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Qualcomm rocks top 10! Is fabless the way ahead?

August 27, 2007

For the first time in semiconductors, a fabless company has cracked the Top 10! This honor has gone to Qualcomm, which broke into the Top-10 ranks of the global chip industry in the second quarter of 2007, according to iSuppli!

The list is consumed by the usual suspects, the giants — Intel, Samsung, Texas Instruments, Toshiba, STMicroelectronics, Renesas, Hynix, NXP — from no. 1 to no. 8, and then, Qualcomm — the surprise entrant at no. 9, and finally, Infineon Technologies.

This leads to a question: is fabless the way ahead for the future? Maybe, there is! After all, iSuppli reports of an “Asian flu” — read: all leading Asian semicon suppliers witnessing declines in revenues, even as Qualcomm moved up!

Here’s what Future Horizons has to say in its monthly semiconductor forecast:

If May’s WSTS results were “disappointing”, June’s were a real proverbial kick in the pants, with 2Q07 down 2 percent on the 1Q07. Whilst we had anticipated in last month’s Report that the quarter would be down “at least 1 percent versus 1Q07”, we had expected it to be closer to 1 percent, not 2. This year is turning out to be even more of a white-knuckle ride than normal, testing the industry’s vision and faith to new limits. With short-term industry momentum still refusing to rebound, all bets are still on for the second-half of the year. ASPs remain the underlying cause of the industry’s problem, given June’s IC units were up 11.8 percent on the same period last year. With first-half year units up a respectable — and sustainable — 7.7 percent year-on-year, the value growth limped in at only 2.6 percent, due to a 4.6 percent decline in IC ASPs.

While Qualcomm surged in the second quarter, Asian biggies such as Samsung, Toshiba, Hynix, Sony and NEC saw semiconductor revenues decline. iSuppli reported Hynix and Toshiba as taking the biggest hits among the Top-10 suppliers.

What about India then, where you often hear cries for fabs? Does everyone know what kind of investment is required for a fab? And well, do people even have an idea how long would it take for a fab to break even?

Let’s try something easier! Even if India currently has close to 200mn mobile phones and is growing, how many of those chips for mobile phones are currently being made in fabs located in India? Would a fab located in India only cater to the domestic market or should it cater to the overseas market as well? How many Indian companies are making those chips and how much is it all adding to India’s GDP? Most importantly, are those fabs run by home-grown Indian companies? Are there any chances?

There are several fabless companies in India, especially in Bangalore. It won’t take long to find them! There has been an endless debate on fabs vs. fabless. There’s a reason why India has been stronger in semicon design!

However, to move up the value chain, India is being pushed hard to join the fab community. Given the current market dynamics, it may a long while before we get to see real success, should, as and when a fab or multiple fabs come up. Success may come, but it won’t be easily achieved.

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