Competition in the pure play foundry industry is about to heat up. ars technica has an interesting blog article on AMD's spinoff company Globalfoundries who seem to be on thr prowl for TSMC and UMC customers. ars technica writes:
It's launched, online, and the now-independent Globalfoundries is searching for its non-AMD customers. CEO Doug Grose is reportedly visiting Taiwan to seek relationships with companies that may be currently contracting with TSMC or UMC for their semiconductor foundry needs. If true, this would raise questions regarding the future of AMD's relationship with TSMC. That company currently fabricates Radeon processors for Advanced Micro Devices, and while Globalfoundries and AMD are now separate entities, they are separate entities that remain joined at the hip. Globalfoundries will probably take over fabbing ATI Radeon processors at some point, but is not yet believed to have the bulk silicon production in place to do so.
So what are your thoughts? Will Globalfoundries actions in Taiwan threaten the relationship between AMD and TSMC? Will Globalfoundries be able to compete effectively? Are TSMC and UMC in a world of trouble? I will be interested to read your comments. In the meantime, I look forward to see how the pure-play foundry industry landscape changes. (Remember last week TSMC and Intel signed an agreement). The future is always exciting, especially in this industry
ars technica: Globalfoundries on the prowl for non-AMD customers
3 comments:
Well, you asked, but I think this is all obvious and standard stuff for contract manufacturing. It's like a manufacturer coming out with its own brand and competing with customers and suffers from all the same problems.
For true value to be unlocked from Globalfoundries, AMD needs to divest itself of holdings. If it doesn't, then I think people will think the following legitimately:
1) Foundries will not want to do business with AMD because it means helping a competitor.
2) Designers will be reluctant to contract with Globalfoundries because because it means helping a competitor (Nvidia for example).
AMD contracting to anyone else from here on out has to fear that they won't be treated as a regular customer; likewise, would you give your design to Globalfoundries knowing that a) AMD chips will undoubtedly be given priority over yours and b) AMD engineers can study your design close up with all the actual manufacturing problems.
Since TSMC and UMC have plenty of capacity right now, I highly doubt Globalfoundries is going anywhere anytime soon. Everyone else that's tried has failed, and AMD has the poor economy, everyone else's failures, and the lack of separation.
If AMD divested completely, I think they would have to be very fearful of Globalfoundries a) going under b) not investing in technologies at a pace AMD needs c) not maintaining a level of capacity desired by AMD and with no one else to turn to.
I guess that why Intel isn't in the foundry business.
Hi There Anon,
Yes I did ask!
Most of what you have expressed are my thoughts exactly. I have sen a lot of Taiwanese companies try to do something similar without much success. I know of at least one contract manufacturer that spun off a brand company and ripped of their OEM clients' designs and migrated them into their own brand. Then they were left wondering why their contract manufacturing orders fell off a cliff. The CEO was CEO of both companies so guess who gets priority?
As for AMD's global foundries! There is a lot of talk around them obviously. Apparently they would get a sweet deal if they invested in New York and their German fab is apparently one of the best in the world. I think a huge concern for them would be scale and utilization rates and, as you say, prioritizing AMD chips over chips of other companies.
I still think TSMC and UMC will be able to dominate pure-play foundry sector and I am wondering how long Globalfoundries will survive. There is apparently a lot of money from Dubai locked into the company but money provides breathing room, not competitive advantage.
I think the other thing TSMC and UMC have that Globalfoundries lacks is long term relationships with big Chip Design Houses and also, many of the chip design houses here in Taiwan were spunoff by TSMC and UMC because they wanted to stay in the foundry business and not forward integrate into branded chip design. To make inroads on these relationships will be tough.
However, I don't think we can write Globalfoundries off just yet. We will give it a year or two before we see if they fall off the cliff. Although, the tremendous cash-burn in a foundry may hurt them a lot in the first year.
We will see.
As always, thanks for your insightful comments.
Ciao
Paul
P.S. Are you in Taipei?
Yes, though I was mostly naysaying, but the capital they raised from Dubai, tax breaks for new plants, and their relatively advanced technology in manufacturing as you point out are definite advantages.
Still, it's one thing to be really good at making your own chips--set a design once in awhile, produce zillions--and it's another to be producing designs from many customers, most in much smaller numbers. Getting the scheduling right (this means some really expensive custom software... software takes time... I don't think TSMC or UMC are selling...), providing design services, are all things they need to learn, and they need to learn fast.
Like you said, we will see :-).
Yes, I am mostly located in Taipei.
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