Analog Devices is investing billions in a hybrid manufacturing strategy that blends internal and external production. This approach aims to mitigate supply chain risks, enhance flexibility, and increase utilization rates amid a global semiconductor demand shift.
A Hybrid Model for Resiliency
Semiconductor giant Analog Devices (ADI) is doubling down on a hybrid manufacturing model designed to optimize production and shield against regional supply disruptions. The approach, highlighted in the company’s Q4 earnings call, combines in-house production with partnerships, notably with Taiwan Semiconductor Manufacturing Company (TSMC), to secure advanced 300mm wafer capacity in Japan.
This strategy enables Analog Devices to shift (“swing”) production capacity between its internal and external facilities, positioning the company to capture 70% of its revenue through this flexible model in the coming years, CFO Richard Puccio explained. This adaptability, particularly during industry downturns, has proven critical for maintaining operational momentum.
Strategic Investments Across Global Facilities
Since acquiring Maxim Integrated in 2021, Analog Devices has invested $2.7 billion in capital expenditures to expand its capacity and reinforce its manufacturing footprint. In the U.S., the company plans to invest $1 billion in its Beaverton, Oregon, plant to double capacity and convert it to a full 8-inch fab. In Ireland, Analog Devices is developing a 45,000-square-foot research and development and manufacturing facility in Limerick to triple production capacity. Meanwhile, in Camas, Washington, the company is enhancing its facilities to double production capacity.
Additionally, Analog Devices secured a long-term agreement with TSMC through its Japan-based subsidiary to boost wafer node production, bolstering its global supply chain resilience.
Despite a 23% year-over-year drop in Q4 revenue to $2.4 billion, the company’s CEO, Vincent Roche, emphasized the resilience of its business model, with operating margins exceeding 40%. By the end of FY 2025, ADI expects to double its output capacity while normalizing capital expenditures to 4%-6% of revenue, supported by the U.S. CHIPS Act and the European Chips Act.
Analog Devices’ hybrid manufacturing model demonstrates a forward-thinking approach to managing supply chain uncertainty while building long-term resilience. Balancing internal production with strategic external partnerships allows the company to remain agile, even amid industry headwinds. As global semiconductor demand evolves, this dual approach could become a blueprint for navigating future disruptions.
