AMD: Going Asset-Light May not be the Best Solution

AMD's recent approach at cutting down on costs in order to turn back to profit might force the company to sell its two fabrication facilities in Germany. Hector Ruiz, the company's CEO recently hinted at the fact that AMD might sell its customer division, but other control measures could force the company to sell its chip fabs.

Speculations started to emerge immediately after Hector Ruiz announced that the company would deploy its manufacturing assets more cost-effectively.

According to some industry analysts, selling the production plans would be a major mistake, that will make the company's situation even worse. It is true that fabs require important investments, expecially when shifting from a process node to another, but selling the units would leave the chip manufacturer at the mercy of third-party foundries. This is the case of server builder Sun, that manufactured its chip at Texas Instruments, but was forced to shift to TSMC, as the foundry teamed up with other chip designers.

Spinning off the fabs will also add extra manufacturing costs, and this would be a critical issue in AMD's market battle with its arch-rival Intel. However, according to Dean McCarron, an analyst with Mercury Research, if AMD decides to sell the fabs, it would transfer its debts to the new buyer.

AMD has invested huge amounts of money in its fabrication facilities, and it is expected to pour some more capital in order to catch up with its arch-rival.

"[AMD] has two options. Design more products that run in that fab or take in other people's chips," said Jack Gold, president of market analysis company J. Gold Associates. "But the processes run in the fab are not up to the leading edge like Intel has," he continued.

Insight64 analyst Nathan Brookwood also claims that selling the fabs is a bad idea. He said that the only way AMD can compete with Intel is to keep both chip design and chip manufacturing under the same roof. The future could be brighter for AMD, now that it has overcome the design flaws in the Barcelona silicon and resumed volume shipments.

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