AMD cuts to the core with 'Bulldozer' Opterons

[JumpingJack]

I don't think AMD will be paying the equivilant of the $4-5 Billion on wafers, that it costs to build and equip a fab and develop a new process.

http://www.semiaccurate.com/forums/s...t=1226&page=27

Foundries, though, pay these costs and, as business, they also want to be profitable. Therefore, the fab build (Capital expenditures) are paid, depreciated, and recouped by billing those costs into the costs of the wafers they sell to their customers.

The GloFo maneuver only works if the resulting foundry can keep utilization at high as possible spread over many customers (the more the better). If AMD were GloFo's only customer (this is hypothetical, because this is certainly not the case) and GloFo was on a mandate for profit, ultimately costs to AMD would be higher not lower due to the spin off. This is why many analysts were skeptical of the spin off approach, if GloFo did not retain any new customers, ultimately AMD would be paying that 4-5 billion for a fab and development costs as it would have been built into the price GloFo would charge them per wafer.

The concept is that the capital expenditure costs necessary to run a fab is spread over several customers, such that the total wafer costs are lower per customer than if they tried going it alone. This requires as many customers as you can secure and selling all your capacity to run at high efficiency.