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AMD Businesses Hardware

AMD Considering Getting Out of Fabrication Business 229

Posted by Zonk from the say-hey-hey-goodbye dept.
mytrip writes "2007 has not been kind to AMD, but it's surprising to hear rumours that they might be considering outsourcing chip fabrication. Analysts are predicting that AMD will try to cut costs by moving some fabrication elements out of the company by early next year. 'One Citigroup analyst is predicting a "transformational move" that would result in AMD's lower-end CPUs being manufactured by a third party and possibly selling off part or all of its Dresden, Germany facility. Another report from Goldman Sachs outlines the investment firm's belief that the company will leave manufacturing completely in the hands of third parties.'"
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AMD Considering Getting Out of Fabrication Business More

AMD Considering Getting Out of Fabrication Business

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  • What a Busines (Score:5, Funny)

    by SEWilco ( 27983 ) on Tuesday June 19, 2007 @10:43PM (#19574503) Journal
    There's no Busines
    Like Show Busines...

  • Busines? (Score:3, Informative)

    by thesolo ( 131008 ) * <slap@fighttheriaa.org> on Tuesday June 19, 2007 @10:43PM (#19574509) Homepage
    "AMD Considering Getting Out of Fabrication Busines"

    You know, I even did the good little /. helper routine and emailed the on-duty editor, and this still went live with a blatant typo.

    I'm not trying to sound like a jerk, but come on editors, this is basic stuff here.

  • I hate to say it... (Score:5, Insightful)

    by jhfry ( 829244 ) on Tuesday June 19, 2007 @10:48PM (#19574541)
    but this might actually be a "good thing."

    Why? Because the main reason that no one but AMD can curretnly compete is because of the hight cost of the fab's... If third party fabs, capable of producing transistors the size that Intel makes, start springing up around the world we will probably see other design companies come out of the woodwork and start producing innovative and competitive chip designs.

    If Via, for example, could produce chips in a 65nm fab in reasonable volumes... they might compete for the laptop market.

    It may not be the best move for AMD, but for the buying public it should encourage innovation and competition. Which ultimately benefits everyone.
    • tart springing up around the world we will probably see other design companies come out of the woodwork and start producing innovative and competitive chip designs.

      From someone who adores FPGA, I would welcome the possibility of getting custom chips fabricated at a reasonable rate. I have some ideas I'd love to see in silicon, but the cost is just horrendous. Guess it'll sit in VHDL till this day comes.

      • Re: (Score:3, Interesting)

        by Simon80 ( 874052 )
        Neither ATI nor NVidia fab their own chips, so I don't think this heralds a drastic reduction in price of low quantity orders.

        • Re: (Score:2)

          by Reziac ( 43301 ) *
          I'm wondering what this does to quality control. ISTM nothing outsourced is ever as carefully monitored as what's made in a company's own back yard... after all, if the outsourced product is crap, it can be blamed on the supplier instead of on one's own company.

    • Re:I hate to say it... (Score:5, Interesting)

      by suv4x4 ( 956391 ) on Tuesday June 19, 2007 @11:11PM (#19574683)
      but this might actually be a "good thing."
      It may not be the best move for AMD, but for the buying public it should encourage innovation and competition. Which ultimately benefits everyone.

      Don't even kid about it. It's a path that once taken will be very hard to revert for AMD. Before you know it they'll outsource the rest of their fab, then sell their design to someone, and all that will be left, is a patent troll.

      Last time when we discussed AMD's poor financial performance, I critized a guy who said we should buy AMD to support them, or the future may be quite grim, with Intel (being de facto complete monopolist on the x86 market) raising prices and stagnating.

      When I read THIS article, I gotta say, that fear makes me think more like this guy and I'm suddenly feeling the need to buy AMD chips for the hell of it. I know it's wrong.

      I always suspected that if they continue performing badly, IBM could consider purchasing them and entering the market of x86 chips. Both companies have worked together for a long time and share lots of technologies, some fab and many processes and design decisions.

      Thing is, I didn't expect AMD to begin falling apart by itself, by selling some of its fab business. If they continue trying to minimize their losses by destroying themselves in this way, soon no one will want to have anything with them at all.

      What a sad fate.

      • Re:I hate to say it... (Score:4, Interesting)

        by cryptoluddite ( 658517 ) on Wednesday June 20, 2007 @12:09AM (#19574953)

        When I read THIS article, I gotta say, that fear makes me think more like this guy and I'm suddenly feeling the need to buy AMD chips for the hell of it. I know it's wrong.
        I've bought AMD and VIA chips for the last decade because the 10% difference in price or performance, depending on the time period, does not affect me much (so you get 31 fps instead of 33 who cares) and AMD has acted like a model company in comparison to Intel. AMD might as well be jesus when you put it up against Intel.

        It's called voting with your wallet. It's pretty much the only thing you as a single consumer can do to affect these large companies, the other being to spread the Word. Not only is it the right thing to do, it's your responsibility to consider who you are buying from.

        • Re: (Score:2)

          by spoco2 ( 322835 )
          That worked up until Intel Core... I was a AMD only buyer until then too, but now, Core uses less power, Core is faster at lower clock speeds, Core is just an all round nice guy in the CPU world, it does what it should do much better than AMD.

          AMD has no products to effectively compete and is bleeding money because they couldn't come to market quickly enough with an effective counter measure.

          Ditto for ATI, under the AMD banner, same problem... they just haven't kept up with the competition.

          From being an AMD

          • Re:I hate to say it... (Score:5, Interesting)

            by Enderandrew ( 866215 ) <enderandrew.gmail@com> on Wednesday June 20, 2007 @01:30AM (#19575391) Homepage Journal
            I was an AMD consumer for ages based on price and performance.

            I just built a new AMD rig however for two reasons.

            Firstly, At the very low-end price point, I found AMD still performed better for that price range. I bought a Brisbane dual-core proc for $59. It overclocks unfairly well, and the peformance I get out of it is insane given the price. I haven't dared really push it over the edge, but consider just the latest review off NewEgg.

            "This chip's a little beast, I've got the combo running stable (prime 16 hrs) @ 3106 (9.5,x326 @ 533 htt 3x) on air! "

            Again, we're talking a measly $59 USD.

            Secondly, it seems AMD got Intel dead to rights on their anti-trust suit. Several vendors and partners have offered credible evidence, and Intel is claiming their IT department deleted all pertinent email that would be the nails in said case. Again, they sound guilty as sin. I will not financially support such a company.

            Even if Intel offered slight performance increase for the money (which isn't the case here) I wouldn't buy their product.

            • Re: (Score:2)

              by yorugua ( 697900 )
              Well, my situation with AMD is as follows: about one or two years ago, I bought a AMD Athlon 64 x2 3800+, ASUS A8N Sli Premium mobo (top of the line mobo on those days, it has two IDE, SLI support, 8 SATA connectors, blablabla), nVidia 6500 PCI-Express 256MB RAM card. Of course, it is a socket 939 type mobo.

              The issue is: given the ongoing price cuts based on the AMD/Intel wars and the new Core Duo architecture, I would have willingly bought a faster CPU for my mobo or one with better virtualization support
          • That worked up until Intel Core... I was a AMD only buyer until then too, but now, Core uses less power, Core is faster at lower clock speeds, Core is just an all round nice guy in the CPU world, it does what it should do much better than AMD.

            Or, rather, it worked easily up until Core. Now that AMD is no longer top performance dog it's harder to justify a purchase beyond supporting a company flag.

            Now you have to decide whether the increase in benefits of an Intel processor is worth, well, supporting Intel.

            T

            • The point of voting with you wallet is that you purchase according to your own convictions. If your convictions place a price:performance ratio above corporate behavior, then so be it: don't look back.

              Corollary: either you have convictions, or you don't. Your actions demonstrate which is the case.

      • Re: (Score:2)

        by Grave ( 8234 )
        The only company other than Intel that could support the fabrication needs of AMD is IBM--no other company has the wherewithal or money to get the job done. AMD's Dresden fabs (and the one in New York that is under development) are very good. But they're not high enough capacity to keep AMD afloat at 25-30% market share, and they can't afford the downtime at any one of their fabs while retooling for a smaller process. So they have to milk as much as they can from each process generation, and this leaves
        • I could be way off base, I honestly don't know, but what about TI? Are they any where near the fab size of these chips?

      • Re: (Score:2)

        by Reziac ( 43301 ) *
        I had similar thoughts, winding up with "I wonder if this is the beginning of an exit strategy."

      • Don't even kid about it. It's a path that once taken will be very hard to revert for AMD. Before you know it they'll outsource the rest of their fab, then sell their design to someone, and all that will be left, is a patent troll.

        I doubt they sell their designs. Xilinx seems to be doing ok as an IP firm. They certainly seem to sell plenty of FPGAs (odds are there will be at least one or two Spartan FPGAs in some product in your house/apartment right now). Should also note that a small little company call

    • Since they now own ATI, AMD is already fabbing GPUs with TSMC. Gotta think a big part of the merger is taking that fabless model to the other chips where it makes sense. Does leveraging the TSMC link that ATI already has mean AMD is going fabless? Or, if they go with the new "Common Platform" of IBM, Chartered, Samsung, Freescale etc to provide additional capacity when needed, does that indicate a shift away from owning fabs? Yet on the other hand, you couldn't blame them for wanting to sell the Dresde

    • Re: (Score:3, Insightful)

      by Deliveranc3 ( 629997 )
      Unfortunately AMD has a strong relationship with IBM so they will likely moe their fabs over to their quasi-partner (perhaps with an agreement that IBM stay out of the consumer/low end server marketspace).

      Most third party fabs run in the 20-35nm range where flexbility is higher and diffrent products can be released simultaneously.

      I would prefer to see AMD stay in this and create an arm of their business that fabs and outsources fabbing to companies like SIS, NVIDIA etc who could benefit from larger dies

    • Re:I hate to say it... (Score:5, Informative)

      by MITEgghead ( 570541 ) on Tuesday June 19, 2007 @11:24PM (#19574745)

      In reality, there are already plenty of third-party fabs out there. For instance, TSMC. And they have a 65nm process and that's what ATI's new 2000 HD series is manufactured on. So AMD (which includes ATI) is already manufacturing a lot of chips through a third-party. Even more than that, the current lowest end AMD processors, the Geode family, which is being used for the OLPC is also already manufactured by a third-party.

      The only contention in this story is that AMD will be moving more low-end manufacturing to third-parties. The highest-end CPU's really have to be manufactured by the company itself. Not only does AMD have to stay as close to the bleeding edge as possible but they also have to have control enough to add certain devices or change certain design constraints. The change in volume to a TSMC or other third-party manufacturer from moving over some of AMD's manufacuting would not affect their bottom line or cost very much at all.

      In addition, there are plenty of companies making various chips for all kinds of purposes. The limiting factor for new entries into the general purpose processor business is not the fab technology . A company can find the few million to make the masks and start making runs but the number of engineers they would need to compete with a design from Intel or AMD is enormous and would take years. In addition, Via could make a chip at 65nm right now if they wanted to but they don't have the partners or the platforms or market for those chips so they're not going to do it.

      So while I'm looking forward to the day when there can be lots of players in the high-performance CPU business, the day is not here yet and this rumor, even if it were true, would do almost nothing to bring it closer.

    • The major limiting factor in x86 space is not fab cost but patents. Intel and AMD are hardly going to hand out free passes to compete in x86. It is far easier for most suppliers to work with something like ARM or PowerPC which are far more suited to better licensing deals.

      Both Intel and AMD seem to keep going through many wild gyrations that don't seem to make long term sense. For instance, both got into the mobile CPU business (Au1000 and XScale) and baled out.

      However, the change to outsorcing fab does mak

    • Re: (Score:3, Interesting)

      by MikShapi ( 681808 )
      The reason nobody buys AMD is because the delta in power consumption of an AMD CPU over a year compared to a similar core-based CPU is more expensive than the cost of the CPU itself.

      • Re: (Score:2)

        by HuguesT ( 84078 )
        Not quite,

        Assuming a 70W difference (more than what Intel claims [zdnet.com]) in TDP at 100% utilization (unlikely) and a 10c kWh (residential prices are lower, not to mention corporate rates), that works out to 50*0.001*24*365*0.1 = $43 for a year.

        Even if you double that to account for extra air-con costs, you're still far from it. The cheapest core-duo is around 200$. The above calculations are for high-end CPU, which cost hundreds more.

        In reality, CPU utilization average is generally nowhere near 100% over a whole y

        • Re: (Score:2)

          by Fweeky ( 41046 )
          TDP between Core 2 and AMD's current chips are about the same anyway; 65W. And AMD *still* have lower idle power use and less power hungry northbridges (because of the on-die memory controller).

          Of course the highest end parts all have higher TDP's, but if you're going for raw performance and don't care about price, you'll be getting a high end Core 2 anyway, at least for the time being.
      • Meanwhile back in the real world AMD produces Athlon 64 X2s with a TDP of 35W, while the lowest Intel can produce is 65W.

      • Re: (Score:2)

        by Dirtside ( 91468 )
        Nobody buys AMD? That's funny, my wife and I always buy AMD. In fact, I bought an AMD CPU about two months ago when I built a new gaming box. I guess you meant that *almost* nobody buys AMD. :)

    • Re:I hate to say it... (Score:5, Insightful)

      by jd ( 1658 ) <<moc.oohay> <ta> <kapimi>> on Wednesday June 20, 2007 @12:31AM (#19575061) Homepage Journal
      One CPU manufacturer, one GPU manufacturer... This is in no way a good thing. With ATI being bought out, the market has lost TWO major vendors, not one. Worse, Intel has dumped their network processor, Transmeta is dead, Freescale is practically dead, rival chips are dead or dying, Intel is reducing their diversity, are losing their knowledge-base and only change when competitors get close.

      We need more competition, not less. If there was ever a time when subsidies were a good idea, this would be it.

      • Re: (Score:3, Insightful)

        by soulhuntre ( 52742 )
        If there was ever a time when subsidies were a good idea, this would be it

        Yes, by all means use our tax dollars to support failure. That will really help!

      • Re: (Score:3, Interesting)

        by dreddnott ( 555950 )
        I weep openly at the mention of the DEC Alpha. I'm even touched by the apparent demise of the MIPS processor.

        The processors that came out of the Digital's collapse (UltraSPARC V, K7 and K8) were great processors but paled in comparison, especially considering the relative power of other CPUs on the market at the time (200MHz in 1992!).

        What else out there is both powerful and elegant? All I see around me are multicore monstrosities.
        • Those "multicore monstrosities" are really quite elegant inside, they just have an x86 interface. I think you speak of what you do not know.

        • The processors that came out of the Digital's collapse (UltraSPARC V, K7 and K8) were great processors but paled in comparison, especially considering the relative power of other CPUs on the market at the time (200MHz in 1992!).

          The Alpha cost huge money to produce and ran hotter than hell (I used to have a DEC Alphastation, whee. I hear you can get them for scrap costs now, but who wants one of those? They're antiques now) whereas Hammer is [relatively] inexpensive to make and has very low power consumptio

      • Re: (Score:3, Informative)

        by drew ( 2081 )

        With ATI being bought out, the market has lost TWO major vendors, not one.

        The market hasn't lost any major vendors yet...

        A lot of people seem to be getting really bent out of shape considering that all that has really happened is that a few analysts have speculated that AMD might continue doing something that it has already been doing for a while- i.e. outsourcing more of its low end chips to third party fabs.

    • Re: (Score:2)

      by crgrace ( 220738 )
      Almost as many chips are built by third parties today as built internally. Intel is the only American company still developing leading edge CMOS right now. THere are a lot of semiconductor design companies that outsource fabrication to Taiwan. Some of the biggest are Broadcom, Xilinx, Altera, Marvell.... It makes good business sense, since the huge captial and NRE costs of fabrication are spread over a lot of customers, lowering the price for all.... the big downside is that it makes it harder to differ
      • Ummm... what about IBM? Currently Samsung, Toshiba, Sony, Freescale, AMD, Infineon and Samsung all pay IBM money to do the R&D needed for advanced CMOS processing. The net result is that roughly 75% of the world's chips are produced with IBM technology.

        • Re: (Score:2)

          by crgrace ( 220738 )
          IBM is punting on pure CMOS after 65nm. I don't have the reference, but that is my understanding.

    • Capacity-limited AMD just BUILD a fab (Score:4, Informative)

      by Chris Burke ( 6130 ) on Wednesday June 20, 2007 @10:40AM (#19580851) Homepage
      No, it would not be a good idea, it would be a terrible idea, and it would basically mean AMD intended to get out of the CPU business if not completely liquidate.

      Outside of the last couple quarters, AMD's biggest problem has been production capacity. As in, they can't make enough chips, their market share is artificially capped, and as big players like Dell sell more AMD chips others are having a hard time buying enough.

      That is NOT a problem you solve by becoming fabless. The already have foundry deals with e.g. Chartered, simply to provide some flexible extra capacity. It CAN NOT replace their current capacity with foundry deals, much less expand it. Being Yet Another TSMC Customer is not how you maintain your position as a top cpu maker.

      The way you solve a capacity problem is by building another fab, which is what AMD just did. They built a whole new fab abutting the existing fab in Dresden, to the tune of $billions. $Billions that comes largely in the form of debt. You can't undo that by selling the fab because like a car the equipment begins to depreciate immediately. The only way to recoup that investment is to build parts in that fab and sell them. Now some analyst is saying that AMD is going to dump the fab, abandon that investment as a wash, and essentially give up the ability to have more than a pitance of marketshare while still carrying all the debt for building the fab? That's a great way to shore up the financials!

      Utterly. Retarded. Analyst.

      But I repeat myself.
  • as quality remains the same more power to them. If they can save money hopefully that'll be diverted to further R&D. It is a cut throat business, anything that can give them an edge is great as long as quality remains the same or gets better.

  • Queue up years of a true Intel monopoly. (Score:5, Interesting)

    by Spazntwich ( 208070 ) on Tuesday June 19, 2007 @10:49PM (#19574549)
    Lately, IBM and AMD have been the only firms out there capable of keeping up with Intel's process advances, with most of AMD's due in significant part to IBM. This move could well usher in an era of consumer level technology stagnation. We saw what Intel did while AMD was a non-competitor (how many damn generations did they ride the basic pentium pro architecture??) and how badly they react to renewed competition (Yeah, great job on both the 1.13ghz P3 and the whole Netburst architecture). Intel has just in the past year or so bothered to give consumers worthy processors, and now if IBM doesn't decide to take a look at the consumer market and keep Intel on its toes, well, we're fucked.

    Awesome news! Next up, Torvalds indicted on murder charges when a mailing list discussion gets so heated he sticks a pointer straight through a face? Netcraft confirmation of BSD's death? Ron Paul is assassinated as republicrats cheer in the streets? :'(
    • And if AMD can outsource their chip fabrication to Intel? (possibly with government anti-trust enforcement).

    • Re:Queue up years of a true Intel monopoly. (Score:5, Informative)

      by mr_mischief ( 456295 ) on Tuesday June 19, 2007 @11:30PM (#19574767) Journal
      I thought I read somewhere that TSMC was gearing up to do 32nm fabrication on contract for other companies. Here's a reference to assure me I have some sliver of sanity left [beyond3d.com]. 45nm by September, and 32nm by Q4 of '09. So it seems that at least one company might be an option for outsourcing some fabrication.

      Chartered Semi just signed another tech partnership with IBM, Samsung, Infineon, and Freescale. This one [charteredsemi.com] goes down to 32nm.

      UMC and TI are working on 32nm together [digitimes.com], too.

      Fujitsu, although not especially known for fabbing chips for third parties, is working on getting down to 32nm as well. They do some fabbing for others now.

      In any case, this story at Fabtech [fabtech.org] gives a much more reasoned and insightful look at the issues. They says it's likely AMD will outsource lower-end CPUs and continue to outsourc emuch of the GPU business as ATI already did. They may ramp up more outsourced work to Chartered than they currently do, and may share some fab space at Dresden and in New York. That's a far cry from going fully fabless.

      • Re: (Score:2)

        by pkulak ( 815640 )
        But how do you just outsource your lower-end chips? Aren't they just made with the fabs that made your high end chips 5 years ago?

    • how many damn generations did they ride the basic pentium pro architecture??

      The PPro is alive and well in the form of Core 2, of course with some incremental changes every generation. P3 was a damn good chip considering performance per watt, which is why it was used as the basis for Pentium M, which in turn was further developed into Core. Meanwhile, the P4 was a damn stupid chip that should never have been released, if only for environmental reasons.

  • Works for NVIDIA (Score:5, Informative)

    by daVinci1980 ( 73174 ) on Tuesday June 19, 2007 @11:07PM (#19574661) Homepage
    Being fabless works for lots of companies, for example NVIDIA [nvidia.com] (disclaimer: I work for the gentle green giant).

    There are lots of companies who only do fabrication, just as there are many other fabless semiconductor companies. With process shrinks occuring as quickly as they are today, it makes a lot of sense to let someone else (or several other someone elses) deal with the cost of developing fab facilities capable of the latest and greatest process size.
    • Does it? It would suck having a processor design finalized and not being able to fab it while factories are overhauled? Or having a new fab process come out and having no design to upgrade too?

      If the two aspects of AMDs business aren't lining up then that's terrible but it seems like they were doing a good job for a while, fab5 and 6 were coming online when the 754 and 939 were doing well.

    • Re: (Score:3, Interesting)

      by iew ( 802116 )
      No this is very dangerous! If AMD wants to survive it should not give up its fabs. Charter and the other foundry companies like TSMC, UMC, Grace have their own competitive pressures, and while AMD will be a prefered customer, the foundry fabs will not be totally dedicated to AMD. Put another way by having their own fabs, AMD can maintain bleeding edge process technology customized to its needs, with high logic performance and high density, and a very low manufacturing defect rate suitable for microproces
    • Has anyone considered that a company like AMD might be able to negotiate a zero-sum cost conversion to fabless?

      These companies that run 65 or 45nm plants for fabless semiconductor companies can run them non-stop at full capacity and never have to worry about exess inventory, demand, et al. They just fill their quotas for various manufacturers.

      The biggest problem these companies face is taking more orders than they are capable of producing therefore their clients face production delays. I'm sure you've h

      • This is why I love the stock market. You clearly don't have a good grasp about how fabrication works yet invest based on flaw assumptions. They're never running at "full speed" for a significant length of time. there is a long [and expensive] ramp up from design and test runs, especially when using a new process, to fully nominal yields. They can't just lease out fab time to be jumping around from project to project because nothing would get done.

        AMD going fabless would just be another way to shoot them
  • I'm sure this is going to be a dumb question, but how can a business as high-tech as AMD outsource production? Isn't that kind of like Ferrari outsourcing its car production or NASA outsourcing the launching of the space shuttle?

    • Re: (Score:3, Interesting)

      by Millenniumman ( 924859 )
      No, it would be like a car company designing a car but outsourcing the manufacturing of it. Several companies have done this, outsourcing production of some sports cars to Lotus, including Tesla with their electric Roadster.

      • No, it would be like a car company designing a car but outsourcing the manufacturing of it.

        Not quite. Lotus has had significant input [wikipedia.org] in the design of the Tesla Roadster. They're not just assembling them. Other 'outsourcing' ventures by car companies (e.g. convertibles being built by the likes of Karmann) have been similar.


        The Roadster was developed in collaboration with Lotus Cars. ...

        Lotus supplied the basic chassis technology from its Lotus Elise. Tesla engineers designed a new chassis with this technolo

    • Re: (Score:3, Insightful)

      by Nyeerrmm ( 940927 )
      Well, I'd say NASA should outsource launch services, or at least start to look at doing it (and in fact they are with the COTS program.) I would argue that they're job should be to do new and unprofitable things out in deep space, and let commercial companies handle launches (which can be profitable).

      This isn't entirely offtopic, because I'd say that that may be the approach AMD is taking here. Lots of companies can make silicon chips with ever smaller features, its just a matter of time and money, and AM
      • They can not only focus their core compentancy on design, more importantly they can focus the huge fucking piles of cash that normally would be spent on re-fitting a fab plant or buying a new facility on research and development, allowing them to design better and more innovative chips. It's positive harmonic feedback when one of the most advanced microprocessor designers can focus all their resources on designing microprocessors. It's like a doctor spends two-thirds of his time filling out paperwork to com
        • Not a very valid comparison. Doctors hiring an assistant expands the scarce resource, time, by trading in money. AMD expanding its scarce resource, money, by... by what?

          Okay, so let's say the plants are spun off as an independent entity. Well, this other company will still need to spend money building and upgrading plants, or else AMD will be stuck with a stagnant supplier. Where would this other company get the money to do this? From the money it charges AMD to manufacture the chips, which AMD gets fr
  • Most use Taiwan TSMC, UMC and others. Can't AMD just start to operate like these two? Offer high end fabs for anybody who has need? And why would anybody buy AMD's fabs when they are hardly a good investment due to high price.

    • Re: (Score:2)

      by geekoid ( 135745 )


      depends on the state of the fabs, and the market for the chips that fab is capable of making.

      For example. There might be an after market for a chip, but mot enough of a market to spend a billion dollars on a fab. 200 million might be worth it.

      AMD might cut the buyer a deal on the price, but in return reserve the right to some fab time at a reduced rate.

  • I am not surprised (Score:5, Informative)

    by eebra82 ( 907996 ) on Tuesday June 19, 2007 @11:36PM (#19574799) Homepage
    When the Core series were released, things didn't look to good for AMD. When they announced the delay of Barcelona, things started to look really bad. There are a few reasons why AMD may go bankrupt in a few years:

    -AMD is behind in the laptop market, which is growing at a staggering pace. -Intel has as extreme cash flow, and therefore more room for mistakes. -The marketing team at Intel has been doing a better job than its counter-part. -Intel is ahead of schedule. In the meantime, AMD is behind. -AMD recently purchased ATI. It is not necessarily a bad move, but it cost them tons of money. To make things worse, ATI is behind schedule and also behind its only competitor, nVidia, which means less money for AMD. -AMD shares are currently falling.

    I can only hope that I am wrong but I would definitely not buy AMD shares today.

    • There are a few reasons why AMD may go bankrupt in a few years:

      AMD isn't stealing market share, hand over fist, from Intel anymore... That, however, is an absolute world away from bankruptcy, which you claim. AMD is a closer second than they've ever been before, and doing extremely well. What's more, over the past few years of dominance they've made the same inroads with systems manufacturers that kept Intel artificially propped-up throughout the years of the P4 fiasco.

      AMD is behind in the laptop market,

      • Re: (Score:2)

        by eebra82 ( 907996 )
        That, however, is an absolute world away from bankruptcy, which you claim.

        Are you serious or are you just trying to ignore the fact that I used the word "may" in bold? Nowhere am I claiming that AMD is about to go bankrupt. I am just saying that it is more possible now than it has been for a very long time.

        AMD has a more significant share of the laptop market now than they did for basically the rest of their existance.

        I never said anything else. You are missing the point, however. Yes, they have a
    • When the largest PC distributor out there refuses to use AMD chips (Dell) that certainly hurts you.

      When Intel is using illegal anti-trust tactics, that certainly hurts you.

      The sad thing is that even if AMD wins their case, the damage both in lost revenue and market share will be almost possible to replace. Everyone in the world knows the name Intel. By illegally leveraging themselves, they've guaranteed that most people will demand their products regardless.

      The lesson here is that illegal tactics work. I

  • out sourcnig to cut costs never works. (Score:3, Insightful)

    by timmarhy ( 659436 ) on Tuesday June 19, 2007 @11:42PM (#19574817)
    the reaosn it never saves you money WITHOUT degrading quality is the company you are outsourcing to will attempt to make as much out of you as it can, where a company department will try make you money.

    add to this many outsourcing companys don't have a very good understanding on your business and it's a recipe for failure. I work in an industry where out sourcing is common, and most of the time the contractors are hopeless.

    • Re: (Score:2)

      by Reziac ( 43301 ) *
      I'm reminded of the old Army jape:

      "Remember, grunts -- your weapon was made by the lowest bidder!"

  • Maybe a little of topic... (Score:3, Funny)

    by Brad1138 ( 590148 ) * <brad1138@yahoo.com> on Tuesday June 19, 2007 @11:55PM (#19574887)
    But with the infinite number of universes theory, do you think there is one just for slashdot with "business" spelled correctly?

  • The sad state of affaird (Score:5, Informative)

    by guacamole ( 24270 ) on Wednesday June 20, 2007 @12:01AM (#19574921)
    It is well known that running a state-of-art foundry efficiently requires ginormous production volumes, so most semiconductor companies go fabless these days. However, if a company like AMD can't afford its own fab, then Intel might have a huge advantage here and we might see less competition in the microprocessor market from now. Just look at Sun's experience. Sun Microsystems had been historically fabless. Their newest SPARC processors were being fabricated primarily by Texas Instruments, and Texas Instruments has pretty much ruined Sun's ability to compete with Intel on CPU speed because it often took TI years to start producing a new Sun chip in significant numbers. I remember how Sun's introduction of UltraSPARC III was the longest and most painful CPU rollout ever. It took them something like three or four years to replace the major UltraSPARC II products.

  • Very revealing (Score:2, Interesting)

    by Anonymous Coward

    Another report from Goldman Sachs outlines the investment firm's belief that the company will leave manufacturing completely in the hands of third parties.'"

    This makes me question whether Goldman Sachs has any business "analyzing" tech companies like AMD in the first place. Out sourcing low-end fabs that can be done on larger equipment just makes sense, there are other companies that can do it cheaper than they can. Outsourcing high end, cutting edge, small scale fabrication on the other hand doesn't really

    • Re: (Score:3, Informative)

      by aussersterne ( 212916 )
      Goldman Sachs is big capital. Big (capital [B]) Capital. They have people in house to analyze everything, and they are doing very well (Very Well) in the market right now. Almost disgustingly well. Of all industries, Big Capital is probably most informed about the widest variety of things, because their only job is to "know." There is literally not much else that they do.

      So while it's okay to doubt, I wouldn't bet too much against the top investment banks right now, because they fund much of the world's ind
      • Part of how they do well is by not always matching what they know with what they say. The rich guy over there, you might seek his advice because you figure he's smart about getting rich. But here's the rub: Does he give you advice that leads to actions that make you richer, or does he give you advice that leads to actions that make him richer?

        In making a public case for AMD divesting its fab business, Goldman Sachs is speaking to two audiences: the stock buying public, and AMD executives. And Goldman is hop

  • But who started the rumors? (Score:5, Interesting)

    by zippthorne ( 748122 ) on Wednesday June 20, 2007 @12:24AM (#19575021) Journal
    It looks to me a lot like the article about Microsoft divesting its massive cash reserves a while back. It's "analyst" speculation by people who, by virtue of being in the "analyst" business don't actually understand the industry they're speculating on. This is what they think AMD will do because "that's how it's done." Never mind whether or not AMD thinks it'd be a good idea.

    Speculators speculate on money moving, so it's rather unsurprising that they'd suggest that the response {large company} would have to lackluster performance would be to spin off the cost centers and reorganize to maximize the synergy of the core competencies.

    Now, it is beneficial to make sure you're only worried about the business you're in. A lot of companies in the 90s for instance had huge in-house IT departments despite IT not being the thing that makes them money. They'd have a lot less headaches if they'd subscribed to an IT service to take care of their needs there, freeing them up to worry about the thing they really sell. You wouldn't worry about that any more than you'd worry about a company purchasing paper instead of milling it themselves.

    To my untrained eye, AMD appears to be in the business of selling microprocessors. The manufacture of those isn't an incidental part of the business (the manufacture of the tools to manufacture the chips would be such an outside activity), but a key layer in their vertical integration. Unless their numbers are really small, I can't see why it'd be cost effective to drop that.

  • Bad idea... (Score:3, Interesting)

    by linuxtelephony ( 141049 ) on Wednesday June 20, 2007 @12:50AM (#19575165) Homepage
    At least part of the potential downside was included in the article:

    But it's a different story for CPU makers. From a technical perspective, ditching your fab capabilities is an iffy proposition as it introduces a separation between design and manufacturing that could ultimately stretch out development times.
    While I understand that outsourcing to third parties things that are not part of your organization's core competencies, such as an auto parts store using an IT services provider or a software development house hiring an accounting firm, it seems very risky to farm out your core business to third parties. That is, unless AMD does not consider chips to be their main business any longer. Perhaps their main business is chip design? Or graphics cards?

    However, if chips are their core business, then they should probably maintain at least some manufacturing capacity of their own just to be able to maintain control of their own destiny. It might be cheaper for a third party to make some of their chips now, but in just a short while I bet it becomes more expensive when the third parties realize that AMD can't make their own chips any more. What are they going to do? They will have AMD between a rock and a hard place. Besides, AMD has already had problems in the past with ramping up to production fast enough to satisfy demand, and more than one person mentioned potential availability concerns as one of the reasons Apple went to Intel instead of AMD.

    If AMD does this, I hope they look to copy how Apple does things. As far as I understand it, Apple doesn't manufacture much of anything themselves any longer. Apple's core business is not "making computers" or "making ipods." No, Apple's core business revolves a lot around design, usability, etc. With that clearly understood, then it makes sense for Apple not to be a "manufacturer" (building computers and circuit boards from scratch like they used to).

    I certainly hope this isn't a short pier that AMD will be taking a long walk on. Time will tell.

    • Re: (Score:2)

      by ooze ( 307871 )
      If you make design and usability your main concern in the microprocessor business, you can't make x86 chips anymore.

  • Just another rumour by just another analyst. (Score:5, Informative)

    by WoTG ( 610710 ) on Wednesday June 20, 2007 @12:58AM (#19575217) Homepage Journal
    Don't get too worked up. AMD will be outsourcing bits of production, that's public knowledge. They've contracted with Charter for CPUs, and ATI, which AMD bought in 2006, has always been fabless. So, yes, more outsourcing is in the cards.

    Will AMD go completely fabless? I highly doubt it. IMHO, top-end chips pretty much require in-house fabs. That extra 10% of control and 10% of benefit to tweaking a fab to your own specific needs and 10% benefit to setting your own time lines can make the difference between being competitive in the high-end and not. (Yeah, I'm making those numbers up, but you get the idea).

    Sure, AMD is having a tough year, but hopefully things will get on track. When they do, having at least one in-house fab is pretty much crucial to being competitive in the top-end... and the top-end counts because the margins are incredible there.

    The mid-range chips and lower end stuff can probably be pushed off to a 3rd party... and I think we might see something like that from AMD.

    • Debt carrying costs (Score:5, Insightful)

      by alexhmit01 ( 104757 ) on Wednesday June 20, 2007 @08:15AM (#19578231)
      To own and run ones own fabs, one has a LOT of cash tied up in fabs. That means carrying tremendous debt levels, and given AMD's shaky financials, at a higher interest rate than Intel. This gives Intel a competitive edge, just from the finance side. Selling the fabs would let AMD reduce its debt levels, improve it's balance sheet, and possibly cut costs.

      AMD's "tough" years are in part because as a company with its own fabs, it has massive fixed costs (and the interest expenses associated with it), which means that when cyclical demand trends downward, their numbers get destroyed by the high fixed costs. High fixed costs are irrelevant to huge market leaders, but the nimble competitor gets eaten up when things get painful.

      OTOH, if one can move capital intensive projects off balance sheet, the company's financial reports improve, which can improve their bond rating and lower their interest costs on other areas.

      Right now, AMD must focus on chip design, chip manufacturing, chip marketing, and financial maneuvering. Going fabless would let them focus on designing and selling chips, instead of manufacturing them and managing complicated financial operations to fund everything.

      Whether they gain a competitive edge by owning the fabs is another question, and the only people that know that are inside of AMD. Whether the CEO and Board will ask them is another question, but AMD's internal guys know whether they are really good at manufacturing or not.

  • Anal-ysts (Score:5, Interesting)

    by Doc Ruby ( 173196 ) on Wednesday June 20, 2007 @01:04AM (#19575261) Homepage Journal
    How about if AMD used its debt investments in new fabs in Germany and NY to accept outsourced fabrication for other companies it doesn't suffer from boosting? That would make a lot more sense than getting in debt to sell capital facilities at a loss of both investment and competitive control.

    These analysts don't know anything. They just want every business to cut costs and debt while still producing the most revenue, for the most short-term profits, even if trying to do so is a stupid strategy that wrecks the company. When was the last time any published equities analyst was right about some surprising transformation of an industry leader? If they understood business strategy, they'd be running one, or privately advising one on equity development. These are people who can't even hold a job speculating in the market, so they try to make it speculating on the market.
  • You can never outsource your core business, the thing that makes you unique and that you hope gives you a better product compared to other companies. If AMD wants the most leading edge new techniques in chip manufacture, they HAVE TO do it themselves. If you outsource, all you get is industry standard last-generation technology. If they give up manufacturing, they have given up half of their core business, and it will be very difficult for them to ever make a product innovative enough to compete. I'll p
  • So if you have stock in AMD, do you hold?
  • ...because they seriously need to get out of the production business and back into the "better design" business. They've been a full generation behind Intel now forever, which puts them on the same level as nVidia, ATI, all the memory producers etc. which are also usually the same distance behind. They've not been able to sustain the kind of process lead that Intel has, so they might as get the volume of outsourcing.

    I've been using AMD from Duron 700 -> Athlon 1200 -> Athlon 2000+ -> Athlon64 3500+

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