A recent story has emerged that AMD will soon spin-off their manufacturing plants. AMD have, over the past few years, been in a brutal price war with Intel that has left the future of AMD in doubt. There was already speculation about AMD outsourcing most of their manufacturing earlier this year. In AMD to Oustource CPU Manufacturing to TSMC we observed IC Insights predicted AMD may have to go fab-lite or even fabless. Earlier this month the Austin American Statesman broke the story that AMD would be splitting into several different companies.
According to the Statesman:
Executives have essentially guaranteed Wall Street that AMD will achieve an operating profit in the second half of the year. And Meyer says the company is just months away from a major restructuring that will spin the manufacturing operations off into a separate company, wth new ownership.
Without the expensive manufacturing operations, AMD can concentrate on designing, marketing and selling chips that compete effectively against its two tough competitors - Intel Corp., the largest and richest company in the semiconductor industry, and Nvidia Corp., the foremost maker of graphics chips.
AMD have now denied this claim. EWeek has said:
Advanced Micro Devices is planning to keep its fabs for now.
AMD is denying a report that appeared in the Austin American-Statesman that contains an interview with new CEO Dirk Meyer that seemed to indicate that the chip maker was preparing to spin off its manufacturing facilities in Germany and sell its two fabrication plants, or fabs.
Interesting! AMD has been hammered. Without looking at the financials its hard to say either way whether they stand a chance of recovering. They are way behind in their innovation and while Intel are moving to 45nm technologies soon, AMD are still a long way off. Maybe they can stay in the fight. Who knows? But to be honest, losing the manufacturing arm will help them become more flexible and agile in responding to market demand and will certainly help them to cut down on their capex requirements. There are of course advantages and disadvantages to keeping the manufacturing.
However, before ruling out spinning off their manufacturing plants completely, perhaps they should look at the Acer and ASUSTek business model. A few years ago Acer was struggling. They spun off their manufacturing into Wistron and focused on brand development. This gave Acer the ability to focus on developing a market for their own branded products and enabled Wistron to focus on manufacturing products for many other companies, not only Acer. ASUSTek has done the same thing and earlier this year spun-off their manufacturing into two companies called Pegatron and Unihan.
AMD might consider doing the same thing. I know the semiconductor industry is very different from the PC industry but there are many many examples of very successful fabless design companies. Consider Mediatek and Nvidia! AMD can succeed in this realm. I personally think to continue to compete with Intel head-on is sheer madness. AMD have to return to profitibality and I for one am interested in seeing what they will do next.
EWeek: AMD Denies Fab Sell-Off
Austin-American Statesman: New AMD chief sees clear path to recovery
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