What fabless means for your supply chain

May 2026Sascab Microsystems5 min read

If you buy silicon, sooner or later you care about how your supplier is organised. The industry's three models are not equivalent from a risk point of view.

The three models

IDM (Integrated Device Manufacturer). Designs and manufactures under one roof. It controls the whole process, but carries the fixed cost of operating plants — and the pressure to keep them loaded.

Foundry. Manufactures what others design. It has no products of its own; it sells manufacturing capacity.

Fabless. Designs and does not manufacture. It contracts production out to a foundry. Its asset is intellectual property, not a plant.

Where the risk sits in each case

For a buyer, the practical difference is in what breaks when something breaks.

• With an IDM, design and capacity are coupled. If their plant has a problem, your supply has a problem, and there is no natural second source.
• With a fabless supplier, the design is portable in principle. If the foundry fails, migration is possible — expensive and slow, but possible.
• With licensed IP instead of a component, you do the integrating. The dependency on a physical part disappears: what you receive is files.

That last point is the one most often overlooked. Licensing an IP block instead of buying a chip does not eliminate supply risk — it moves it into your own relationship with your foundry, which you probably already manage.

What to ask a fabless supplier

1. Is the design portable across processes, or tied to one specific foundry?
2. What exactly do I receive: RTL, a model, documentation, verification vectors?
3. What happens to my licence if the company disappears? Is there source code escrow?
4. How much of the design can I inspect before committing?

The fourth separates suppliers fastest. A core published under an open licence answers it without a non-disclosure agreement, and incidentally reduces exposure on the other three: if you can read the algorithm, your dependency on the supplier is smaller than it would be with a black box.

Why we chose to be fabless

For a young company the immediate reason is capital: a plant costs orders of magnitude more than a design team, and that capital is not recoverable if the product does not find a market.

But there is a second, less obvious reason. With no plant to fill, there is no pressure to sell volume in order to amortise idle capacity. We can afford to tell a customer that our block is not right for their case — and sometimes that is the correct answer.