Keeping pace with a giant entails taking large steps and AMD’s hiving off of its manufacturing plants is its second major bound in two years. It is far less risky than its last one.
AMD is being outspent 10 to one by Intel this year on increasing the sophistication of the manufacturing process for semiconductors.
Intel has forged ahead of AMD in reducing the circuit widths of chips from 65 to 45 and next 32 billionths of a metre. Equally significant, AMD was on the verge of being left behind in the move up from wafers 300mm in diameter to 450mm from 2012.
Intel, Samsung and TSMC announced in May that they had reached agreement on managing the transition to the larger wafers from which chips are cut, creating savings of as much as 40 per cent.
In July, Intel senior vice president Pat Gelsinger predicted that the cost of retooling to 450mm would force consolidation and reduce the number of chip manufacturers to less than 10. Anyone spending less than $1bn a year on capital expenditure – AMD is expected to spend $900m in 2008 – would fall off the pace, he warned.
AMD’s spinning off and recapitalisation of its manufacturing arm puts it back in the game, while allowing it to focus on its core business of designing the processing “cores” of computers.
Its earlier bold step of buying Canadian graphics chipmaker ATI in 2006 with the idea of creating a “Fusion” product, combining the central processing unit (CPU) and graphics processing unit (GPU), has yet to bear fruit, bringing nothing but writedowns and losses.
It sold ATI’s digital TV chip business to Broadcom in August to further narrow its focus and has just launched a major branding campaign around the Fusion concept.
“The Future is Fusion” was both a message to its customers and an urgent memo to itself.
