FabTech briefly analyzed AMD's asset smart plan and believes AMD's future still looks pretty troubled. The site reports the fabless AMD will continue to struggle and that the new "The Foundry Company" doesn't look set to do any better.
Just like any other fabless company, AMD will need to make dealing with foundries an integral part of its business operations and there are also doubts about what the firm is trying to achieve with The Foundry Company. FabTech claims demand for cutting-edge foundry capacity is not as high as AMD wants everyone to believe and doubts the new fab in NY State is a good investment:
Another aspect that concerned me was the notion pumped out by AMD that demand for leading-edge foundry capacity was something that was in strong demand. Ask SMIC, Chartered or UMC how much of its capacity is allocated to 65nm-and-below production and you will find it is very small. The number of companies moving to smaller geometries also gets smaller by each technology node.
Also, if demand for foundry capacity was that strong, then why are wafer ASPs in decline and the major foundries cutting CapEx each year?
Even worse is the fact that SMIC has struggled since birth to actually turn a profit, so why should we think that a new foundry start-up in Europe will fare any better?
Importantly, why is there a rush for the foundry spin-off to equip a shuttered fab in Dresden and charge ahead with a new fab in Luther Forrest, NY? Fab 36 has obviously been able to handle all of AMD’s MPU demand and has barely used its then foundry partner Chartered for extra capacity requirements.
Part of that conundrum was answered in an email from AMD last night. Apparently, the graphics chips currently being produced at TSMC will migrate over to Dresden (Fab 38). However, the issue of why AMD/The Foundry Company see the need for the fab in NY has yet to be explained!
With over a $ billion in funding from NY State on the table, it may well be a case of "the fab can be built at zero cost, so why not go ahead?". Figuring out what they can do with it after that it is another matter, but they will have at least 12 months to figure that one out!
FabTech also writes the funding The Foundry Company will receive is uninspiring at best. According to analyst Bill McClean at IC Insights, the up to $6 billion Abu Dhabi plans to invest in The Foundry Company is less than AMD's capital spending budget over the previous five years. You can read the full analysis over here.