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Opinion: No room for new foundry company

Posted: 10 Oct 2008     Print Version  Bookmark and Share

Keywords:foundry  Process technology  pure-play vendors 

Right now, there are too many pure-play foundries in the market. On the leading-edge, for example, Chartered, SMIC, TSMC and UMC represent the bulk of this market. IBM, Samsung and Toshiba are also involved in the leading-edge foundry segment.

But only TSMC consistently makes a profit in the arena. The rest of the pure-play vendors struggle—at least on the bottom line. When times are good, they struggle. When times are bad, they suffer.

Bottom line: Process technology is a commodity. What vendors sell are services and TSMC leads the charge.

That's why I'm scratching my head over the new foundry spin-off from Advanced Micro Devices Inc. It won't work. It's too late. Silly idea.

Here are the details: As reported, AMD and the Advanced Technology Investment Company (ATIC) of Abu Dhabi announced the creation of a U.S.-based foundry company, dubbed Foundry Company for now. At the same time, the Mubadala Development Co. will increase its current investment in AMD to 19.3 per cent on a fully diluted basis.

AMD will contribute to so-called Foundry Company its manufacturing facilities, including two fabrication facilities in Dresden, Germany, as well as related assets and intellectual property rights. It will also move full speed ahead with a proposed fab in New York.

ATIC will invest Rs.9,032.23 crore ($2.1 billion) to purchase its stake in the Foundry Company, of which it will invest Rs.6,021.49 crore ($1.4 billion) directly in the new entity and the remainder will be paid to AMD to purchase additional shares in the start-up. The Foundry Company will also assume approximately Rs.5,161.27 crore ($1.2 billion) of AMD's existing debt.

ATIC has committed additional equity funding to the Foundry Company of a minimum of Rs.15,483.82 crore ($3.6 billion) and up to Rs.25,806.37 crore ($6.0 billion) over the next five years to fund the expansion its chip-making capacity.

The board of the Foundry Company will be equally divided between representatives of AMD and ATIC. AMD will own 44.4 per cent and ATIC will own 55.6 per cent of the Foundry Company's fully-converted common stock upon its formation.

Doug Grose will relinquish his current role as AMD's senior VP of manufacturing operations to become chief executive officer of the Foundry Company. Hector Ruiz will relinquish his current role as AMD's executive chairman and chairman of the board to become chairman of the Foundry Company.

- Mark LaPedus
EE Times

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