Tuesday, November 27, 2007

More Analyst Expect TSMC to Make AMD’s Processors

As Advanced Micro Devices strongly denies outsourcing of its central processing units’ (CPUs’) manufacturing to Taiwan Semiconductor Manufacturing Co. (TSMC), more analysts predict the forthcoming deal between the world’s second largest maker of x86 microprocessors and the world’s top contract semiconductor maker.

Two investment banking firms, Caris & Co. and Lehman Brothers, are quoted as saying by Barron’s magazine’s Technology Trader section that AMD is considering to outsource some of its production to TSMC and is also looking forward to outsource more of its chips to Chartered and, perhaps, even to IBM. While the rumours are hardly new, they come from totally different sources amid the facts that AMD announced its “asset lite” strategy earlier this year and also postponed its financial annual analyst day from November to December, which may indicate that the company is working on a move that may not be expected.

Caris & Co.’s Daniel Berenbaum is reported to have said that a partnership between the two companies is “more advanced than expected,” and that TSMC will start pilot production for several non-mainstream AMD products in the first half of 2008, much sooner than the analyst firm expected. According to Caris & Co, the products involved include CPUs as well as Fusion/Falcon chips that integrate both graphics and x86 cores, both targeted at the low end of the PC market.

It should be noted that Mr. Berenbaum does not expect AMD to sell of its foundry to TSMC and that the potential deal “falls well short of the radical ‘fab light’ strategy that some were hoping for”.

Tim Luke from Lehman Brothers reported, according to the magazine, that AMD and TSMC may be planning an arrangement under which the latter would produce low-cost microprocessors for the former. Besides, it is said, AMD may be considering outsourcing to Chartered or IBM.

“We believe that the initiation of this long awaited manufacturing partnership may begin with a limited volume with some technical issues remaining, but that it is likely to be viewed as constructive for AMD,” the report from Lehman Brothers reads.

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. Still considering that manufacturing technologies by contract makers are continuously improving, while AMD’s Fusion chips are not intended for high-performance applications, TSMC may truly have chances to land orders from AMD.

AMD did not comment on the news-story.

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