Fabless chip design

Fabless chip design is the way of making chips in which a company designs the chip but does not own the factory, called a fab, that manufactures it. The company pays a contract chip factory, called a foundry, to make the chips for it. Most chip companies in the world work this way. Many of them design their chips in Bengaluru, Hyderabad, Pune or Noida. The foundries they use are mostly in Taiwan, with others in South Korea, China and the US.

Here is how it works in general. The chip company's engineers design the chip in software over one to three years. They decide what it must do, describe it in a hardware description language, test the design and draw its physical layout. This process is the VLSI design flow. They often license ready-made blocks, such as a processor core, from other companies. Then they send the finished layout to the foundry. This hand-over is called tape-out. The foundry prints the design onto silicon wafers, in a process that takes about three months. Another firm cuts the wafers into chips, packages them and tests them. The chip company then sells the chips to device makers.

Why not build a factory? A factory for the most advanced chips can cost well over ₹1 lakh crore, and it needs a steady stream of orders to pay for itself. A foundry spreads that cost over hundreds of customers. The fabless company spends its money on engineers and design software instead. India has many chip design engineers, and the government now supports Indian fabless start-ups with design incentives. India's first large chip factory, which makes chips on silicon wafers, is being built at Dholera in Gujarat. Plants that package and test chips are starting production in Gujarat and Assam.

Take, for example, the main chip inside a phone. A system-on-chip is designed by a chip company, made by a foundry and fitted by the phone maker.

Consider a start-up that puts a mobile tower's signal processing onto one chip. Its 5G baseband chip is designed by its own engineers and made in a foundry it does not own.

Say a company makes the switching chips inside data-centre equipment. Each networking chip it sells must first win a place in an equipment maker's product, which is called a design win.

How is a fabless company different from a foundry and from an integrated device manufacturer? A foundry makes chips for others but designs none of its own. An integrated device manufacturer, or IDM, designs chips and also makes them in its own factories. A fabless company only designs.