtained, so ON Semiconductor tends to take a more flexible manufacturing route and strategy. The future will maintain such a manufacturing route and strategy, and exit from undersized fabs.

A few years ago, ADI also opened the Fablite model, only retaining part of the 6-inch and 8-inch factory, and the acquisition of Maxim is also the same choice and foundry cooperation, their own factories began to sell and reduce production, 300mm wafers are jointly developed with the foundry process model.

It can be seen that, in addition to TI, the traditional sense of analog IDM semiconductor companies are almost all transformed to Fablite, from pure IDM to Fablite model, can be said to be an evolutionary route in the development of the semiconductor industry. From the big dimension of industrial development, the industrial division of labor will be more refined and efficient, and Fablite and IDM companies doing foundry work is just one side of the elephant turning.

According to data released by the Semiconductor Industry Association (SIA), global chip sales in 2022 saw analog chip sales increase by 7.5% year-over-year to $89 billion, the largest sales increase among all chip categories. Analog chips have continued to grow in wave after wave, with a bright future.

Both the continued acquisition of manufacturing lines by analog chipmakers and the streamlining of IDM to the Fablite model, as well as the new Fabless to wafer production lines, illustrate the importance of manufacturing for chips. In the bulk segment, vertical integration still makes a lot of competitive sense. At the same time, the adoption of a flexible and appropriate manufacturing distribution model is also a comprehensive consideration that analog chip companies must take into account to ensure competitiveness.

Ultimately, the choice of which business model can not be generalized, analog manufacturers need to evaluate a variety of factors based on industry attributes, the company's own strengths and weaknesses, the market environment and strategic planning, and choose a suitable model for their own development is the best.