A technological example of backward integration would be the common practice of a software publisher buying a software development house. In the semiconductor industry, a company that designs and manufactures chips is called an Integrated Device Manufacturer, or IDM (like Motorola, Samsung, or, for the time being, AMD); a firm that designs semiconductors and contracts out to have them made is called Fabless (i.e.: having no fabrication, like NVIDIA) and the businesses to which the manufacturing is contracted out are called Merchant Foundries, or just Foundries. These aren’t hard and fast definitions: many IDMs also offer Foundry services.
Actually, that is how the Foundry idea got started. Fabless companies, along with government and academic researchers, relied on excess capacity from IDMs. The IDMs were happy to keep their expensive fab lines running when they didn’t need them for their own products, but the Fabless customers could get left out in the cold if the capacity was needed internally. Also, if you just designed a mobile phone chip far better than what is out there, you might be wary of sending the plans off to Motorola to get it made, an immense complication in terms of nondisclosure and non-competition components of a contract.
Until the Taiwan Semiconductor Manufacturing Company, the first “pure-play" Foundry, hit the scene in 1987, that was the situation for Fabless companies. TSMC success and the other Foundries that have started since lend some credence to the business model.