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Opinion: Setting up a new foundry a 'tough choice'

Posted: 09 Oct 2008 ?? ?Print Version ?Bookmark and Share

Keywords:foundry market? manufacturing technology?

Is there a need for a new silicon foundry company? A quick answer is: No!

Most foundries are losing money and the business is tough. It needs big capital and good technology. Competition now is fierce in both the trailing-edge and leading technology segments. At present, there are too many pure-play foundries available. On the leading-edge, for example, Chartered, Semiconductor Manufacturing International Corp., Taiwan Semiconductor Manufacturing Co. Ltd and United Microelectronics Corp. represent the bulk of the market. IBM, Samsung and Toshiba are also involved in the leading-edge foundry segment.

But only TSMC consistently makes a profit in the arena. The rest of the pure-play vendors struggle or are at least on the bottom line. When times are good, they struggle. When times are bad, they suffer.

Process technology is a commodity. What vendors sell are services and TSMC leads the charge.

That's why I'm scratching my head over the new foundry spin-off from Advanced Micro Devices Inc. It won't work. It's too late and it's a silly idea.

As reported, AMD and the Advanced Technology Investment Company (ATIC) of Abu Dhabi announced the creation of a U.S.-based foundry company, dubbed as Foundry Company for now. At the same time, the Mubadala Development Co. will increase its current investment in AMD to 19.3 percent on a fully diluted basis.

Shared investment
AMD will contribute to so-called Foundry Company its manufacturing facilities, along with two fabrication facilities in Dresden, Germany, as well as related assets and intellectual property rights. It will also shift to full speed ahead with a proposed fab in New York.

ATIC will invest $2.1 billion to purchase its stake in the Foundry Company, of which it will put $1.4 billion directly in the new entity and the remainder will be paid to AMD to purchase other shares in the startup. The new firm will also assume around $1.2 billion of AMD's existing debt.

ATIC has committed added equity funding to the Foundry Company of a minimum of $3.6 billion and up to $6 billion over the next five years to fund the expansion its chipmaking capacity.

The board of the Foundry Company will be equally divided between executives of AMD and ATIC. AMD will own 44.4 percent and ATIC will own 55.6 percent of the new company's fully-converted common stock after its establishment.

New leadership
Doug Grose will relinquish his current role as AMD's senior VP of manufacturing operations to become CEO of the Foundry Company. Hector Ruiz will leave his present post as AMD's executive chairman and chairman of the board to become chairman of the Foundry Company.

Upon finalization of the transaction, the Foundry Company will start its operations with about 3,000 employees who will work in the new company from AMD facilities in Silicon Valley, New York, Dresden and Austin.

The new company's principal headquarters will be in Silicon Valley and its R&D and manufacturing management teams and ecosystems will be based in New York, Dresden and Austin. The transaction is expected to close at the start of 2009.

- Mark LaPedus
EE Times





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