AMD: Keeping Competition Alive

Posted by: Stephen Wildstrom on October 7, 2008

AMD_logo_us-en.gif
Advanced Micro Devices’ announcement that it is spinning out its chip fabrication operations to a new Abu Dhabi-financed company is good news for the future of competition in the processor and graphics chips businesses. AMD has a lot of advanced manufacturing technology, some of it courtesy of a technology sharing arrangement with IBM and a state-of-the-art chip fab in Dresden, Germany. But it could never come close to matching its much larger rival, Intel, in manufacturing efficiency. AMD was slowly, or not so slowly, being crushed by the capital cost and debt burden imposed by its manufacturing operations.

As industry analyst Roger Kay of Endpoint Technologies Associates notes: “AMD gets to lower its fixed costs, making it profitable at a lower level of revenue, and it can still participate in leading-edge technology development. It gets out from under some of its debt and receives a cash infusion from a patient source. The bonus: it gets to participate in an entirely new business, a foundry that takes in knitting from other fabless semi companies. AMD sweated this deal for a long time. It wanted to enter into, not just any partnership, but the right partnership. Certainly, Samsung and other large semi companies would have been happy to have a captive processor and graphics company in the stable, but AMD wanted to continue doing what it does best: developing computer innards. By moving in this direction, the company positions itself well in both its existing business and a whole new future business.”

Reader Comments

Kevin

October 7, 2008 2:27 PM

AMD Chips, at least at one point, ran 12% faster than Intel at the same speed rating.

Wallace Eastman

October 7, 2008 2:30 PM

I have not had a computer with an Intel chip since my 40Mhz AT. AMD has performed well in all my machines since.

Eric Henry

October 7, 2008 2:38 PM

aw

October 7, 2008 2:45 PM

I would rather have intel buy up amd (even at the cost of competition) than some terrorist controlling it.

Ladder

October 7, 2008 2:59 PM

And what of all the jobs here in the U.S. that will be lost due to them being exported over seas? AMD has become just another big corporation that apparently cares nothing about the well being of its own country.

Steve Wildstrom

October 7, 2008 3:22 PM

@Ladder
I don;t think there any reason to expect substantial loss of U.S. jobs. First, chip fabrication requires vast amounts of capital but is so highly automated that relatively few people are employed in a fab. In fact, fab engineers regard humans primarily as sources of contamination and the fewer of htem there are around, the better. Second, AMD's primary manufacturing facility is in Germany. The high-value chip design functions will stay with AMD in Austin and Silicon Valley.

Abu bin-Chip

October 7, 2008 3:35 PM

Abu Dhabi may know camel chips, but they sure as Hades don't know caca-mecca about processors. The term "Empty Quarter" refers not only to the geographical site, but also to the 8th quarter (and counting) of AMD's major losses. AMD, the all-mecca-device.

Kyle York

October 7, 2008 3:52 PM

Steve et al-

I live here in Northern New York State where AMD has promised...on a handshake...to build $3.2 billion dollar chip fab plant. The state has promised a nice incentive package of 1.6 billion IFFFF they break ground in July 2009. So, do y'all think we'll have a BOOMING July Fourth or will it fizzle out?

Zandora

October 7, 2008 8:08 PM

The ignorance of some people is amazing. To label Abu-Dhabi as "terrorist" is silly. You don't know squat, not everything in the middle east is anti-american or anti-capitalism, and lumping it all as "mecca" is quite absurd. This deal represents some of the oil dollars that we have sent overseas coming back to the USA. And to the Intel fanboys, just remember that if AMD didn't exist, you would all be running Itanic processors and emulating x86 today, paying 2-5x as much for processors that consisted of what Intel thinks is good for themselves (as opposed to its customers). You might also remember that Conroe/Core2 was a design that came from Israel, not the US.

Roger Kay

October 8, 2008 5:50 PM

Eric Henry, thanks for the pointer. His review was quite complete, but mine was shorter. ;)

Roger L. Kay

Post a comment

 

About

Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

Categories

 

BW Mall - Sponsored Links

Buy a link now!