gross margin

Gross margin is **revenue minus cost of goods sold (COGS), expressed as a percentage** of revenue. It measures how efficiently a semiconductor company converts revenue into profit before operating expenses. **Formula** Gross Margin = (Revenue - COGS) / Revenue × 100% **Semiconductor Industry Gross Margins** • **TSMC**: ~53-55% (foundry, high volume, capital intensive) • **NVIDIA**: ~70-75% (fabless, high-value AI chips, massive pricing power) • **Intel**: ~40-45% (IDM, includes manufacturing costs) • **Qualcomm**: ~55-60% (fabless, licensing revenue boosts margin) • **Analog Devices / TI**: ~65-70% (analog chips have long product lifecycles, low cost) • **Memory (Micron, SK Hynix)**: Highly cyclical—ranges from **-10% to +50%** depending on supply/demand **Why Margins Vary** **Fabless companies** (NVIDIA, AMD, Qualcomm) have higher gross margins because they don't carry fab depreciation in COGS. **IDMs** (Intel, Samsung) include manufacturing costs. **Analog companies** achieve high margins through long-lived products with low R&D cost per unit and captive fabs running on fully depreciated equipment. **What Affects Gross Margin** **Product mix**: Higher-value products improve margin. **Utilization**: Running fabs below capacity increases cost per wafer (fixed costs spread over fewer wafers). **Yield**: Higher yields mean more good dies per wafer, reducing cost per chip. **Pricing power**: Unique products with no alternatives command premium pricing. **Technology node**: Leading-edge manufacturing has higher cost but enables premium pricing for performance-leading products.