Leaving PenangThin moat

Analog Devices (ADI) — moat facet

ADI sold its Penang test and assembly site in 2026 and relies on the Philippines, Thailand and subcontractors, keeping only the wafer processes that are hard to copy.

The final steps of making a chip, testing and packaging, have moved around ADI's map. In the third quarter of fiscal 2026 the company "completed the sale of a subsidiary in Penang, Malaysia, which included its facility and certain equipment previously classified as held for sale"1, recording a gain of about $24.2 million2. The site covered 697,000 square feet of wafer probe, testing, assembly and engineering space3.

Analog Devices property, plant and equipment in Malaysia ($M)123.6FY2023108.3FY202436.9FY2025Analog Devices Form 10-K FY2025, long-lived assets by country
Two-thirds of the Malaysian plant gone in a year, then the site sold.

The balance sheet shows the exit. Property, plant and equipment in Malaysia was $123.6 million at the end of fiscal 2023, $108.3 million in 2024 and $36.9 million in 20254. Testing now runs mainly in the Philippines and Thailand, where ADI had $433.0 million and $263.9 million of plant at the end of fiscal 20255, and the company says it makes "extensive use of third-party subcontractors for the assembly and testing of our products"6.

Why sell? The 10-K does not say, and a reader should not invent a reason. What it shows is a company that keeps what is distinctive, the wafer processes in its own fabs, and is willing to move or outsource the rest. Testing is valuable but not unique; many companies can do it.

The pattern fits the hybrid model: own the scarce steps, buy the common ones. It lowers capital needs and gives flexibility when tariffs or trade rules change where products should be finished.

The risk is in the other direction. If ADI begins selling or outsourcing wafer fabs as well as test sites, the model will have become fabless by stages. The sign would be internal fab space falling while revenue rises, visible in the properties list of the next 10-K.

Moat trajectory: Holding steady

Malaysia PP&E $36.9M in FY2025 from $123.6M in FY2023; Penang sold Q3 FY2026.

The number that tests this moat
Reported
Special charges, net, latest quarter
a $24.2M credit (Q3 FY2026, including the Penang gain), against $69.98M of charges in FY2025

The cost of reshaping the footprint; charges above $100M a year would mean restructuring is becoming routine.

Source: Analog Devices Q3 FY2026 results release ↗
⚠ Threats to the moat
⚠ THREAT 01
Test and Assembly by Subcontractors
ADI's final test and assembly runs in the Philippines, Thailand and at subcontractors, so trade rules and local disruptions can hold up finished…
References
  1. ReportedIn the third quarter of fiscal 2026 the company "completed the sale of a subsidiary in Penang, Malaysia, which included its facility and certain equipment previously classified as held for sale", recording a gain of about $24.2 million.
    Analog Devices Form 10-Q for the quarter ended 1 August 2026 - end-market and channel revenue, the Empower acquisition, the Penang sale, the buyback authorisation and the chief operating decision maker. — Q3 FY2026 · publ. 19 August 2026 · source ↗
  2. ReportedIn the third quarter of fiscal 2026 the company "completed the sale of a subsidiary in Penang, Malaysia, which included its facility and certain equipment previously classified as held for sale", recording a gain of about $24.2 million.
    Analog Devices Form 10-Q for the quarter ended 1 August 2026 - end-market and channel revenue, the Empower acquisition, the Penang sale, the buyback authorisation and the chief operating decision maker. — Q3 FY2026 · publ. 19 August 2026 · source ↗
  3. ReportedThe site covered 697,000 square feet of wafer probe, testing, assembly and engineering space.
    Analog Devices Form 10-K for fiscal 2025 (year ended 1 November 2025) - manufacturing, wafer sourcing, fabs and properties. — FY2025 · publ. 25 November 2025 · source ↗
  4. ReportedProperty, plant and equipment in Malaysia was $123.6 million at the end of fiscal 2023, $108.3 million in 2024 and $36.9 million in 2025.
    Analog Devices Form 10-K for fiscal 2025 (year ended 1 November 2025) - manufacturing, wafer sourcing, fabs and properties. — FY2025 · publ. 25 November 2025 · source ↗
  5. ReportedTesting now runs mainly in the Philippines and Thailand, where ADI had $433.0 million and $263.9 million of plant at the end of fiscal 2025, and the company says it makes "extensive use of third-party subcontractors for the assembly and testing of our products".
    Analog Devices Form 10-K for fiscal 2025 (year ended 1 November 2025) - manufacturing, wafer sourcing, fabs and properties. — FY2025 · publ. 25 November 2025 · source ↗
  6. ReportedTesting now runs mainly in the Philippines and Thailand, where ADI had $433.0 million and $263.9 million of plant at the end of fiscal 2025, and the company says it makes "extensive use of third-party subcontractors for the assembly and testing of our products".
    Analog Devices Form 10-K for fiscal 2025 (year ended 1 November 2025) - manufacturing, wafer sourcing, fabs and properties. — FY2025 · publ. 25 November 2025 · source ↗
Sources
Generated September 29, 2026