FABLESS TO FAB-LITE: AN EMERGING TREND?
Each year brings new challenges and opportunities for the global semiconductor industry. What remains constant though is a company’s need to produce the right product, in the right quantity, on time, and at a competitive price. As semiconductor companies encounter supply chain disruptions, IP breaches, currency fluctuations, and market downturns, they are continually compelled to rethink their manufacturing strategies. This can lead to unexpected, innovative transactions that occasionally have broader implications for the industry at large.
One such transaction came in during the last market downturn of 2009. Recognizing that a pause in the market can create opportunities in manufacturing, Texas Instruments shrewdly purchased Qimonda’s 300mm tool line for cents on the dollar, and used the equipment to establish the world’s first 300mm analog fab.
A more recent unexpected, innovative transaction is the recently announced AOS / IDT deal. Alpha and Omega Semiconductor Ltd. (AOS) announced that by January 31, 2012, it intends to exercise its option to buy IDT’s 200mm semiconductor fabrication plant located in Hillsboro, Oregon. A fabless company buying a fab is a bold approach, and one that is counter-intuitive in today’s market. So this begs the questions: Could a fab‐lite model make sense for other fabless companies? What are the key deciding factors behind this new approach? And are we likely to see more transactions of that kind in the future?
It is too early to say whether the AOS acquisition is a pre-cursor to a broader fabless to fab-lite trend. However, innovative deal structures such as sale / leaseback and options to purchase will likely lead to more uncommon results. These structures can help semiconductor companies maintain margins, avoid losses during product qualification and ramp, and in some cases avoid the necessity to carry operations on their books until the operation is cash-flow positive. At ATREG, we believe that the combination of these innovative deal structures with the already low pricing for older generation manufacturing assets sets the stage for more fabless companies choosing to in-source some of their manufacturing. Time will tell how this new trend will impact manufacturing and price points for semiconductor assets, and what strategies companies adopt around their manufacturing plants moving forward in 2012. What is clear is that by exploring manufacturing alternatives and potential transaction structures, companies are in a better position than ever before to make more informed decisions that address key business objectives and impact long-term success.
Sincerely,
Stephen Rothrock
President / Managing Principal
ATREG APPOINTS INTERNATIONAL ADVISORY BOARD
One year after becoming a successful independent entity, ATREG is pleased to announce that it has appointed a new international Advisory Board that will provide support across the full spectrum of ATREG’s business activities. It is made up of five high-profile current and former semiconductor executives and influencers from North America, Europe, and Asia who have previously helped lead major global semiconductor organizations. Each of them brings a unique set of skills, interests, expertise, and relationships to complement the ATREG team, and help steer ATREG’s future growth and business direction.
ATREG is pleased to welcome to its international advisory board:
- Hideto Goto, Senior Advisor, ASE Japan / Management Advisor, Unison Capital (formerly Managing Director, NEC Semiconductors UK, and Board Member / Executive VP, NEC Electronics)
- Allen Lu, President, SEMI China (formerly China Fab Program Manager, Intel Technology Manufacturing and Engineering Group)
- Werner Mohr, Senior Semiconductor Advisor / Consultant (formerly Head of Manufacturing Engineering, Semiconductor Division, Siemens AG, and Head of Corporate Logic, Infineon Technologies AG)
- Jack Saltich, Senior Semiconductor Business and Technology Executive (formerly VP and GM of Advanced Micro Devices’ Dresden European Electronics Center)
- David Smukowski, CEO, Sensors in Motion (formerly Managing Director, Boeing Ventures)
ATREG SECURES SALE OF FREESCALE’S EAST KILBRIDE, UK FAB
ATREG has facilitated the successful sale and partial leaseback of the 800,000 sq. ft. Freescale Semiconductor facility located on 26 acres in East Kilbride, Scotland to Edinburgh-based Clowes Developments (Scotland) Limited. Freescale is leasing back 70,000 sq. ft. of campus offices from Clowes for research and development, applications engineering, systems architecture, and product engineering purposes.
This agreement maintains Freescale’s presence at the location, while offering Clowes significant scope to redevelop the rest of the site. In December 2010, ATREG advised Freescale Semiconductor on the sale of its other Scottish facility located in Dunfermline to Shepherd Offshore Services Ltd.
ATREG TO SPEAK AT THE INTERNATIONAL ELECTRONICS 2011 FORUM IN SEVILLE, SPAIN
Why does the global semiconductor industry need innovative deal structures, and what do these exactly look like? These are some of the questions that ATREG’s Senior Vice President and Principal Doug Barrett will address at the upcoming International Electronics Forum to be held October 5-7 in Seville, Spain. In this presentation based on real-world customer case studies and 12 years of experience providing semiconductor companies with strategic advice with regards to manufacturing capability, ATREG will discuss how innovative deal structures can make depreciated fab sales work and touch on how these new approaches may lead to a fabless to fab-lite trend.
Inaugurated in 1991 by consulting and market research firm Future Horizons, Ltd., the International Electronics Forum is an annual meeting typically attended by over 120 CEOs and senior executives of semiconductor companies, microelectronics companies, semiconductor equipment and materials firms, electronics equipment and systems manufacturers, start-up organizations, government and industry officials, as well as investment firms. Email us to request a copy of our presentation.