Foundries are not new to the GaAs industryjust ask TriQuint, TRW, OMMIC (formerly Philips Limeil) and a number of other manufacturers that fabricate device wafers according to their customers proprietary designs. However, while these fabs also have in-house designers, a number of new companies are emerging which are positioned as "pure-play" foundries. These fabs have no designers, and their entire business is to fabricate customer-specific devices and ICs. The first such "pure-play" foundry in the GaAs industry was Global Communication Semiconductors (GCS) of Torrance, CA. Another GaAs foundry based in California, Network Device Inc. (NDI), was purchased by Alpha. Not surprisingly, most of the other new foundry activity is taking place in Taiwan. The foundry model has been adopted extremely successfully in the silicon industry, especially in Taiwan, resulting in the formation of manufacturing giants such as Taiwan Semiconductor Manufacturing Company (TSMC) and UMC. The first Taiwanese GaAs foundry, Advanced Wireless Semiconductor Company (AWSC), commenced operations at the end of 1999, and has since been followed by WIN Semiconductor, the world s first 6-inch foundry. As described on page 57 of this issue, Global Communication Technology (GCT) has also built a 6-inch GaAs foundry and there are several more in the pipeline. Who Uses Foundry Services? Broadly speaking, there are two types of foundry customer; design houses that don t have a fab, and existing GaAs manufacturers (also referred to as IDMs, or integrated device manufacturers) that need to outsource production for a variety of reasons. The growing list of fabless GaAs companies includes Stanford Micro-devices, the largest fabless vendor of RF components for communications; Endwave, which focuses on broadband wireless systems; and Multilink, a fiber-optic IC manufacturer [for a profile of these three companies, see CS 6(8), p.55]. A new entrant to the field is RF Solutionssee box. According to Owen Wu, President of GCS, around 40% of his company s business comes from fabless companies, with the remainder coming from IDMs. "Both groups using foundries will increase in the future, however the percentages will remain roughly the same i.e. 4050% for fabless, 5060% for IDMs," he says. There are three main reasons why IDMs use foundry services, says Owen Wu. "Many GaAs manufacturers want to offer their customers a second source for their products," he says. "Secondly, some manufacturers don t have enough capacity and have to use foundries to cover the overflow. Also, foundries can offer access to new or alternative technologies that the IDMs don t have." Fujitsu Outsources Production Earlier this year, Fujitsu Quantum Devices, ranked by some as the largest GaAs manufacturer in the world, announced that it would outsource up to 35% of its total production by 2002 [see CS 6(6), p.31]. The company is planning to use foundries to produce some of its RF and microwave GaAs products, while at the same time expanding its internal production capacity. Gene Brannock, Executive VP of Fujitsu Compound Semiconductor Inc. (a member of the family of Fujitsu subsidiaries in the US), explained the reasoning behind this decision. "Fujitsu is now exploring the use of foundry services, and outsourcing in general, because we see the markets served by our products (compound semiconductors) reaching various levels of maturity that require security of supply," he says. "This security of supply takes several forms. We require flexibility in rapidly changing market segments, such as Lightwave Optics, and we also need to ensure adequate supply from multiple sources in larger scale market segments, namely Cellular Terminals. Further, we need access to state-of-the-art performance in emerging and high reliability market segments, such as Space and Cellular Base Stations. "It is not practical to envision a single manufacturing entity managing these diverse disciplines well. Hence, Fujitsu is focusing on maintaining its core competency and utilizing the appropriate manufacturing core competencies, whether these are internal or external." Why Use Foundries? Of course, there are many arguments both for and against the use of foundries. For fabless companies, the most obvious advantage of using foundries is that there is no need to build a fab. There is a lower capital investment, a lower technology risk and a greater degree of process flexibility. Building a fab can involve a commitment to technology up to two years in advance. A fabless model provides shared economies of scale and there is no cost to exit, while a fab must be filled. However, there are certainly drawbacks to being fabless, the main one being slow turnaround time related to the difficulty of securing priority in over-subscribed fabs. Speaking at the 2000 GaAs IC Symposium, Larry Wang of EiC described how his company was initially fabless. "We ran into problems with securing commitment and delivery from foundries," he says. "Our customers were concerned about the supply volumes that we could guarantee. In the end, we decided that we had to go ahead and build a fab." EiC s fab commenced production in early 1998. With the prospect of lots of new foundry capacity in the industry, the current climate seems much healthier for fabless vendors. In fact, the foundries will require more fabless design houses to keep them in business. It is also worth pointing out that the foundry model is more complicated for GaAs than for silicon. Most silicon foundry work involves digital VLSI, with simple on/off gates, large die sizes, 8-inch (or larger) wafers, mature processes and designs that are easily ported from one foundry to another. A lot of GaAs foundry work involves analog ICs that depend on transistor characteristics, which are in turn closely related to process parameters, especially for HEMTs (the properties of HBTs are more closely tied to the epitaxial layer structure). This reduces the level of portability between foundries, and can lead to specialization. Nevertheless, the demand for foundry services looks set to rise, and both foundries and fabless companies will play an increasingly important role in the GaAs industry. A Fabless ViewRF Solutions A number of companies in the GaAs industry are focusing their efforts on design and utilizing foundry services for their manufacturing needs. Compound Semiconductor spoke with Steve Richeson, CEO of RF Solutions, a fabless design company based in Atlanta, Georgia. "Four years ago, fab capacity was the main constraint for GaAs ICs in the wireless industry," says Steve Richeson. "Starting about 18 months ago, fab capacity has increased rapidly, and the primary constraint is now the availability of designers." RF Solutions has about 35 employees and has grown out of Georgia Tech, which creates more RFIC designers than almost anywhere else. "It takes longer to make an IC designer than it does to make a fab," says Richeson. "We think that design will continue to be the primary constraint in the industry for the next six years." To compete with established GaAs manufacturers, RF Solutions has to differentiate itself, either in terms of market focus or by designing more efficiently. "Product designers at GaAs fabs have established channels to market and can push their designs out to the fab and make money," says Richeson. "Their focus is to innovate rapidly, whereas we have to be extremely efficient with our designs. When you have your own fab you re less concerned with that." RF Solutions target market is transceivers for wireless broadband devices operating at 26 GHz, focusing on high levels of integration, with lots of different functions on a single chip. Volume production in these markets is too far in the future to attract a great deal of interest from the incumbent GaAs manufacturers, says Richeson. "There aren t many public companies that can rationalize spending $14 million this year on below-the-line costs to develop MCMs for broadband wireless, which is what we re doing. The incumbents watch companies like us then snap them up as the market gains tractionthat s how R&D is done these days." The landscape of the wireless GaAs industry is also changing. "We re selling highly integrated RF modules to companies that make wireless networking equipment," says Steve Richeson. "In a couple of years there won t be any more wireless equipment companies that buy RF components and make wireless devices, only networking companies that buy RF blocks." Richeson is confident that gaining access to foundries will not prove to be a stumbling block. "With all the new fabs and capacity expansions, we don t see a constraint on the supply side," he says. "Also, we ve taken steps in building our Board of Directors to establish relationships with various fabs, to make sure we don t get left out."