Market, Partners Positive On 'Fabless' AMD

The Foundry Co., to be chaired by former AMD CEO Hector Ruiz with AMD's senior VP of manufacturing operations Doug Grose serving as CEO, will take over AMD's main manufacturing facilities in Dresden, Germany and is expected to go ahead with building a new fabrication plant in upstate New York's Saratoga County which had been uncertain due to AMD's long-standing financial difficulties.

Even as AMD is reportedly set to downsize about 3,000 current employees as part of the deal, the Saratoga County facility would create 1,400 direct manufacturing jobs and an additional 5,000 new jobs in the fab's vicinity, according to Nigel Dessau, chief marketing officer at Sunnyvale, Calif.-based AMD. Dessau said those projections were based on AMD's observations of job growth at and around its Dresden facilities.

The move is the culmination of AMD's self-coined "Asset Smart" strategy. Industry watchers have anticipated some form of fab sell-off by AMD for more than a year, but until Tuesday, AMD executives had bobbed and weaved on the when, the how and the who.

"We didn't want to simply find any partner, but the right partner," Dessau said. That turned out not to be a larger company with its own stake and expertise in semiconductor manufacturing, like Samsung or the Taiwan Semiconductor Manufacturing Company (TSMC), but rather long-term investors from a region with plenty of sand but not much history of converting it into silicon.

"We were looking for an investor that had patient capital, that could invest in a long-term, five-year roadmap, and address both the needs of AMD and the needs of worldwide demand for semiconductor products," Dessau said.

Such a hands-off investor means AMD might well get to have its cake and eat it too, said Dean McCarron, principal analyst at Mercury Research.

"This is the direction they've kind of been pushed to go in, but you look at the details and it sounds like they've got a good plan. This allows the people working at their factories to stay there and it gets the debt off of AMD's balance sheets," McCarron said.

Many analysts agreed that AMD's core business should now be freed up to focus exclusively product design and marketing, but McCarron noted that the Foundry Co. should also be in a good position to leverage AMD's leading edge process technology to gain more customers and keep its fabs at full capacity.

"The real trick to this market is that you need to keep [fab] utilization at around 100 percent," McCarron said.

One new foundry customer for the AMD-ATIC joint venture could turn out to be graphics chip maker Nvidia.

"There's no reason to think we wouldn't make wafers for Nvidia," AMD's Tom Sonderman, who is set to become VP of manufacturing technology at Foundry Co., told ChannelWeb Tuesday. "Do keep in mind that Foundry Co. has equal ownership between ATIC and AMD, so they will have some influence on which customers we want to do business with."

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