When it comes to the world of semiconductor manufacturing, two terms often pop up: what is a foundry and what is a fab? While they sound similar—and sometimes even overlap in function—they play distinct roles in how the chips powering your devices are designed, produced, and scaled. In this post, we’ll break down the difference between a chip foundry an a chip fab, explore how each operates, and explain how both matter to your business. In this article we will explore:
- What is a Chip Foundry?
- What is a Chip Fab?
- How do they work?
- Why are they important to global business?
- How do they impact my business?
What Is a Chip Foundry?
Let’s start with what is a foundry. A chip foundry is a manufacturing facility that fabricates semiconductor chips, but doesn’t typically design them. Instead, foundries work with “fabless” companies—businesses that design chips but outsource production. When people ask what is a chip foundry, the answer is simple: they are contract manufacturers, turning digital blueprints into physical silicon wafers. While there are many semiconductor companies based in America, not all of them manufacture their own chips (especially the companies manufacturing AI chips). This is because, historically, foundries are very expensive and complex to start, but in 2025, the barrier to entry is the most accessible it's ever been.
What Is a Chip Fab?
Now let’s talk about, "what is a fab?" Short for “fabrication plant,” a chip fab is where semiconductor wafers are actually produced. The term "fab" is sometimes used interchangeably with "foundry," but there’s a subtle difference. While all foundries are fabs, not all fabs are foundries. So, what is a chip fab exactly? It’s a full-scale facility equipped to handle everything from photolithography to etching to packaging. A fab might be part of an integrated device manufacturer (IDM)—a company that both designs and manufactures chips in-house. In short, when you hear what is a fab, it's a manufacturing facility that both designs and manufactures computer chips.
How do they work?
Foundries and fabs work at the bleeding edge of technology. In a typical workflow, a fabless company sends its chip designs to a foundry. The foundry then uses its fab to etch, deposit, and build those designs onto silicon wafers through hundreds of precise, controlled steps. High-resolution optical inspection tools are critical throughout this process to ensure yield, performance, and reliability. No matter a foundry or a fab, the answer always includes meticulous quality control and nanometer-level scrutiny.
Why are they important to global businesses?
Understanding chip foundries and chip fabs and why they are essential in today’s global economy is important for all business leaders. These facilities are the backbone of every modern device—phones, cars, medical tech, industrial machinery—you name it. As supply chains grow more complex, companies rely heavily on foundries and fabs to keep innovation moving. When geopolitical tensions or equipment delays hit the semiconductor world, the ripple effect is massive. Knowing the difference between a foundry and a fab helps business leaders plan smarter, source better, and innovate faster.
How do they impact my business?
If you are in business in 2025, you are using equipment that was made in a chip foundry or a chip fab. With ongoing global changes, it is very important to know where your technology is made and how it impacts your business. To learn more, contact us to schedule a consultation or demo.