Rethinking the IDM Business Model: The 12-inch Wafer Challenge

Shall we rethink about the advantage of 12” and IDM business model?

 

In the past, when 12” was not prevalent for IDMs (except Intel), having 12” capacity is a privilege that helps lower cost.

However, now most Asian foundries have 12”, and especially Chinese ones hold huge cost advantage - land subsidy from gov’t , able to tolerate low gross margin, easier for employees to work overtime flexibly. In such case, the cost difference of fabless using Asian IDMs vs Western IDMs has widened. This is evidenced by that more European IDMs choose to use Chinese foundry or collaborate with Chinese local IDM.

Going forward, if a 12" IDM in Europe/US would continue see margin deterioration, shall they continue to expand or give up now? But no matter what, one thing certain is all administration want the high-class advanced 12" at their home, but don't want too much mature 12" at backyard - and this kind of mindset is exactly why no administration had successfully lured the whole semiconductor cluster back - without the talent trained from mature 12" footprint, there would be insufficent operation/engineering staff to migrate to advanced node.

It is a question not only about how much money to be poured in, but about whether an administration has the determination to spend time long enough to foster a real industry.