Advanced Micro Devices is reportedly in talks with Taiwanese semiconductor TMSC regarding the fabrication of AMD's upcoming Fusion processor. The manufacturer has been producing its graphics processors at its foundry partners for some time now and it seems that it will take the same approach with its upcoming CPUs.

According to Chinese website Digitimes, the partnership will be effective as of the second quarter of the year. Advanced Micro Devices is currently manufacturing most of its processors at its Fab 38 located in Dresden, Germany, while the rest of the chips are outsourced to Singapore's Chartered Semiconductor.

The company inked the deal with Chartered back in 2004 when it was manufacturing chips at the 90-nanometer process node. Later in October 2006, AMD certified the foundry to manufacture 65-nanometer Athlon and Opteron parts.

The rumors also claim that TSMC has already begun implementing the silicon-on-insulator (SOI) process that is a specific element in AMD's chip designs. However, TSMC will not be able to ramp up production of the company's AMD64 chips until it completely finishes the SOI implementation and gets AMD's approval. The preparations are likely to end in early 2009, just in time for Fusion's introduction.

Fusion is a different breed of CPUs, that somewhat resembles the Cell chip developed by IBM, Sony and Toshiba. The Fusion architecture allows the implementation of specialized processing cores, such as GPUs and TCP/IP packet handlers. It is highly customizable, and AMD could offer multiple SKUs to match a specific application.

However, outsourcing the CPU production to a partner foundry could mean that the company is ready to sell its two semiconductor fabrication facilities, a risky move in the semiconductor world. Fabless chip designers are heavily dependent of their manufacturing partners, and any policy shift could account for catastrophic delays.