AMD to outsource/sell Fabs (confirmed)

[Hornet331]

http://bigtech.blogs.fortune.cnn.com...gineering-amd/

Since it can’t afford to do this anymore, AMD plans to spin off its chip manufacturing operations by year’s end, probably by hawking them outright or by inking a partnership with a larger chipmaker – a maneuver akin to selling a house and leasing it back. Meyer is vague on the exact timing of a deal, but he knows it’s probably the best thing the company can do quickly to improve its financial position, and its reputation with investors. A successful transaction would see AMD pocket a good chunk of cash, while handing manufacturing to a company that can better keep pace with Intel’s world-class operations.

“We’re going to go away from a captive fab model to more of a fables model for the CPU part of the business,” Meyer says. “Longer-term, it relieves us of the burden of having to shell out cash for these gigantic factories. So it will be more of a pay-as-you-go model like a traditional fables semiconductor company.”

Direct form the mouth of Dirk Meyer... i wonder why this wasn't post here already...

[situman]

Well I guess there won't be a new fab in NY.

[Katanai]

Now the question is: what will they do with the money they get? Invest in some much needed research or try to strengthen their current market position? Whatever they do, this is not good for AMD as a company, I don't see how anything like this will make investors or shareholders more confident. It just means that in case of a bankruptcy there will be less assets to sell hence less money that can be recovered. I for one, if I was still a shareholder, would sell all my stock now. It's like this company is saying that it has no confidence in its own future...

[Hornet331]

Now the question is: what will they do with the money they get? Invest in some much needed research or try to strengthen their current market position? Whatever they do, this is not good for AMD as a company, I don't see how anything like this will make investors or shareholders more confident. It just means that in case of a bankruptcy there will be less assets to sell hence less money that can be recovered. I for one, if I was still a shareholder, would sell all my stock now. It's like this company is saying that it has no confidence in its own future...

its also bad form engeeiring pov, they are now bound to generic processes from large foundrieslike TSMC or UMC.

[Periander6]

They have been trying to do this since last year, but the purported date keeps getting pushed back. The hold up is not their willingness to spin the fabs off, but their ability. The trick is finding someone stupid enough to put money into it. Who wants to invest in a SOI contract fab operation located in high cost Germany? In the current market environment idiots with money to throw away are a lot harder to find than they were last year. Right now I'm having a hard time seeing anyone other than the German government itself falling for this, but hey human stupidity should never be underestimated.

[[XC] gomeler]

Oh the gap that will widen between AMD and Intel after this happens. Goodbye tweaking your process and modifying the materials for your design!

They have been trying to do this since last year, but the purported date keeps getting pushed back. The hold up is not their willingness to spin the fabs off, but their ability. The trick is finding someone stupid enough to put money into it. Who wants to invest in a SOI contract fab operation located in high cost Germany? In the current market environment idiots with money to throw away are a lot harder to find than they were last year. Right now I'm having a hard time seeing anyone other than the German government itself falling for this, but hey human stupidity should never be underestimated.

I think the machines in the fab are worth more than the land so... buy the fabs, strip them clean, send machines to China, sell buildings.

[T_Flight]

This is the sign I was looking for 3-4 years ago. They have been in trouble for a long time, and if they don't start selling off stuff to at least become solvent a Judge would start throwing people in prison. "In debt up to their eyeballs" wouldn't even begin to describe this company. They are over their head so far they are 200 feet below sea level.

Back when I built my last system this Ruiz guy came up with the crazy notion to take on Intel, and challenge them to a fight in the ring. Anybody remember that? Well, they got it, and not only did they get knocked out, they got finished.

They were doing really well, and we had a good level of competition going until they went and got stupid and challenged a giant that has 10's of millions if not Billions more in disposable income than they did and they got owned. It was a very stupid thing to do.

It's really a shame. I fear that prices will soar if this company declares bankrupsy. The investors need to take over that company and fire Ruiz for starters, and get somebody in there with the sense God gave them and straiten stuff out. They should've done that years ago. Even if they did it right now it may be too late.

Selling off is just the first step to get through court without criminal charges being files. The mismanagement has gone on too long.

[informal]

“We’re going to go away from a captive fab model to more of a fables model for the CPU part of the business,” Meyer says. “Longer-term, it relieves us of the burden of having to shell out cash for these gigantic factories. So it will be more of a pay-as-you-go model like a traditional fables semiconductor company.”

I bold out the important part.So no,they won't completely sell the fabs,but more co-manage it and share the cost with other big players(like IBM or TSMC).

[Hornet331]

This is the sign I was looking for 3-4 years ago. They have been in trouble for a long time, and if they don't start selling off stuff to at least become solvent a Judge would start throwing people in prison. "In debt up to their eyeballs" wouldn't even begin to describe this company. They are over their head so far they are 200 feet below sea level.

Back when I built my last system this Ruiz guy came up with the crazy notion to take on Intel, and challenge them to a fight in the ring. Anybody remember that? Well, they got it, and not only did they get knocked out, they got finished.

They were doing really well, and we had a good level of competition going until they went and got stupid and challenged a giant that has 10's of millions if not Billions more in disposable income than they did and they got owned. It was a very stupid thing to do.

It's really a shame. I fear that prices will soar if this company declares bankrupsy. The investors need to take over that company and fire Ruiz for starters, and get somebody in there with the sense God gave them and straiten stuff out. They should've done that years ago. Even if they did it right now it may be too late.

Selling off is just the first step to get through court without criminal charges being files. The mismanagement has gone on too long.

ruiz is already out, but meyer continues what ruiz has stated.

[Periander6]

I think the machines in the fab are worth more than the land so... buy the fabs, strip them clean, send machines to China, sell buildings.

They can't do this because of x-license restrictions. They are prevented from outsourcing more than a certain (unpublished) percentage of their production. They would need to retain a 51% ownership interest in the fab spin-off, then have it remain as its primary fab.

[Rammsteiner]

Dont know either why this hasnt been posted earlier. Although, I only check TPU mostly and now and then VR-Zone/Expreview. That link is a bit, well, unknown. To me at least.

Anyway, Ive mixed feelings about this.

It's not a new thing that having the most recources for your final product owned by your self is the best and cheapest thing. Otherwise you'll have to buy a lot of products for your final product, and all the people you buy from want to have a margin of profit.

On the otherhand, it's also not a new thing that if you actually make a deal with someone for a very large order or even an order for years, you can get a fair amount of savings from it since that producer has a guaranteed income and that's all what he wants. The buyer of that fab already has one solid customer.

Also AMD knows how much it roughly costs to get those products out of that fab so that fab really cant mess with AMD there.

But with this move, doesnt this basicly mean that this fab does not run max capacity 24/7? Otherwise I dont see the point of doing this. Also, if this fab doesnt run max capacity 24/7, why not offer to build chips for other compagnies instead?

[cadaveca]

Um, it was first mentioned(by me) when they announced asset lite, so it's really no surprise here. Also, it has been known for a while that they were forming two seperate AMD entities, one owned by AMD proper, and one owned by abu-dhabi. AMD will retain all intellectual property, abu-dhabi will produce it. This allows AMD to appear in the black on paper, while abu-dhabi takes all the loses from production. Should production kill abu-dhabi side of AMD, AMD itself will remain alive, and part of the industry.

I have mentioned for at last the last three years that the money was in the fabs, and we needed a new start-up, so it's no surprise to me that this is the direction taken, as it's been clear for years that this was the direction that Hector was taking AMD...Um, hello Motorola, once again...

[Shintai]

I bold out the important part.So no,they won't completely sell the fabs,but more co-manage it and share the cost with other big players(like IBM or TSMC).

They already bleed like mad with their main neckartery cut open. Now they also cut the vains on their arms to survieve abit longer.

Sharing profit just makes everything harder, plus a process node you cant explicit optimize. Its a VIA #2...

And 1 of the 2 companies will sink for sure. Now its just a matter of wich one.

[@@@@]

this was publish a month or 2 ago

I am still searching for the article but I also read an article that Dirk Meyer said he was miss quoted

but if Dirk Meyers is telling the truth or not I do not know

but a Question came to mind

with the cross license they have with intel, one of the agreement is that they have to produce 85% of their chips in house
or as stated above mas own the majority of the stocks, basically 51% percent

[BrowncoatGR]

They can't do this because of x-license restrictions. They are prevented from outsourcing more than a certain (unpublished) percentage of their production. They would need to retain a 51% ownership interest in the fab spin-off, then have it remain as its primary fab.

So many people insist on this. The truth is it is far from simple. Intel is using several AMD patents in their CPUs that are cross-licensed through this very same agreement. It is far easier and less costly imo for Intel to simply agree to renew the license with new terms. Besides i don't think they have anything to loose out of this. Also i think the age of in house manufacturing seems to slowly be coming to an end. If current trends continue, a decade or two in the future i dont think any company will be able to afford in house manufacturing without also acting as a foundry.

I bold out the important part.So no,they won't completely sell the fabs,but more co-manage it and share the cost with other big players(like IBM or TSMC).

Yeah i think people are not really paying attention to what they read. That article is sensationalist journalism at it's best.

[naokaji]

Now the question is: what will they do with the money they get?

2 choices:
1: pay off debts
2: use it to develop a competitive product.

option one leads to bankrupt as they wont have the money needed to develop anything new, option 2 wont work as they will be bankrupt from the debt before they get something really good out of the door.

Who wants to invest in a SOI contract fab operation located in high cost Germany?

depends entirely on how much the german government gives a company to move there...

[metro.cl]

Um, it was first mentioned(by me) when they announced asset lite, so it's really no surprise here. Also, it has been known for a while that they were forming two seperate AMD entities, one owned by AMD proper, and one owned by abu-dhabi. AMD will retain all intellectual property, abu-dhabi will produce it. This allows AMD to appear in the black on paper, while abu-dhabi takes all the loses from production. Should production kill abu-dhabi side of AMD, AMD itself will remain alive, and part of the industry.

I have mentioned for at last the last three years that the money was in the fabs, and we needed a new start-up, so it's no surprise to me that this is the direction taken, as it's been clear for years that this was the direction that Hector was taking AMD...Um, hello Motorola, once again...

Why would anyone pay to get losses? that is the only part of the Abu-dhabi story that doesnt fit for me.

It is a lot more logical that someone like TSMC or UMC or so could get into a agreement (not actually buy) AMD fabs included the future NY fab and manage them, so they build the fabs and have to renew the machinery to get new production process. But this still has a ton of issues to solve.

[Miss Banana]

They already bleed like mad with their main neckartery cut open. Now they also cut the vains on their arms to survieve abit longer.

I am used to you saying things that don't make a whole lot of sense, but Shintai, this comparison beats everything.

A lot of people yell things about AMD being unable to optimize their tech like they used to if they go asset light, but they don't even know how AMD plans to arrange this strategy to begin with.

Asset-light is not the same as asset-less.

[savantu]

I'm amazed how some folks here fail to realize how impossible is for AMD to get a good deal on their FABs :

1.AMD has $4.9B in debt
2.The Dresden complex isn't worth more than $2-2.5B. ( assuming someone is foolish enough to buy a FAB in need of upgrades and an empty shell in Germany , the most labour expensive country in Europe )

As a result ,assuming someone pays $1.5-2B for the FABs , AMD is still stuck with close to $3B in debt ( nobody is stupid to buy their debt , you can bet on this ) since they're forced to pay the credit before anything else.

End result : a FABless AMD with $3B in debt.
Positives : no investment in FABs ; better debt schedule
Negative : costs per unit will rise ; less tunning.

[Shintai]

Germany , the most labour expensive country in Europe

That far from right tho. Germany is rather cheap, but still alot higher than in Taiwan and China with UMC, SMC and TSMC. And Singapore is in the middle with Chartered.

Move it to Denmark and you pay twice the wage.

[Miss Banana]

I'm amazed how some folks here fail to realize how impossible is for AMD to get a good deal on their FABs :

1.AMD has $4.9B in debt
2.The Dresden complex isn't worth more than $2-2.5B. ( assuming someone is foolish enough to buy a FAB in need of upgrades and an empty shell in Germany , the most labour expensive country in Europe )

As a result ,assuming someone pays $1.5-2B for the FABs , AMD is still stuck with close to $3B in debt ( nobody is stupid to buy their debt , you can bet on this ) since they're forced to pay the credit before anything else.

End result : a FABless AMD with $3B in debt.
Positives : no investment in FABs ; better debt schedule
Negative : costs per unit will rise ; less tunning.

I hate it when people talk out of their ass, acting as if they know it all.
Germany is not labour expensive, you do not know if there will be less tuning options for AMD, you do not know if costs will rise, you do not know what investors are willing to give for different fabs.

You just do not know...
All we know is that AMD is going to try to lower their dept by using a strategy not one company has used before.

[savantu]

I hate it when people talk out of their ass, acting as if they know it all.

I hate it when people don't use their brain before posting.

Germany is not labour expensive,

Not exactly cheap either.Compared to the US , I'd think they're more expensive by any standard.
Factor in the social benefits and it's a bad choice to produce in Germany in Euros and sell in $.

you do not know if there will be less tuning options for AMD,

Let's assume a new entity owns the FABs.Will they produce something else there or just stick to AMD CPUs ? Obviously the former option.
If you produce something else you need a different process because different features are needed.
Can anyone afford to have multiple processes tuned for different markets ? Maybe TSMC and UMC.
Otherwise you have a generic one.

you do not know if costs will rise,

So AMD produces CPUs in house ; those are registered at production cost.
AMD sells the FABs and outsource its CPUs : now you pay production cost + profit margin.

Economics 101.

you do not know what investors are willing to give for different fabs.

You can search how much a new FAB costs , add in depreciation , labour deals , etc and you can put a very rough estimate.

All we know is that AMD is going to try to lower their dept by using a strategy not one company has used before.

Why not wait and see before making such absolute claims.

[qurious63ss]

I hate it when people talk out of their ass, acting as if they know it all.
Germany is not labour expensive, you do not know if there will be less tuning options for AMD, you do not know if costs will rise, you do not know what investors are willing to give for different fabs.

You just do not know...
All we know is that AMD is going to try to lower their dept by using a strategy not one company has used before.

Well if it Ruiz driving this, then yes we have seen this strategy before. He did this with Motorolla when they split manufacturing from design in the 90s.

[Shintai]

Btw, AMDs new "foundry" would be a tiny tiny tiny little player. I dont even think it would be 1% of TSMC.

The new foundry got everything against it, nothing for it.

[Glow9]

TSMC Has been making ATI chips for like 12 years I Dunno if I'd just call them generic obviously ATI/AMD brought in some business partners