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AMD To Spin Off Fabrication From Design Work
I.M.O.G. was one of many readers to write with the news that "Advanced Micro Devices plans to announce Tuesday that it will split into two companies — one focused on designing microprocessors and the other on the costly business of manufacturing them — in a drastic effort to maintain its position as the only real rival to Intel. 'This is the biggest announcement in our history,' said AMD's chief executive, Dirk Meyer. 'This will make us a financially stronger company, both in the near term and in the long term, as a result of being out from the capital expense burden we have had to bear.'"
Can someone give me some insight into why splitting the company into two is supposed to help AMD?
Because Design without Fab worked so well for Transmeta?
I see your sarcasm, but it works for ARM and MIPS.
Not really. By decoupling it makes it somewhat easier for the fabrication company to fill it's production lines by making chips for other fabless companies. It's not quite a move of desperation or some kind of accounting trick as you seem to imply.
You have to wonder if this was actually a good long term idea that Intel would be doing it as well. I'm guessing this is more of an accounting trick to help their numbers look better and/or some how lower taxes. I don't own any AMD stock so this doesn't effect me too much... I just hope that they don't go under as Intel does need some one to compete against.
Funny, my company just did the opposite. Our design department was just recently merged with manufacturing. This was done because:
A) Design would rarely factor in the manufacturability of it's designs, driving up costs.
B) Manufacturing had a tendency to sacrifice quality to reduce costs.
This new corporate structure has only been in place for a few months, but so far has worked quite well. Entire product lines have been eliminated (design didn't know manufacturing was still making the old stuff). Entire processes have been eliminated (manufacturing thought they were needed to meet the final spec, but weren't).
Most of these issues could have been resolved with better management and communication, but when design and manufacturing are a single unit, these issues resolve themselves naturally.
One of our competitors trademarked the term "hypothesis". From now on, we will call them "boneheaded ideas".
Stick a fork in AMD, they're done.
A design firm plus a foundry does not equal an integrated semiconductor powerhouse.
Who is left to compete with Intel now? At least we will have Nehalem. Get used to Nehalem, embrace it, love it. Because it's going to be around for a long, long time. At least we have the x86-64 ISA, on-board memory controller, and point-to-point processor communications as an AMD legacy. And thank $DEITY that AMD was able to put a stake through the heart of Itanium.
There won't be much future innovation from Intel without the spur of aggressive competition from AMD.
Cheers!
"The only good windmill is a tilted windmill."
If they are a single company, then, internally, the two groups almost have to use each other or else seem bizarre. I.e., if the designers contracted out fabrication of a model even though their own fabrication division was not fully utilized, that would seem unhealthy. By the same token, if the fabrication division pre-empted production in-house designs for a third-party, that would similarly look bad.
With that view, it would be a tad harder for the fabrication portion of the business to attract design companies, with prospective companies knowing they are putting their manufacturing capabilities in the hands of a company that would be both partner and competitor. The conflict of interest is far from appealing.
Few large corporations under typical circumstances preserve in-house at-scale manufacturing. I.e., most x86 system vendors now at most design the system and then feed to another company for fulfillment, potentially even a company spun off from themselves when they reached a similar conclusion.
As consumers, we don't stand to lose, only to gain. For example, if nVidia has been held back in any quality/performance way by inferior fabrication companies, they may now approach AMD fabrication. Same goes for AMD v. Intel, if another fab company can deliver more aggressive process size/yield improvements, then AMD design can go to that company and produce a valid competitor to Intel.
Or it shows that both halves of the company were completely average nowadays even in only the context of their similar competitors, and still doesn't do well, but that isn't different from today.
XML is like violence. If it doesn't solve the problem, use more.
So the bottom line is that the Abu Dhabi Government is buying AMD?
"The ferrets, they're every where I tell you!"
How better to help with financial bailout than to make a big company stay profitable instead of laying off highly skilled workers?
A hot fab is useless unless you can get product to market, and sell into the markets you need to achieve sales goals. AMD hasn't done this.
While they have very good engineers, they're weak in so many places. An infusion of foreign capital makes no sense if you can't get the basics right.
Yes, Intel, IMHO, used illegal tactics to kill AMD at many turns. AMD needs to recruit the best and brightest and get a regime change in motion to diffuse their preyed-upon attitude. They could lead again, but not with the current regime.
Chopping the company into bits will be a distraction, not a savior.
---- Teach Peace. It's Cheaper Than War.
I am not an MBA but I would hazard to guess that AMD Fabless and AMD Fab will have some sort of contract in place guaranteeing a certain level of capacity.
Once again, another American company selling off to foreign investors.
Another powerhouse US industry falling to the wayside.
Sucks that I foolishly spent many years studying to work in said industry.
At least both presidential candidates are planning to retrain me to sell cars or something.
Lurking in the desert
ATI contracted out their fabrication in the past, correct? Since AMD acquired them, perhaps they now realize this might work for their x86 stuff. Disclaimer: I have absolutely no expertise in this area.
If you have followed AMD for some time (and I have - I lived in Dresden for two years), you would know all the troubles associated with building a fan now.
For its first fab, AMD could pull it mostly on its own. Still there were some other parties in the deal. For seconds fab in Dresden it was much much more complicated: further improvements in manufacturing processes made fabs more expensive. $2Bln is quite number for smallish company like AMD to pull. And finding partners is quite hard, because many wouldn't like that AMD sits on two chairs and getting guarantees that your product will not stall somewhere in AMD's fab pipeline, preempted by urgent work for AMD itself (to compete with no less Intel itself), is impossible. Thus finding partners for new fab is very hard for monolithic AMD.
Short term it would of course suck. Bureaucracy and communication of design details can easily introduce unwanted delays.
In long term it would also suck. Competing with Intel which has dozen of fabs would be very hard. New manufacturing processes would be harder to sync with CPUs road map.
But that's of course much better than sitting with the fabs on your balance sheet: they quickly loose relevance and need to be scrapped and rebuild literally completely anew. And the old manufacturing process is not that really old and irrelevant: it is old for CPUs and GPUs (due to competitive pressure from Nvidia and Intel), yet can be used for bunch of other products. e.g. Xbox only recently went to 65nm, while ATI's 48x0 GPU family already enjoys 55nm process.
All hope abandon ye who enter here.
They got greedy when they were on top, and charged too much for processors which allowed Intel to do to them exactly what they did to Intel(swoop in with cheaper parts).
They've also got some problems with maintaining any presence in the top end of the CPU market. This isn't a huge deal for fabrication as almost no one buys those thousand dollar CPUs anyway, but those thousand dollar CPUs are your next generation main stream CPUs so you've got to have them.
They've also had some issues because they aren't big enough to take what's been happening in the market lately as easily as Intel has. AMD is now worth less than they paid for ATI, they're not alone in being worth a lot less, but it's not as visible for other companies.
Essentially the biggest thing this does is allow AMD the design company to ditch its debts into AMD the fab company. Investors will be much more willing to accept debt in the fab company because at the very least the assets are worth cash and it won't be dependent on whether AMD can come up with something halfway decent design wise. If the design company goes under, they can always just go fab Intel CPUs.
The design company on the other hand, after offloading a whole lot of its debt, is much more likely to stay alive long enough to fix things. They've got to get designs out into the market, they've got to be cheaper, and they've got to be at least almost as good as the Intel parts, but they have to survive long enough to do that.
Realistically, AMD will probably buy the company back if they do survive because having your own fabrication facilities is probably key to being in the top of this market, but in the meanwhile they get to stay alive in a failing economy, a credit crunch, and a time of total lack of vision for the future.
This split, silly as it sounds, may allow them to survive long enough to do this, and at the very least might keep Intel worried enough that they don't go back to the old days for a few more years.
Or...
3) Intel/VIA/TMSC/IBM Fabs sticks to contractual obligations it has with AMD that carried over from when it was still AMD Fabs.
4) AMD keeps dominating the x86-64 server market.
These corporate types aren't stupid, you know. This is the obvious fear factor, and the stockholders would never go along with the plan if this fear were not addressed.
I read that Gordon Moore once explained his "Moore's law" as being economic, not technical. He said that when Intel builds a new plant, each new plant costs about twice as much as the last one. so he said at some point a plant will cost more money then there is on earth so they will have to stop buiding new plants at some point and then Moore's law will end. I think what we are seeing is the front end of this. A few smaller companies are finding they can build new fab plants. Maybe in 20 year even Intel will have to do what AMD is doing and then we will see the end of exponential growth.
The key observation here was by Gordon Moore that growth in the number of transisters is due to growth in capital spending on fab plants, not technology.
Um. You do realize that Intel had no intention of ever extending x86 arch to 64-bits, right?
And that the plan was to force anyone who needed more that 4GB of address space or eight 32-bit registers to migrate to Itanium?
And that Intel had strong-armed or bluffed all competing RISC vendors (except Sun) into abandoning their 64-bit CPUs based on Intel's plans for an entire Itanium 'ecosystem'?
And that they had the entire IT press eating out of their hands, blathering on about the bright inescapable future of Itanium everywhere for about four straight years?
And that Intel didn't really care about cost, price-performance, power consumption, or other customer-centric innovations whatsoever?
No, Intel had all their plans laid out, and nothing would stand in their way. It was their way (Itanium) or the highway.
And then AMD put the Hammer down. The debut of the Opteron in 2003 was the beginning of the end of Itanium. AMD's intense competitive streak, while not always profitable, certainly altered the entire x86 ecosystem away from 'legacy' status, and sidelined Itanium into a niche player that any smaller manufacturer would have dropped years ago.
So yes, I think the whole IT world owes AMD a huge debt of gratitude for nipping Itanium in the bud. And for creating a vibrant, competitive market that otherwise would have stagnated under the sway of a single monopolistic vendor.
So like I said before, who will keep Intel honest now that AMD has applied King Solomon's solution to itself?
Cheers!
"The only good windmill is a tilted windmill."