Foundry model

In microelectronics, the foundry model refers to the separation of a semiconductor fabrication plant operation (foundry) from an integrated circuit design operation, into separate companies or business units.

Although many companies continue to both design and manufacture integrated circuits (achieving efficiency through vertical integration), these integrated device manufacturers (IDMs) are not alone in the marketplace. Economic forces have led to the existence of many companies that only design devices, known as fabless semiconductor companies, as well as merchant foundries that only manufacture devices under contract by other companies, without designing them.

Integrated circuit production facilities are expensive to build and maintain. Unless they can be kept at nearly full utilization, they will become a drain on the finances of the company that owns them. The foundry model uses two methods to avoid these costs: fabless companies avoid costs by not owning such facilities. Merchant foundries, on the other hand, find work from the worldwide pool of fabless companies, and by careful scheduling, pricing, and contracting keep their plants at full utilization.

Originally, microelectronic devices were manufactured by companies that both designed and produced the devices. This was necessary because manufacturing involved tweaking parameters, precise understanding of the manufacturing processes being used, and the occasional need to redesign. These manufacturers were involved in both the research and development of manufacturing processes and the research and development of microcircuit design.

...
Wikipedia