Fabless Company – What is it?

• by Helen Cotter
• September 17, 2020

You have probably heard about fabless companies in the past. However, do you know what it means and what they entail? Fabless companies are specialize in the design and selling semiconductors and other hardware components. The materials used by these companies are outsourced from other industries.  Outsourcing allows these companies to utilize the skills and manpower of other companies that produce quality raw materials needed in the manufacturing of hardware components and semiconductors. Fabless semiconductor companies have become very popular common in the recent past.

The Dynamics

Firms that produced raw materials used in making semiconductors are located in industrialized nations like China. Such countries are known for using the latest technology and equipment, thus enabling them to lower the average cost of production and labor costs. Fabless companies are situated nations with high labor costs. For this reason, they prefer outsourcing cheap raw materials from nations whose lower labor costs is relatively cheaper. A fabless semiconductor company, therefore, provides significant savings. This write-up is going to have a look at fabless companies and why they are quickly becoming popular.

The History of Fabless Companies

In simple terms, fabless companies aim at making the manufacturing process more economical and easier. Initially, these companies were involved in the marketing and design of their product.

Fabless manufacturing process began in the late 1970s when some private companies started other manufacturing to design some of the components used in their electronic industries. In essence, the manufactures of semiconductors companies took advantage of other investors who were ready to fund them, and then started to outsource some of their components. The problem with the small companies was that they could not manage the high manufacturing costs. This is the main reason why they preferr to outsource most of their products. The subtle shift proved as the stepping stone towards the establishment of modern fabless semiconductor companies.

Advantages of a Fabless Company

Many semiconductor companies find the fabless model as a viable option that reduces costs. Fabless semiconductor companies can put all their focus on the design of their product. Again, the products made by these firms are highly durable since they are made of quality materials. Fabless manufacturing is one of the effective ways of lowering the cost of production.

Should I Choose a Fab or Fabless Company

New semiconductor companies have to debate between a fab or fabless company structure. You either get to control your production or outsource to a third company with that capability. The fabless system has lots of advantages when your company is set up in a highly industrialized company.

A semiconductor company that decides to go fabless will have more capital and effort towards the design and production of its hardware units and semiconductors. When left with the choice of going fabless, then you have to consider it.

Conclusion

A fabless business structure brings a lot of advantages that we cannot ignore. Cutting down costs will ensure that you make more profits and produce quality designs.

You have probably heard about fabless companies in the past. However, do you know what it means and what they entail? Fabless companies are specialize in the design and selling semiconductors and other hardware components. The materials used by these companies are outsourced from other industries.  Outsourcing allows these companies to utilize the skills and…