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Can AMD's survival plan overcome Intel's pressure?

Posted: 13 Oct 2008 ?? ?Print Version ?Bookmark and Share

Keywords:processor? AMD Intel rivalry? fabless plan?

It is rival processor vendor Intel Corp. that carries the key to the survival of Advanced Micro Devices Inc. (AMD) as a fabless chip company and the formation of Foundry Co., with wafer fabs in Dresden and in New York. With a few flourishes of a legal counsel's pen, Intel could scupper it. The real question is: "ls Intel willing to allow the plan to go through and keep AMD on life-support?" This would have the advantage of highlighting Intel to not be perceived as a monopoly supplier.

When taken from the AMD point of view, most analysts believe that the inclusion of petrodollars from Abu Dhabi is a life-saver. The substantial streamlined operation that splits off manufacturing is sufficient to keep AMD in the microprocessor game, but not yet enough for the company to gain market share.

The plan permits AMD to go fabless, which should give some sort of economic advantage over Intel, and clears $1.2 billion of debt of AMD's books, while the formation of Foundry Co., tapping into the IBM Common Platform alliance, should provide AMD access to competitive leading-edge manufacturing processes.

However, examining the point of view of Foundry Co., the deal seems to have less sense. The foundry market is already crowded and dominated by Taiwan Semiconductor Manufacturing Co. Ltd. The idea of any newcomer getting into the market should be able to choose to have fabs in the western hemisphere rather than the eastern hemisphere that looks almost perverse.

Abu Dhabi wants to get into the chip-making business or at least invest in it. This goes along with about $8 billion in the total price. If Foundry Co. should start to flounder, a fabless AMD will have other sources of 32- and 28nm silicon from within the Common Platform alliance.

But one question that remains unanswered regarding the plan is that whether AMD has the right to pass on x86 processor manufacturing technology details, some of which are covered by cross-licensing partnership with Intel, to a third party, such as Foundry Co.

Even if AMD argues that the cross-licensing that came out of an almost decade-long legal battle between AMD and Intel in the 1990s has become irrelevant with the passing of time and the expiry of patents, it should consider that Intel is quite ready to go to court to hammer out the details for years if necessary.

The very act of being dragged to court could be enough to thwart AMD's dreams of resurgence. A smaller, fabless AMD would be less able to survive such an atmosphere of fear, uncertainty and doubt than its predecessor.

- Peter Clarke
EE Times Europe

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