Stephen Rothrock, President & CEO, ATREG, Inc.

Three Scenarios for Securing Chip Capacity in 2025

IDC estimates that fabless revenue as a percentage of the semiconductor market is expected to reach 62% in 2028, up from 30% in 2019. The COVID pandemic and Russia's invasion of Ukraine have refocused attention on making semiconductors, begging the question for the increasingly fabless chip market – how to secure semiconductor capacity short of owning a fab? Three models are currently available to companies wishing to become less dependent on single sourcing and regain control over their supply chain at a lower cost.

Option 1 – Captive capacity corridors

A greenfield fab in 2026 could carry a 10-year total cost of ownership of $35 to $43 billion, 33% to 66% higher than in 2023. Captive capacity corridors help many companies seeking guaranteed manufacturing capacity through ownership of only part of manufacturing while continuing to defray other costs to fab operators. Some make capital commitments for tooling early on in an engagement, expecting to receive rebates later in the form of discounted wafers.

Option 2 – Joint-venture investment partnerships

In August 2023, TSMC announced a partnership with European IDMs Bosch, Infineon, and NXP to jointly construct a 300mm fab in Dresden, Germany, expected to cost in excess of €10 billion. In the arrangement, TSMC will retain 70% ownership, with each other company retaining a 10% stake and supporting their capacity to serve growing industrial and automotive markets.

Option 3 – Third-party fab space lease at underutilized fabs

As part of the sale of its 200mm Dortmund wafer fab to Littelfuse, Elmos agreed to enter into a multi-year capacity-sharing arrangement, with Elmos buying defined volumes of wafers produced at the fab. Elmos retains ownership of the fab while Littelfuse will lease a portion of the manufacturing facility to fulfill the terms of the supply agreement.