Saturday, November 17, 2007

AMD Rumoured to Consider Selling Off Fab 38 to TSMC

Advanced Micro Devices, currently the No. 2 maker of x86 central processing units (CPUs), is reportedly in talks with Taiwan Semiconductor Manufacturing Co. (TSMC) over the transition of Fab 38 to the world’s largest contract semiconductor manufacturer. Even though the rumour has been circulating for months and is generally considered as an improbable one, there may be changes in AMD’s way of managing its business.

“We had heard this speculation before but those talks were deadlocked on approval by German officials. We now hear that the talks are on again, probably with greater clarity from the German authorities and further review of AMD’s outsourcing strategies,” said John Lau, an analyst for Jefferies & Co., in a note, reports EE Times web-site.

In particular, it is claimed that AMD is looking forward to either sell off its Fab 30, which should be converted to Fab 38 that will be processing 300mm wafers and capable of producing 45nm or 65nm chips in the coming years, completely, or to find an investor who will be operating the fab together with AMD, speculates FabTech web-site. In a situation when a joint-venture between AMD and, for example, TSMC will operate the fab, AMD will trim its manufacturing-related financial losses and will lower the cost of improving its manufacturing facilities.

For many years Advanced Micro Devices has constructed leading-edge fabs to manufacture chips, developed state-of-the-art fabrication technologies, created advanced microprocessors and had to manage their manufacturing, packaging and delivery to customers. While even a decade ago the whole process was rather complex, it allowed AMD to become one of the world’s largest semiconductor companies and obtain revenues that fabless semiconductor developers could only dream about. But the times change and in the most recent quarter AMD’s earnings were roughly $1.6 billion, whereas revenue of fabless Nvidia Corp. reached nearly $1.2 billion, moreover, unlike AMD, the graphics chip designer Nvidia reported a huge profit, whereas the x86 CPU maker claimed another loss. Therefore, it may be logical for AMD to think about become a company that develops and sells and cease to be the one that develops, manufactures and sells.

Contract semiconductor manufactures like TSMC and United Microelectronics Corp. (UMC) develop so-called bulk process technologies that are tailored for usage model of a chip, but are not tailored for its micro-architecture. But supplying state-of-the-art x86 chips requires developers of those chips and appropriate process technologies to work very closely together and tailor both for each other. Therefore, AMD would need work very closely with TSMC and share its intellectual property to get its chips produced. On the other hand, ATI, graphics product group of AMD, is already a client of TSMC and produces very complex graphics chips using manufacturing capacities of the contract Taiwan semiconductor manufacturer. Moreover, as soon as AMD gets its code-named Fusion microprocessors with built-in graphics chips ready, it will have to decide whether it is easier to produce them using its own fabs, or outsource production to other makers.

Earlier this year AMD denied possibilities of selling off its manufacturing facilities in Germany. The company did not comment on the current news-story.

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