Fabless-foundry partnership: models and analysis of coordination issues

The fabless-foundry partnership for integrated circuit (IC) manufacturing business is expected to grow from 12% in 1995 to approximately 17% (i.e., $45B) of the total IC market in 2000. The growth of this market will be even more significant for subquarter micron technologies-whose growth is driven by the multimedia industry. The customer base will extend beyond traditional fabless IC companies into vertically integrated IC manufacturers and system vendors. Given the rate of growth and the high technology profile of products, substantial investments in capital, technology, and skilled workforce have to be dedicated and managed effectively for ensuring a successful partnership. In this paper, we outline the potential coordination problems that may arise in such partnerships, and propose a framework for analyzing issues related to yield information sharing and yield improvement. Our analysis indicates that fabless-foundry contracts that are based on a fixed number of good dies, and better yield information are more profitable.