AI, Business Strategy, and Ethics Practice Exam

In the semiconductor world, a company that designs GPUs but outsources fabrication to a foundry is described as fabless. The essential idea is that the company focuses on the digital design and intellectual property of the chip, while the actual manufacturing—the expensive, complex process—is handled by a dedicated foundry like TSMC. This separation allows firms to innovate in design without building and maintaining fabrication facilities.

This model contrasts with an IDM, which designs and manufactures its own chips in-house; foundry-only firms, which provide fabrication services but do not design chips themselves; and Original Design Manufacturers, which are typically design-and-manufacture providers for other brands, often focusing on contract manufacturing for a brand owner. In the GPU example, the designing company owns and develops the GPU architecture and IP, while the production is done by the foundry, matching the fabless approach.