Fabless Design Firms

Actor Type: Producer (fabless) Breaks When: Product failure; supply constraints Capital Intensity: High (R&D) Cash Flow Stability: Hit-driven Economic Nature: IP ownership Margin Driver: Product differentiation Performs Best When: Successful launches Pricing Power: Moderate Primary Function: Design & market chips Primary Risk Transfer Mechanism: None (self-insured) Primary Risks Held: Market & R&D risk Public / Private Mix: Mostly public Representative Firms: NVIDIA; Qualcomm; Broadcom; AMD Residual Risk After Transfer: High Revenue Model: Chip sales / IP licensing Typical Margin Profile: Very wide Value Chain Segment: Upstream Who Ultimately Bears the Risk?: Shareholders