Will AMD Stop Fabbing Their Own Chips?

If you're hungry for news about the future of Intel's pesky little rival, AMD, (we always are) then perhaps you'd go to their spokesman and flat out ask. If you're Business Week, here's the sort of answer you'd get:

"AMD continues to look at multiple options that leverage our world-class manufacturing capabilities and relationships to achieve an optimum blend of internal and external operations."

Let's play PowerPoint Bingo with that short sentence. Let's see, we've got:

  • multiple options
  • leverage (used as a verb)
  • world-class (fill-in the blank)
  • relationships
  • optimum blend (not referring to coffee)
  • internal and external operations

Bingo! They said absolutely nothing. If you substituted "NAZI Germany" for "AMD" in that sentence, that could mean they were about to invade Poland. It's that vague. Saying nothing to the media leads to all sorts of wild speculation. Some of the most interesting answers to the "whither AMD?" question center on AMD ending the fabrication of the chips they design altogether. 

Selling off fabs would have clear financial benefits for AMD, but would also expose some problems. For one thing it would go a long way toward cutting AMD's operational expenses, which were $1.6 billion in the first six months of the fiscal year, eclipsing its $1.3 billion gross margin. Unloading the fabs would put AMD in a class of chip companies who don't own their own factories, and thus hire companies like Chartered, TSM, United Microelectronics (UMC), and even IBM (IBM) to make chips under contract. Going "fabless" has meant success for chip companies as varied as Nvidia (NVDA), Broadcom (BRCM) and Qualcomm (QCOM). Still, such a move would fly in the face of AMD tradition: Its founder, Jerry Sanders, once famously quipped "Real men have fabs."

Real men go bankrupt sometimes, too, when they stubbornly cling to approaches that don't work. Intel is always upping the ante on AMD, requiring them to expend enormous sums to build chip fabrication plants that are close to obsolete the minute they come on line. If AMD concentrated on chip design, their undoubted strength, and farmed out the fab, they'd be more nimble and not be stuck writing off sunk costs over and over when Intel dumps their dumptruck of money into their next-generation fabrication plant. BusinessWeek thinks the subcontrated fab approach is at least on the table now, and until AMD tells us what they're going to do, it's as good a guess as anybody's.

Tags:  AMD, Fab, Chip, Bing, chips, Will, IPS, IP, AM