Technology

AMD Gears Up to Transfer Production, Cut Down Costs

The company might sell its fabs, then outsource production to TSMC

By Bogdan Botezatu, Hardware Editor

25th of February 2008, 14:18 GMT

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AMD's fabs cost the company more than it can currently afford

World's second largest manufacturer of x86 processors has had a rough year, with failed launches and product delays all along its roadmap. Lack of sales, accumulated with loss of profit, has pushed the company

on the edge of bankruptcy. The company needs to rethink its policy in order to survive and deliver the next generation of processors.

According to a Lehman Brothers Holdings Inc. analyst, the company may announce plans to transfer more production in the next two to three months to reduce costs. The company gained 13 cents, or 1.9 percent, to $6.96 in New York Stock Exchange composite trading. The company analysts met last week Chief Financial Officer Robert Rivet. "AMD continues to be very focused on developing an asset light plan," said analyst Tim Luke right after the meeting. "Developing an asset light approach is of critical strategic importance to AMD given the strains on its balance sheet," he continued.

The company's Chief Executive Officer Hector Ruiz claimed that the company is currently evaluating the possible solutions to diminish its spendings at the semiconductor plans (or fabs), since they cost the company about $3 billion to build and equip for production. Ruiz refused to disclose Advanced Micro Devices' next steps, because unveiling the "asset smart strategy" would allow its rivals on the processor market (such as Intel) to undermine his plans regarding the company.

However, the analysts who attended the meeting drew the conclusion that the chip manufacturer might even sell its semiconductor facilities or even outsource all its production to other companies such as Taiwan Semiconductor Manufacturing Co.

"We are looking at ways to lighten our capital load on our balance sheet through partnerships like the one we have with IBM," said AMD spokesman Drew Prairie. "We are looking to do similar relationships to that but in the manufacturing sector," Prairie said.

TAGS:

AMD | TSMC | outsourcing | fab

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