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AMD outlines restructuring plan

Posted: 12 Nov 2002 ?? ?Print Version ?Bookmark and Share

Keywords:amd? flash memory? microprocessor? opteron processors? silicon-on-insulator process?

Advanced Micro Devices Inc. is working on a broad restructuring plan that will slash $100 million from its quarterly operating costs in 2003, cut $100 million from its capital expenditures both this year and next, and entail significant layoffs by June, executives said at the company's annual analyst meeting.

The meeting left open a number of questions about the company's existing process technology partnerships in its battles against Intel Corp. on the microprocessor and flash memory fronts. The extent of the upcoming layoffs and the restructuring charges over the next two quarters were also unclear.

Separately, AMD is on track to roll out its 64-bit Opteron processors at 2GHz or faster in the first half of next year, and expects growth of more than 30 percent in its Flash business next year.

Analysts' views of the restructuring moves were mixed, with some expressing confidence in the outline of the plan and others waiting to hear details about the cuts, their related charges and the overall results of the plan.

"This is the first time you have a smart, empowered CFO take a look at costs at AMD. Under [chairman and former president] Jerry Sanders no one ran this company with an eye on costs," said Joe Osha, senior analyst at Merrill Lynch, who said the $100 million-per-quarter cuts were plausible.

"I had hoped for more details from this meeting but there was not enough information here for me to change my guidance on the company," said Dan Scovel of Needham and Co.

Hector Ruiz, president and CEO of AMD, said the company would take a charge of "several hundred million dollars" over the next two quarters to pay for restructuring, aiming to slash $350 million in annual costs in the course of 2003. Capital expenditures would be trimmed to the $750 million-to-$800 million range this year and to $650 million in 2003, Ruiz said. He did not yet have a figure of how many layoffs the plan will involve between now and June. "People have to go, and it is a significant number," he said.

On a positive note, AMD said at the meeting that it has sorted through problems with the nine-layer-metal Opteron processor and the 130nm silicon-on-insulator (SOI) process on which it is being built. Most recent yields for the Hammer processor have hit 50 percent, Ruiz said.

Correcting speculation, Dirk Meyer, general manager of AMD's computational products group, said the timing of the Opteron launch will be "better than late in the first half of next year." Ruiz called Opteron a "clean kill" in the server CPU arena in part because it has Spec performance that beats Intel's Xeon processor.

Process questions

The meeting left a sense that AMD might still be seeking future process technology partners as it competes against Intel's deeper pockets.

Bill Siegel, AMD's chief scientist, said the company's partnership with Motorola Inc. on SOI and copper has now ended, and that Motorola has transferred its HiP8 90nm SOI technology to AMD. He also said that an agreement to partner with Taiwan's United Microelectronics Corp. on a 65nm, 300mm wafer fabrication facility in Singapore has not been consummated.

"As of right now this is still in a discussion phase. We are reassessing where and how fast this is put in place, but we need to have a 300mm plant in place by 2005," said Ruiz.

Siegel said he was not convinced AMD needed a 300mm fab for the 65nm node, given indications that leading-edge tools might continue to be available for 200mm wafer flows due to the impact of the industry downturn. In any case, he noted that the downturn has given UMC pause in equipping a new 300mm fab in Singapore when it already has one in Taiwan.

IBM provided AMD with design services to help it bust through difficulties in getting a 130nm process up and running in Dresden, Germany, which had contributed to delays in the Hammer rollout. AMD has not decided whether it will continue to enlist IBM's services for its transition to 90nm SOI production, which is scheduled to start in early 2004.

Beyond that, Siegel said AMD has about a year to decide on a process flow for the 65nm node, which could go in any of five directions, including fully-depleted SOI or strained silicon. The company is also working with startup Amberwave Systems on an alternative gate oxide for the 65nm node.

Possible partner

AMD executives clearly believe the company needs a close process technology partner to battle Intel. Speaking over coffee before the meeting, AMD chairman W.J. Sanders III suggested IBM could be such a partner.

"We have a relationship with IBM. We worked with them on SOI and we expect it to lead to other things," Sanders told EE Times.

"When your competitor spends $1.3 billion on process technology and you spend $250 million on it, you have to be better than them. We can be better, but not 5x better," Sanders said, but he deferred to Ruiz and other managers for details.

Siegel echoed that sentiment, tipping his hat to former pugilist Sanders when he noted AMD has beaten Intel in the past two years in number of patents granted. "As our esteemed chairman would say, we are punching above our weight," he said.

In his presentation, Ruiz quoted figures from venture capitalist Arthur Rock stating that capital expenses for chipmakers double every four years. "That is a tough challenge, but there are creative things we can do," Ruiz said.

Perhaps the brightest light from the meeting came from AMD's Flash business, which could beat analyst projections of 32 percent industry-wide growth in 2003, executives said. That is fueled by a rising share of business in cellular and in China.

AMD recently won Flash business from a leading cellular handset maker for one of its mainstream phones, said Bernard Cambou, group VP for memory at AMD, and one of several executives who followed Ruiz to AMD from Motorola.

AMD is selling all the advanced flash it can make on its Fab 25 line, which is now running 170nm processes, Cambou said. Half the line will transition to 130nm technology by the end of 2003, he said.

AMD has trailed Intel in flash process technology by as much as five quarters, Cambou said. But it will reach process parity with Intel by late 2004 when AMD starts making flash at 90nm, he said.

AMD won rights in 1991 from development partner Fujitsu Ltd to sell Flash in Asia and China, which is also fueling current flash sales, Cambou said.

In its labs, AMD is working on an organic polymer flash technology which could have superior SNR ratios and wider signaling variances than MRAM, said Siegel. The technology could vie with MRAM as a dense, fast and non-volatile memory. But the work is still at an early stage of characterizing materials for their writer and erase cycles, Siegel said.

- Rick Merritt

EE Times

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