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AMD To Spin Off Fabrication From Design Work

timothy posted more than 5 years ago | from the splitarama dept.

AMD 153

I.M.O.G. was one of many readers to write with the news that "Advanced Micro Devices plans to announce Tuesday that it will split into two companies — one focused on designing microprocessors and the other on the costly business of manufacturing them — in a drastic effort to maintain its position as the only real rival to Intel. 'This is the biggest announcement in our history,' said AMD's chief executive, Dirk Meyer. 'This will make us a financially stronger company, both in the near term and in the long term, as a result of being out from the capital expense burden we have had to bear.'"

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153 comments

How is this supposed to make things better? (2, Interesting)

SoupIsGoodFood_42 (521389) | more than 5 years ago | (#25284627)

Can someone give me some insight into why splitting the company into two is supposed to help AMD?

Re:How is this supposed to make things better? (5, Informative)

srjh (1316705) | more than 5 years ago | (#25284689)

There seems to be some good information here [wikipedia.org] :

IC production facilities are expensive to build and maintain. Unless they can be kept at nearly full utilization, they will become a drain on the finances of the company that owns them. The foundry model uses two methods to avoid these costs: Fabless companies avoid costs by not owning such facilities. Merchant foundries, on the other hand, find work from the worldwide pool of fabless companies, and by careful scheduling, pricing, and contracting keep their plants at full utilization.

Re:How is this supposed to make things better? (5, Interesting)

cabjf (710106) | more than 5 years ago | (#25284935)

So AMD frees its production facilities to accept contracts from other fabless companies. Meanwhile, they can focus on designing and selling chips and chipsets for motherboards and graphics cards.

I think this will turn out well for AMD, if they can maintain a good relationship with their foundry spin off and if the foundry spin off can keep up with the competition in terms of quality and technology. Although, I guess this would also free AMD to find other partners if they need to either expand production or find better production facilities in the future without neglecting parts of their own business.

Re:How is this supposed to make things better? (1, Interesting)

Anonymous Coward | more than 5 years ago | (#25288455)

This kind of idiocy never goes well for the foundry, just ask the vendors that GM spun off.

Re:How is this supposed to make things better? (3, Insightful)

Stan Vassilev (939229) | more than 5 years ago | (#25284953)

IC production facilities are expensive to build and maintain. Unless they can be kept at nearly full utilization, they will become a drain on the finances of the company that owns them. The foundry model uses two methods to avoid these costs: Fabless companies avoid costs by not owning such facilities. Merchant foundries, on the other hand, find work from the worldwide pool of fabless companies, and by careful scheduling, pricing, and contracting keep their plants at full utilization.

I don't see anything in here that requires two separate companies. AMD can stay a single company and still build chips for other companies to fully utilize their facilities.

It looks more like a decision appealing towards someone's fuzzy feelings: "look the fab is independent now, it's got nothing to do with AMD chips, you can hire it" and "look we're doing bad but we have a big plan to bail out out of the crysis". Ops how come I worded it this exact way :P?

Difficult to pull off that dicotomy... (5, Insightful)

Junta (36770) | more than 5 years ago | (#25285249)

If they are a single company, then, internally, the two groups almost have to use each other or else seem bizarre. I.e., if the designers contracted out fabrication of a model even though their own fabrication division was not fully utilized, that would seem unhealthy. By the same token, if the fabrication division pre-empted production in-house designs for a third-party, that would similarly look bad.

With that view, it would be a tad harder for the fabrication portion of the business to attract design companies, with prospective companies knowing they are putting their manufacturing capabilities in the hands of a company that would be both partner and competitor. The conflict of interest is far from appealing.

Few large corporations under typical circumstances preserve in-house at-scale manufacturing. I.e., most x86 system vendors now at most design the system and then feed to another company for fulfillment, potentially even a company spun off from themselves when they reached a similar conclusion.

As consumers, we don't stand to lose, only to gain. For example, if nVidia has been held back in any quality/performance way by inferior fabrication companies, they may now approach AMD fabrication. Same goes for AMD v. Intel, if another fab company can deliver more aggressive process size/yield improvements, then AMD design can go to that company and produce a valid competitor to Intel.

Or it shows that both halves of the company were completely average nowadays even in only the context of their similar competitors, and still doesn't do well, but that isn't different from today.

Re:Difficult to pull off that dicotomy... (4, Insightful)

jonnythan (79727) | more than 5 years ago | (#25285791)

"With that view, it would be a tad harder for the fabrication portion of the business to attract design companies, with prospective companies knowing they are putting their manufacturing capabilities in the hands of a company that would be both partner and competitor."

Well that's the idea here. By spinning off fabrication into its own company, other chip designers wouldn't be putting their ideas in the hands of a competitor.

ATI, nVidia (2, Interesting)

Hemogoblin (982564) | more than 5 years ago | (#25285999)

ATI contracted out their fabrication in the past, correct? Since AMD acquired them, perhaps they now realize this might work for their x86 stuff. Disclaimer: I have absolutely no expertise in this area.

Re:Difficult to pull off that dicotomy... (2, Insightful)

Ioldanach (88584) | more than 5 years ago | (#25286203)

Unfortunately, the downside is that they probably won't be contracting to their spinoff for 100% of their manufacturing requirements, and as a result we can expect to see chips manufactured in a variety of locations with a variety of quality controls. The occasional complete failure of an entire run of hard drives comes to mind.

Re:Difficult to pull off that dicotomy... (1)

sortius_nod (1080919) | more than 5 years ago | (#25286483)

As far as quality control, not sure what you mean. If they don't pass, they aren't QC OK.

As for complete failures, generally this comes from the opposite - single manufacturer (whether in-house or not) and a whole shipment is contaminated. Yes, I remember the various different drive failures, not all were cheapest manufacturer type deals - the biggest always come from in-house/single source manufacturers.

Re:Difficult to pull off that dicotomy... (1)

Ioldanach (88584) | more than 5 years ago | (#25286619)

My thought was that while they might all pass the specified tests, the QC on the manufacturing equipment isn't all the same and defects not tested for might slip out in one fab and not another. Adds more variability to the product. Then again, you may be right, the competition from fab providers may mean they produce better product than the locked-in fully owned fab.

Re:Difficult to pull off that dicotomy... (2, Insightful)

blind biker (1066130) | more than 5 years ago | (#25287819)

And yet, the GP may have a point. Because, it works for IBM - they are both fabbing ICs for others and for themselves.

Re:How is this supposed to make things better? (5, Insightful)

epiphani (254981) | more than 5 years ago | (#25285621)

I don't see anything in here that requires two separate companies.

From an organization or technology perspective, no, there isnt any reason to split into two companies. From a financial perspective, this makes a huge amount of sense. You'll note that this new company is receiving an enormous amount of new funds from investors, and taking a lot of the AMD debt. They're effectively splitting off R&D from Manufacturing, and people are free to invest in just the R&D component or just the manufacturing component.

Some folk out there thought the manufacturing side was worth a huge investment of cash. Lots of assets there that are worth a fair bit - but not if they're tied to work purely on AMD products. If the R&D side of AMD failed, then there are a crapload of perfectly good assets that would be lost, in effect. This allowed investors separate AMDs chips from AMDs fabs when investing. There is no inherent value in splitting the fabs off - except when someone is willing to spend $8 billion to fix them up, separate from the R&D side.

This doesn't mean they think AMD R&D is going to fail - its just about risk. Why tie your $8 billion investment to the ADD of the consumer chip market instead of to physical assets that will be worth something regardless of the mood of the x86 CPU market?

Re:How is this supposed to make things better? (1)

morgan_greywolf (835522) | more than 5 years ago | (#25285709)

I don't see anything in here that requires two separate companies.

You're right, but only in theory. It's a political problem, not a technical one. If the the fab and design are the same company, there will be pressure on design to use the fab group and there will be pressure on the fab to always do the design group's work. If the two companies are separate, the political pressure is a lot less.

Re:How is this supposed to make things better? (2, Insightful)

plague3106 (71849) | more than 5 years ago | (#25285733)

It makes the balance sheets for the design company better... since it's costs are lower and profit likely higher.

Re:How is this supposed to make things better? (2)

santiagodraco (1254708) | more than 5 years ago | (#25286045)

Maybe they don't want to be in the fab for hire business. They need to focus on their core business, not selling space to other chip manufacturers.

It also means they can go to other fabs if they need chips built should the spin off fab fail.

Right now their fab is running under capacity and losing money. Spinning it off makes a lot of sense.

Re:How is this supposed to make things better? (1, Funny)

Anonymous Coward | more than 5 years ago | (#25284695)

Duo corp.

Re:How is this supposed to make things better? (2, Interesting)

Anonymous Coward | more than 5 years ago | (#25284721)

Because Design without Fab worked so well for Transmeta?

ARM is fabless (4, Informative)

tepples (727027) | more than 5 years ago | (#25284793)

Because Design without Fab worked so well for Transmeta?

I see your sarcasm, but it works for ARM and MIPS.

Re:ARM is fabless (4, Insightful)

Stan Vassilev (939229) | more than 5 years ago | (#25285167)

> Because Design without Fab worked so well for Transmeta?
I see your sarcasm, but it works for ARM and MIPS.

What ARM and MIPS have in common is they are RISC architectures with their own specification and market.

What Transmeta and AMD have in common is that they produce x86 compatible chips and thus compete directly with Intel.

Intel as a company owning their fabs has become famous for their well synchronised "tick tock" process where they successively introduce new design, then introduce better fab for the same design, then a new design etc. Such accuracy and consistency is hard to expect from a design-only company that needs to contract a third party to produce their own product, and both parties are constantly looking for a way to skim some pennies in the process.

NVIDIA vs. ATI? (1)

tepples (727027) | more than 5 years ago | (#25286589)

What Transmeta and AMD have in common is that they produce x86 compatible chips and thus compete directly with Intel.

As Spatial pointed out [slashdot.org] , NVIDIA is fabless, and NVIDIA also competes with Intel in chipsets and video. If AMD is going fabless, what makes at least the ATI division of AMD any different from NVIDIA?

Re:ARM is fabless (0)

Anonymous Coward | more than 5 years ago | (#25285521)

Because Design without Fab worked so well for Transmeta?

I see your sarcasm, but it works for ARM and MIPS.

Forgive me if I'm wrong, but hasn't Design without Fab been nVidia's strategy for over a decade now?

Re:ARM is fabless (4, Insightful)

evilviper (135110) | more than 5 years ago | (#25285585)

it works for ARM and MIPS.

To be fair, ARM and MIPS don't need cutting-edge performance. They are fabbed on whatever slightly older, absolutely dirt-cheap process is available. They're so small and low power already that a process shrink or two doesn't noticeably affect the overall performance of the embedded device.

Part of the reason it works so well is because companies that need to be on the cutting edge of chip tech (like Intel and AMD) pay the huge expense of building high tech fabs, then, when the technology moves on, they've got to do SOMETHING with the obsolete fabs, so they might as well contract out and make dirt cheap chips at minimal profits. After all, little profit is better than no-profits, on a fab you've long since paid for and (hopefully) profited from.

And I believe AMD was already trying to better utilize their old fabs, making (low-power) Geode chips for embedded apps and the like with spare capacity.

And this really shouldn't have surprised anyone... They've contracted out other fabs to produce AMD cores in addition to their own, but only as contingencies when they couldn't immediately meet demand... I suppose they don't have that problem anymore.

Re:How is this supposed to make things better? (4, Informative)

dfghjk (711126) | more than 5 years ago | (#25285631)

Transmeta failed because its product sucked.

Re:How is this supposed to make things better? (0)

Anonymous Coward | more than 5 years ago | (#25287209)

Did it under-perform because the product was built with silicon that was 1-2 generations behind the big boys?

Re:How is this supposed to make things better? (5, Informative)

default luser (529332) | more than 5 years ago | (#25287931)

Transmeta failed because its product sucked.

Absolutely. For those who don't know, the Crusoe uses a VLIW architecture with 128-bit words, and x86 instructions have to be decoded and RE-ORDERED in real-time into those 128-bit words. This is the same brick wall Intel ran into with optimizing compilers for the Itanium, but unlike Intel the Crusoe has to do it in REAL TIME.

Sure, the software translation layer meant that they could run Crusoe any architecture, but in the end it cost them precious performance. The chip itself wasn't much to sneeze at (two integer units and an anemic FPU), so it really didn't have the performance to spare. Then they hobbled the chip by integrating a nortbridge; this meant that ALL Crusoe-based systems would have the same video and I/O performance limitations, all in exchange for saving a buck or two on parts.

It didn't help that they hyped the successor, the Efficion, and then it didn't deliver in clock speeds or promised performance increases [vanshardware.com] .

Re:How is this supposed to make things better? (1)

Anonymous Coward | more than 5 years ago | (#25284741)

Technically AMD will be now a design only company and that will make their earnings statements look better so the stock price will be better and the executives richer (the key reason).

Cost Accounting BS (1, Informative)

Anonymous Coward | more than 5 years ago | (#25284747)

The accountants and the lawyers at AMD at the behest of management, came up with this organization to allow for revenues, costs and subsequent profits to be booked in a much more favorable way. Has anything physically changed? Nope.

But! It's a good thing because it will allow AMD to look better to the numbnutzes on Wall Street and keep the share value for sliding into oblivion. It may also allow for the restructuring of any debt and other capital on the books. I think this reorganization may actually save jobs.

Precedent (1, Interesting)

Anonymous Coward | more than 5 years ago | (#25284771)

Maybe they think it will work out as wildly successful as it has for a company like, say, USR/Palm.

IMO, it's time to start short selling them.

Re:Precedent (1)

mr_mischief (456295) | more than 5 years ago | (#25285453)

Short-sell the fab spin-off. The likely split will be the parent company will keep all of the assets other than the expensive fabs, and all the liabilities will go to the spin-off. Instant profitability for one, and instant debt for the other.

Re:How is this supposed to make things better? (0, Troll)

larry bagina (561269) | more than 5 years ago | (#25284811)

There's some good information about spinoff efficiency here [meatspin.com] . Personally, it seems like an economic cycle of mergers/acquisitions and then spinoffs/splits. The only real winners are the investment bankers.

Re:How is this supposed to make things better? (2, Informative)

confused one (671304) | more than 5 years ago | (#25284833)

The cost of building and running the fab does not show up on their corporate books. AMD management can concentrate on the business of designing and marketing the chips and can avoid the fab issues (not entirely, but for the most part). The fab can potentially be operated at a higher utilization if it is not running solely AMD processors, which might improve profitability for the fab. AMD is maintaining a controlling interest in the company being spun off, so that they will be the priority customer.

Re:How is this supposed to make things better? (3, Informative)

I.M.O.G. (811163) | more than 5 years ago | (#25284961)

AMD is maintaining a minority interest - the Foundry Company has a 55% majority on the spunoff part.

Re:How is this supposed to make things better? (2, Insightful)

confused one (671304) | more than 5 years ago | (#25286435)

My mistake. I read the percentages incorrectly. I still maintain that a 45% ownership stake will still make them the first customer in line.

Re:How is this supposed to make things better? (0, Offtopic)

I.M.O.G. (811163) | more than 5 years ago | (#25287265)

Honest mistake... Or your nick and sig have become a self-fulfilling prophecy.

Re:How is this supposed to make things better? (4, Informative)

hey! (33014) | more than 5 years ago | (#25284861)

It is NOT supposed to help AMD. It is supposed to help AMD's stockholders.

This often happens with troubled stocks that have a number of different business functions that can be split off. Some of those business functions may represent a great deal of capital investment, but not return much cash. You don't want that capital tied up in idle buildings and equipment, but you probably can't sell those things to your rival who's happy to see you shrivel up and blow away.

So you split the company up. The more profitable divisions can start to appreciate in value or even pay dividends. The less profitable business can stay afloat on business from its former sibling divisions while the stockholders unload their stock in it. It's possible that new management can turn thing around.

Re:How is this supposed to make things better? (1, Informative)

dnoyeb (547705) | more than 5 years ago | (#25285021)

FUCK! I held on too long. My AMD stock has done well over the last 8 or so years. I knew that ATI acquisition smelled funny...

This happens when the profit margins of the company are not inline with what shareholders expect from a company in the particular field in question. The idea for the split is that the one company will be in the field in question, and have much higher margins (without the other division bringing them down). The other company, while still profitable, is now in a different field with different margin expectations. Now both companies can claim to be competitive in their respective fields. Thus, they are able to borrow more because their individual stock are rated higher. This happened to my last company that was in Aerospace and automotive at the same time. With aerospace being much more profitable, but automotive was still profitable, just not comparatively so.

Overall though I think its a failure to have to do this. Now I gotta find the right time to get out, which is probably not now.

Re:How is this supposed to make things better? (4, Insightful)

Targon (17348) | more than 5 years ago | (#25285113)

Right now, AMD fabs are ONLY used to produce AMD processors. They don't handle GPU manufacturing at this point. As a result of this, and because of the bad economy, the fab side of things would drag AMD down more than keeping the two companies in a good position. On top of this, from a pure bookkeeping/accounting perspective, it becomes easier for investors and potential investors to see a profit from one side of the business or the other.

The Athlon 64 X2 and Phenom sales numbers really are not bad, but the profits from the sales are never seen for investors if the fab side is losing money. The split will make it very clear how well the company is doing in each area. It will also open the doors for other companies to buy fab capacity from AMD, so AMD could make money by making chips for other companies. We may never see Intel use AMD for this, but other companies are out there.

The downside to this is that as two smaller companies, one side or the other might be purchased by another company, which would hurt in the long run. It's a dangerous time...

Re:How is this supposed to make things better? (0)

Anonymous Coward | more than 5 years ago | (#25285923)

You'll also notice that the sovereign investment arm of Dubai will be taking a 46% stake in the fab company, but will not have any ownership of the chip making company. Be sure that that had something to do with the approach.

Re:How is this supposed to make things better? (1)

nategoose (1004564) | more than 5 years ago | (#25286319)

I always thought that combining the fabrication resources of both CPUs and GPUs was one of the big reasons for buying ATi. Why they have never gotten around to this really baffles me.

Re:How is this supposed to make things better? (2, Informative)

ThisNukes4u (752508) | more than 5 years ago | (#25286979)

ATI has/had no fabrication resources other than contacts at TSMC, which /is/ going to be used to fab the new Fusion cpu + gpu cores that are due in the next year or so.

Re:How is this supposed to make things better? (0)

Anonymous Coward | more than 5 years ago | (#25286989)

When a fab decides it is going to produce a new proces it takes years of planning. Somehwere between 2 years and 18 months.

Gpu process' and CPU process' are completly different... so while ATI is used to TSMC's 55nm process AMD is running its own 65nm and just recently 45nm. Even if thats what AMD wanted all along and started work straight away it would not be completed until net year some time.

Re:How is this supposed to make things better? (2, Interesting)

Dr. Spork (142693) | more than 5 years ago | (#25288503)

I foresee a different future for AMD. I have a feeling that they're restructuring themselves to be a big ATi, which was a fabless "silicon design" company. There are plenty of competent and cheap foundries for silicon. The costs of duplicating the engineering work of others is weighing heavily on AMD, since their primary rival can outspend them by such a huge margin. It seems to me that they're betting on the survival of AMD intellectual property by having their competent engineers design stuff that's fabbed in Taiwan.

I might be wrong and maybe they have enough confidence in their process tech that they want to scale up their manufacture beyond the demand of their own processors and GPUs, but I don't think so. AMD GPUs are already fabbed in Taiwan. Despite the huge investment in process tech made by AMD, this is still worth their while. That makes me think that they're regretting their huge investment in process tech, and aren't feeling up to the challenge of spending the dough to stay competitive with the big boys.

Re:How is this supposed to make things better? (1, Interesting)

Anonymous Coward | more than 5 years ago | (#25285187)

So they can shift money back and forth by charging one another for services and products. Great tax shelter and yes I say shelter not evasion, there is a difference.

Re:How is this supposed to make things better? (1)

Sobrique (543255) | more than 5 years ago | (#25286915)

As a wise man once said: "Tax evasion is a crime. Tax avoidance? That's just common sense"

Re:How is this supposed to make things better? (1)

Sj0 (472011) | more than 5 years ago | (#25285481)

Pixie dust. Basically, by making AMD's fab capacity fend for itself, AMD's design work will, through the magic of pixie dust, suddenly not have to worry about lack of fab capacity.

If you don't see it, it's not real!

Re:How is this supposed to make things better? (0)

Anonymous Coward | more than 5 years ago | (#25286061)

AMD can shove all their nuclear waste in one company (manufacturing), and claim huge success (and bonuses) on the other side.

Re:How is this supposed to make things better? (1)

spiralpath (1114695) | more than 5 years ago | (#25286219)

<quote>Can someone give me some insight into why splitting the company into two is supposed to help AMD?</quote>

Because everybody knows a dual-core company is better than a single-core one.

They should have just gone ahead and split into four!

Re:How is this supposed to make things better? (1)

darkshadow (102598) | more than 5 years ago | (#25286511)

So that next year they can merge the two companies in order to create greater synergistic efficiency

Re:How is this supposed to make things better? (1)

sexconker (1179573) | more than 5 years ago | (#25288305)

The real reason is that AMD, the chip designers, will be able to tell the SEC everything is peachy keen.

The chip manufacturer company that AMD spins off will be saddled with debt all the time, but will be kept just barely afloat by those handy contracts from AMD.

AMD can already rent out its fabs to other companies if it wishes. Spinning a new company is just their way of hiding their debt, which AMD (and everyone else, apparently) is currently drowning in.

Aliens Quote (-1, Offtopic)

Anonymous Coward | more than 5 years ago | (#25284711)

That's it man, game over man, game over! What the fuck are we gonna do now?

Tinfoil hat time (0)

Anonymous Coward | more than 5 years ago | (#25284737)

This is probably being done so that AMD's circuit designers have the flexibility of designing chips for someone else's (like IBM's) superior fabs.

why didn't they provide the bailout? (-1, Offtopic)

neonprimetime (528653) | more than 5 years ago | (#25284743)

In addition, the company said two Abu Dhabi investment firms would inject at least $6 billion into the two firms, mostly to finance a new chip factory that A.M.D. planned to build near Albany, N.Y., and to upgrade one of the company's existing plants in Dresden, Germany.

Why didn't they step in and help with our financial bailout? Every little bit helps. Funny how the tables turn and now we're the country needing financial aide.

Re:why didn't they provide the bailout? (0)

Anonymous Coward | more than 5 years ago | (#25284919)

Excellent question! Because you know damn well that AMD is going to take that $6 billion and bury it in a hole in the ground.

Re:why didn't they provide the bailout? (0)

confused one (671304) | more than 5 years ago | (#25284921)

Two comments:

$6 billion is a drop in the bucket. Sounds like a lot of money to the guy on the street but on the grand scheme of thing it's too small to make a difference.

As to "helping with our financial bailout" Why would they? Why should they? The mess in the banking industry was created by the banking industry itself. Our government is handling it. If I were a foreign investor I would be looking to grab some bargins.

Re:why didn't they provide the bailout? (1)

larry bagina (561269) | more than 5 years ago | (#25285109)

Dubai invested a lot of money into Citibank last year. They've got oil money to spare and they have been investing it in the US. But they're not a charity, they're trying to make money (that's a good thing). So there are a lot of shit mortgages/debt out there. Normally, banks that need the money would sell them off below cost (based on what other buyers are willing to pay) and write it off. Alternatively, they would go bankrupt and their assets would be bought up for others. But the bailout fucks that up big time. Why should they sell at the market price when the government will buy it for more? And let's be honest here -- the government doesn't have an incentive to get a good deal and the regulators are former industry insiders.

Government intervention is preventing the invisible hand of capitalism from working.

Re:why didn't they provide the bailout? (1)

qoncept (599709) | more than 5 years ago | (#25285175)

"two Abu Dhabi investment firms"

Why would they help with the bail out? They aren't in the business of charity, they are making an investment. They're buying in to AMD because apparently they see it as a wise investment. I would assume they aren't giving money to Fanny Mae because they don't see that as a wise investment.

Re:why didn't they provide the bailout? (0)

Anonymous Coward | more than 5 years ago | (#25285225)

Because they know a money-toilet when they see one.

Bernake and Paulson have no idea how to take 700 Billion dollars and make it into 701 Billion dollars.

But someone at AMD might be able to take 6 Billion and invest it somehow and pay back a decent return.

If your nation is conquered by another industrialized nation, at least the conquerors will give everyone sweatshop jobs. If your nation is conquered by a gang of multi-level marketers who instead of building factories and growing stuff, announce everyone had better quit wasting their time at jobs and get to black diamond level by winter or you starve, then you are completely fucked.

Re:why didn't they provide the bailout? (1)

westlake (615356) | more than 5 years ago | (#25285447)

Every little bit helps
.

$6 billion spent on a factory in upstate New York is good news for upstate New York.

It takes guts to put that much money into new industrial development during a financial crisis. The money could have been invested in AAA rated bonds from Microsoft.

Re:why didn't they provide the bailout? (2, Interesting)

mr_mischief (456295) | more than 5 years ago | (#25285499)

How better to help with financial bailout than to make a big company stay profitable instead of laying off highly skilled workers?

spinning off= collecting more stock markup money (-1)

Anonymous Coward | more than 5 years ago | (#25284745)

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Wow, AMD going fab-less... (1)

storkus (179708) | more than 5 years ago | (#25284765)

I have to agree with the above comment: this seems like a Three Card Monty or shell game to me as it makes the fab-less part more profitable but consigns the fab itself to possible bankruptcy. Then again, maybe they know that and this way they can, say, sell the fab to a dedicated fab company while telling Wall Street, "Hey, look how profitable we are!" thanks to the insurgence of cash from the sale.

Mike

Re:Wow, AMD going fab-less... (2, Insightful)

dreamchaser (49529) | more than 5 years ago | (#25284903)

Not really. By decoupling it makes it somewhat easier for the fabrication company to fill it's production lines by making chips for other fabless companies. It's not quite a move of desperation or some kind of accounting trick as you seem to imply.

Re:Wow, AMD going fab-less... (1)

bdenton42 (1313735) | more than 5 years ago | (#25285907)

This works well until the economy turns around and the fab becomes oversubscribed. Does the fab fill the (probably less profitable) AMD orders, or the (probably more profitable) outside orders first? At least with them maintaining an ownership interest they should be able to guarantee some capacity as well as have a reasonable shot at maintaining quality but there are bound to be issues.

Re:Wow, AMD going fab-less... (2, Insightful)

dreamchaser (49529) | more than 5 years ago | (#25285935)

I am not an MBA but I would hazard to guess that AMD Fabless and AMD Fab will have some sort of contract in place guaranteeing a certain level of capacity.

Re:Wow, AMD going fab-less... (2, Interesting)

ThePhilips (752041) | more than 5 years ago | (#25286605)

If you have followed AMD for some time (and I have - I lived in Dresden for two years), you would know all the troubles associated with building a fan now.

For its first fab, AMD could pull it mostly on its own. Still there were some other parties in the deal. For seconds fab in Dresden it was much much more complicated: further improvements in manufacturing processes made fabs more expensive. $2Bln is quite number for smallish company like AMD to pull. And finding partners is quite hard, because many wouldn't like that AMD sits on two chairs and getting guarantees that your product will not stall somewhere in AMD's fab pipeline, preempted by urgent work for AMD itself (to compete with no less Intel itself), is impossible. Thus finding partners for new fab is very hard for monolithic AMD.

Short term it would of course suck. Bureaucracy and communication of design details can easily introduce unwanted delays.

In long term it would also suck. Competing with Intel which has dozen of fabs would be very hard. New manufacturing processes would be harder to sync with CPUs road map.

But that's of course much better than sitting with the fabs on your balance sheet: they quickly loose relevance and need to be scrapped and rebuild literally completely anew. And the old manufacturing process is not that really old and irrelevant: it is old for CPUs and GPUs (due to competitive pressure from Nvidia and Intel), yet can be used for bunch of other products. e.g. Xbox only recently went to 65nm, while ATI's 48x0 GPU family already enjoys 55nm process.

Hmm... (3, Insightful)

kabocox (199019) | more than 5 years ago | (#25284949)

You have to wonder if this was actually a good long term idea that Intel would be doing it as well. I'm guessing this is more of an accounting trick to help their numbers look better and/or some how lower taxes. I don't own any AMD stock so this doesn't effect me too much... I just hope that they don't go under as Intel does need some one to compete against.

Re:Hmm... (1)

I.M.O.G. (811163) | more than 5 years ago | (#25285171)

Intel has bags full of money and tons of capacity. If AMD were to be hugely successful with their next gen chip, they wouldn't have the capacity to fully reap the benefits. Where Intel could increase capacity if necessary, AMD would go broke doing so.

So while that's part of it, the other part is that if things start going worse for AMD they could be in real trouble if they remain in the chip-making business. If they can't unload the chips they've already fabbed, they'd have to cut back production until they clear inventory. Cutting back production in the fab business is signing your own death warrant - a fab needs to be at or near capacity to stand any chance at being profitable. So while things currently aren't going great for AMD, if they get worse now that they're split... The cut back in production won't pull them under. In the meantime, the capacity that comes available in the spunoff fabs can be rented out to anyone else needing chips fabbed.

Re:Hmm... (2, Insightful)

skulgnome (1114401) | more than 5 years ago | (#25287189)

The difference is that Intel is chiefly a semiconductor manufacturing company, whereas AMD is chiefly an R&D company. As evidenced by Intel's chips being based on a silicon process that's about half a generation ahead all the time, and AMD's being smart, high-bandwidth designs hampered by slower silicon process development.

A similar move would hurt, not help, Intel.

Re:Hmm... (1)

amilo100 (1345883) | more than 5 years ago | (#25288753)

You have to make a profit before you can pay taxes... I doubt that AMD is doing this because of taxes. :(

Backwards (5, Insightful)

Thelasko (1196535) | more than 5 years ago | (#25285059)

Funny, my company just did the opposite. Our design department was just recently merged with manufacturing. This was done because:
A) Design would rarely factor in the manufacturability of it's designs, driving up costs.
B) Manufacturing had a tendency to sacrifice quality to reduce costs.

This new corporate structure has only been in place for a few months, but so far has worked quite well. Entire product lines have been eliminated (design didn't know manufacturing was still making the old stuff). Entire processes have been eliminated (manufacturing thought they were needed to meet the final spec, but weren't).

Most of these issues could have been resolved with better management and communication, but when design and manufacturing are a single unit, these issues resolve themselves naturally.

Stick a fork in 'em... (4, Interesting)

Dawn Keyhotie (3145) | more than 5 years ago | (#25285239)

Stick a fork in AMD, they're done.

A design firm plus a foundry does not equal an integrated semiconductor powerhouse.

Who is left to compete with Intel now? At least we will have Nehalem. Get used to Nehalem, embrace it, love it. Because it's going to be around for a long, long time. At least we have the x86-64 ISA, on-board memory controller, and point-to-point processor communications as an AMD legacy. And thank $DEITY that AMD was able to put a stake through the heart of Itanium.

There won't be much future innovation from Intel without the spur of aggressive competition from AMD.

Cheers!

Re:Stick a fork in 'em... (1, Redundant)

HBI (604924) | more than 5 years ago | (#25285443)

You're right, but people aren't going to want to recognize it.

AMDs irrelevance will become clear in about a generation of chips, though.

Re:Stick a fork in 'em... (1)

Spatial (1235392) | more than 5 years ago | (#25288215)

Just last week I was bitching about having no worthwhile upgrade path from my X2 6000+, but AMD recently announced that they'll be selling 45nm chips in early January. They claim a 35% average increase in performance over current Phenoms, with the same percentage decrease in power consumption. Intel is still ahead with the incredible Core 2 Duo lineup, but if AMD can pull off the 45nm Phenoms at a reasonable price, I think it will be enough to stay competitive for a while.

Re:Stick a fork in 'em... (1)

Necron69 (35644) | more than 5 years ago | (#25286145)

Hah! This is just the opening that Itanium needs for WORLD DOMINATION!! Just you wait, naysayers. BWAHAHAHAHAHAHHAHAAAA!!!!

- Necron69

Seriously, I like Itanium. :)

Re:Stick a fork in 'em... (2, Informative)

PLBogen (452989) | more than 5 years ago | (#25286755)

I worked for Intel ATD Q&R in 2003 when the Itanium 2 died. It had nothing to do with AMD, and everything to do with problems inherent in the design. The Itanium 2 was failing all of the Q&R tests and was not performing up to the desired specs. That was why Intel killed the line.

Abu Dhabi Investment Group (5, Interesting)

twmcneil (942300) | more than 5 years ago | (#25285263)

So the bottom line is that the Abu Dhabi Government is buying AMD?

Re:Abu Dhabi Investment Group (0)

Anonymous Coward | more than 5 years ago | (#25285489)

I can see the headlines now...

AMD's new "camel" processor given hump in water cooling face off.

Move over Fritz, here comes the Allah chip!

How's this going to work? (0)

Anonymous Coward | more than 5 years ago | (#25285365)

I thought AMD is required to own at least one fab themselves. At least that's what I thought the deal was with INTEL in order to use the x86 architecture

It's a smoke screen for mismanagement (3, Interesting)

postbigbang (761081) | more than 5 years ago | (#25285565)

A hot fab is useless unless you can get product to market, and sell into the markets you need to achieve sales goals. AMD hasn't done this.

While they have very good engineers, they're weak in so many places. An infusion of foreign capital makes no sense if you can't get the basics right.

Yes, Intel, IMHO, used illegal tactics to kill AMD at many turns. AMD needs to recruit the best and brightest and get a regime change in motion to diffuse their preyed-upon attitude. They could lead again, but not with the current regime.

Chopping the company into bits will be a distraction, not a savior.

I Had This Plant... (1)

i_ate_god (899684) | more than 5 years ago | (#25285747)

I don't know what it was, but it also split in two. It was a slow process mind you, took about a week before the split finished.

Then it died in a few months after the split. I think the problem was that I never put the plant into a bigger pot. It split in two and now needed twice as many resources to survive, and that small pot was simply not enough room for its roots.

So imagine my surprise when I read this story and realized that the exact same thing happened to my plant.

amd dead. (1)

t8z5h3 (1241142) | more than 5 years ago | (#25285761)

R.I.P. AMD and see you latter ATI i remeber when AMD/NVIDA was perfect with the nvidia chipset and the video and amd doing the prossor. now AMD is a company that is almost dead. :(

Re:amd dead. (0)

Anonymous Coward | more than 5 years ago | (#25286229)

Oh get over it already.

AMD now has its debts taken care of, doesn't have to worry so much about the fab side of the business. The ATI division is producing awesome product (both GPUs and chipsets).

All it needs is a marketing team worthy of the name.

how to kill AMD in 7 steps. (1)

Deathlizard (115856) | more than 5 years ago | (#25285925)

1) AMD Spins of fabs.
2) Intel/VIA/TMSC/IBM buys AMD Fabs.
3) Intel/VIA/TMSC/IBM Fabs charges huge price to manufacture AMD CPU's.
4) AMD CPU Prices skyrocket. Unable to find a cheap reliable FAB, AMD loses price competitive edge.
5) AMD Stock tanks.
6) ...
7) LOSS.

Re:how to kill AMD in 7 steps. (1)

Pulzar (81031) | more than 5 years ago | (#25286749)

5) AMD Stock tanks.

Well, that has already happened, so they might as well try something new.

Re:how to kill AMD in 7 steps. (2, Insightful)

skulgnome (1114401) | more than 5 years ago | (#25287231)

Or...

3) Intel/VIA/TMSC/IBM Fabs sticks to contractual obligations it has with AMD that carried over from when it was still AMD Fabs.
4) AMD keeps dominating the x86-64 server market.

These corporate types aren't stupid, you know. This is the obvious fear factor, and the stockholders would never go along with the plan if this fear were not addressed.

Slow sucking sound (3, Funny)

matt_martin (159394) | more than 5 years ago | (#25285993)

Once again, another American company selling off to foreign investors.
Another powerhouse US industry falling to the wayside.
Sucks that I foolishly spent many years studying to work in said industry.

At least both presidential candidates are planning to retrain me to sell cars or something.

Re:Slow sucking sound (2, Insightful)

ChrisA90278 (905188) | more than 5 years ago | (#25288485)

No. That "sound" is the sound of technology moving forward. At one steel mills were "high tech" but now it's a low tech "smoke stack industry" that has move over seas. It one point electronic assemby was a high tech industry and now it's moved to China where un-educated one time farmers can build iPhones. My point is that the cutting edge moves fast. The nest wave will be biology. Kids today who want to be on top and work in high tech should be taking Chemistry and Microbiology in school. Electrical Engineering and computer science was "so 1990's"
(Disclaimer: I studied EE and CS in the 1970's) If not biology then "green energy". Everyone working in that area is having to deal with more work then they can handle

Oh no AMD is dying netcraft etc. etc. (1)

Ant P. (974313) | more than 5 years ago | (#25286235)

Where did all these unpaid shills in the replies come from, anyway?

AMD started out as a third party fab for Intel's CPUs. Maybe a few years from now this spun off company will move into chip design too, though hopefully by then there'll be enough people using platform-independent OSes that they won't feel compelled to make yet another x86.

Do you... (0)

Anonymous Coward | more than 5 years ago | (#25286573)

...remember Palm [arstechnica.com] ?

tr/oll (-1, Offtopic)

Anonymous Coward | more than 5 years ago | (#25286721)

influence, the Joi8 in especially OF THE GNAA I THINKING ABOUT IT.

A lot of it is simply accounting.... (4, Insightful)

Eskarel (565631) | more than 5 years ago | (#25286807)

AMD have a lot of issues, and they've made a lot of mistakes.

They got greedy when they were on top, and charged too much for processors which allowed Intel to do to them exactly what they did to Intel(swoop in with cheaper parts).

They've also got some problems with maintaining any presence in the top end of the CPU market. This isn't a huge deal for fabrication as almost no one buys those thousand dollar CPUs anyway, but those thousand dollar CPUs are your next generation main stream CPUs so you've got to have them.

They've also had some issues because they aren't big enough to take what's been happening in the market lately as easily as Intel has. AMD is now worth less than they paid for ATI, they're not alone in being worth a lot less, but it's not as visible for other companies.

Essentially the biggest thing this does is allow AMD the design company to ditch its debts into AMD the fab company. Investors will be much more willing to accept debt in the fab company because at the very least the assets are worth cash and it won't be dependent on whether AMD can come up with something halfway decent design wise. If the design company goes under, they can always just go fab Intel CPUs.

The design company on the other hand, after offloading a whole lot of its debt, is much more likely to stay alive long enough to fix things. They've got to get designs out into the market, they've got to be cheaper, and they've got to be at least almost as good as the Intel parts, but they have to survive long enough to do that.

Realistically, AMD will probably buy the company back if they do survive because having your own fabrication facilities is probably key to being in the top of this market, but in the meanwhile they get to stay alive in a failing economy, a credit crunch, and a time of total lack of vision for the future.

This split, silly as it sounds, may allow them to survive long enough to do this, and at the very least might keep Intel worried enough that they don't go back to the old days for a few more years.

Re:A lot of it is simply accounting.... (1)

Spatial (1235392) | more than 5 years ago | (#25288399)

They've also got some problems with maintaining any presence in the top end of the CPU market. This isn't a huge deal for fabrication as almost no one buys those thousand dollar CPUs anyway, but those thousand dollar CPUs are your next generation main stream CPUs so you've got to have them.

Not just the top end. Look at Intel's mainstream C2D E8400: a stock 3Ghz chip with a peak power draw of about 40 watts, equal in performance to a hypothetical 4.2Ghz Athlon X2. That's amazing, but it gets worse for AMD. Intel are so far ahead they can pull their punches right now; the E8400 is routinely overclocked by ~600Mhz without even changing the stock HSF, and can reach well over 4Ghz with some cooling improvements. Intel's manufacturing process is so good, I think they could put out a stock 4Ghz model with little difficulty for a good price, if they actually needed to compete.

If only I went with an Intel-based motherboard instead of my AMD one last year. :(

Beginning of the end of exponential growth (2, Interesting)

ChrisA90278 (905188) | more than 5 years ago | (#25288301)

I read that Gordon Moore once explained his "Moore's law" as being economic, not technical. He said that when Intel builds a new plant, each new plant costs about twice as much as the last one. so he said at some point a plant will cost more money then there is on earth so they will have to stop buiding new plants at some point and then Moore's law will end. I think what we are seeing is the front end of this. A few smaller companies are finding they can build new fab plants. Maybe in 20 year even Intel will have to do what AMD is doing and then we will see the end of exponential growth.

The key observation here was by Gordon Moore that growth in the number of transisters is due to growth in capital spending on fab plants, not technology.

It's About Time (1)

knapper_tech (813569) | more than 5 years ago | (#25288407)

Not to troll, but being one of the many people who felt the pain as Hector started spinning more and more BS storms to hide the fact that AMD never came up with a good product after K8 and failed time after time to finally capitalize on their gains, I'm glad AMD is finally going to chop itself up.

Conference call after conference call investors were told everything was okay. AMD did some good things for themselves when they let Intel fly into the sun while they held back on GHz and finally got the performance-per-watt metric to stick and won a lot of respect in the industry.

AMD followed up by flying straight into the sun and insisting that their architecture was fundamentally better and that true-quad-core was the way to go while Intel kept making good chips and lo and behold nobody cared if they were dual-die packages or not. AMD didn't have the production capability to fabricate such a part and committed product-pipeline suicide. They lead investors and wall street to believe they had a chance. Conference call after conference call they told the world it was going to be okay.

In the end, Intel's architectures are superior on the right counts. They've done a great job at getting the most out of their transistors with the shared cache architectures. AMD should have followed step, but either couldn't keep up or didn't allocate the resources right. Either way we ended up with a transistor monster in K10 that was hard to produce, buggy, and didn't offer the performance. Shame on Hector for flogging the dead horse.

Malta, New York will never be the same (1)

GreenSwirl (710439) | more than 5 years ago | (#25288469)

They have been building new access roads like crazy in anticipation of this new fab plant, which they didn't know was coming for sure until today. On the one hand, I'm glad that all the construction wasn't for nothing. And local homeowners are excited that their unsellable homes may soon be in demand. But it is still going to suck big time for the local environment, not to mention how the traffic will make life there miserable. And I have a strong suspicion that all those new corporate tax dollars won't reduce property taxes or the sales tax in Saratoga County by a cent.
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