iTechGuides is reader-supported. When you buy through links on our site, we may earn an affiliate commission. As an Amazon Associate I earn from qualifying purchases. Learn more
A fabless chip company designs semiconductor products but has no or limited wafer-fabrication capability. It can sell chips without operating the factory that makes them: instead, it contracts with a foundry to manufacture wafers and may use a foundry or an outsourced semiconductor assembly and test provider (OSAT) for packaging and testing.
What “fabless” means
“Fabless” describes a company’s role and manufacturing capability, not whether it makes or sells semiconductor products. The Semiconductor Industry Association (SIA) defines a fabless company as “a semiconductor design company with no or limited wafer fabrication capability” (SIA glossary).
The qualification “no or limited” matters: fabless does not necessarily mean a company has no fabrication capability at all. The central distinction is that the company specializes in designing chips while relying on external manufacturing partners for wafer production.
Outdated Drivers Are Slowing You Down
One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchPC Slower Than It Used to Be?
A free scan shows the junk files, broken settings and background clutter dragging Windows down - then fixes them in one click.Free scan · Windows 10 & 11How a fabless chip gets made
Semiconductor production is commonly divided into three stages: design, front-end wafer fabrication, and back-end assembly, testing, and packaging. A fabless company focuses on design; its partners handle the manufacturing steps it does not perform itself.
#1 Best Overall
- Design: The fabless company develops the semiconductor product and its design.
- Wafer fabrication: A foundry manufactures the chip design on silicon wafers.
- Assembly, test, and packaging: A foundry or an OSAT provider may perform these downstream services. Some foundries and integrated device manufacturers also have in-house packaging operations, and may outsource some packaging work.
This division of work is known as the fabless-foundry model. It lets design companies specialize without having to establish and maintain their own full wafer-manufacturing operation. The SIA notes that leading-edge fabs can cost several billion dollars to construct, but that broad figure is not a universal cost for every facility or a quantified estimate of what a fabless company saves (SIA industry primer).
Fabless vs. foundry, IDM, and OSAT
The terms refer to different roles in the semiconductor supply chain. A company’s model is best understood by asking who designs the chip, who fabricates wafers, and who handles assembly, testing, and packaging.
| Model | Main role | Typical manufacturing arrangement |
|---|---|---|
| Fabless | Designs semiconductor products; has no or limited wafer-fabrication capability. | Contracts with foundries for wafer manufacturing and may rely on foundries or OSATs for assembly, test, and packaging. |
| Foundry | Manufactures chips on wafers for customer designs. | Provides wafer-fabrication services to fabless firms and can supplement other companies’ manufacturing capacity. |
| Integrated device manufacturer (IDM) | Designs, manufactures, and sells integrated circuits within a vertically integrated company. | Combines design and manufacturing within the business; these activities need not take place at one physical site. |
| OSAT | Provides outsourced assembly, test, and packaging services. | Works downstream of wafer fabrication for chip makers and foundries. |
These are business-model distinctions, not a guarantee about cost or performance. Specialization can spare a fabless company the investment involved in building, maintaining, and upgrading a foundry, but the sources do not establish a universal cost saving compared with an IDM.
Does a fabless company make its own chips?
It designs the chips and may sell them, but usually does not fabricate the wafers itself. In everyday usage, “make a chip” can mean designing the product or physically manufacturing it. For clarity, distinguish chip design from wafer fabrication: a fabless company does the former and contracts with a foundry for the latter.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Examples and how to read them
The SIA’s ecosystem report has listed AMD, Broadcom, MediaTek, and Qualcomm as examples of fabless design companies. Those examples are a historical snapshot, not a current classification of each company’s operations. For a present-day classification, check the company’s latest filings or corporate description.
At its simplest, “fabless” answers who designs a chip and whether that company has wafer-fabrication capability. It does not mean that no one manufactures the chip, or that the designer does not sell it.
Quick Recap
Best Value
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
